, FOR2601 Assignment 1
Semester 2 2025
DUE August 2025
Use this document as a guide and for references to answer your assignment
QUESTION 1
1.1 Discuss in your own words the detection techniques that can be used by
auditors to detect fraud in an organisation. (10)
Fraud detection requires both analytical and investigative techniques. Some of the
common ones include:
1. Analytical review procedures – Comparing current financial data with prior
years, budgets, and industry benchmarks. Large or unusual fluctuations may
indicate manipulation.
2. Trend and ratio analysis – Ratios such as gross profit margins, receivables
turnover, and liquidity can reveal inconsistencies that suggest possible fraud.
3. Data mining and digital tools – Using specialised software to scan large
data sets for duplicate transactions, round-number entries, or unusual
payment patterns.
4. Benford’s Law analysis – Examining the frequency of leading digits in
transactions to detect anomalies that deviate from expected statistical
distributions.
5. Substantive testing – Performing detailed checks on specific transactions,
especially high-value or irregular ones, to verify authenticity.
6. Surprise audits and spot checks – Visiting branches, departments, or cash
locations unannounced to reduce opportunities for concealment.
7. Review of internal controls – Weak or overridden controls often provide the
space for fraud; auditors examine whether controls are functioning
effectively.
8. Document examination – Checking for alterations, missing authorisations,
forged signatures, or inconsistencies in invoices, contracts, and receipts.
9. Third-party confirmations – Contacting banks, suppliers, or customers
directly to confirm balances or transactions. Differences between their
records and the organisation’s may signal fraud.
Semester 2 2025
DUE August 2025
Use this document as a guide and for references to answer your assignment
QUESTION 1
1.1 Discuss in your own words the detection techniques that can be used by
auditors to detect fraud in an organisation. (10)
Fraud detection requires both analytical and investigative techniques. Some of the
common ones include:
1. Analytical review procedures – Comparing current financial data with prior
years, budgets, and industry benchmarks. Large or unusual fluctuations may
indicate manipulation.
2. Trend and ratio analysis – Ratios such as gross profit margins, receivables
turnover, and liquidity can reveal inconsistencies that suggest possible fraud.
3. Data mining and digital tools – Using specialised software to scan large
data sets for duplicate transactions, round-number entries, or unusual
payment patterns.
4. Benford’s Law analysis – Examining the frequency of leading digits in
transactions to detect anomalies that deviate from expected statistical
distributions.
5. Substantive testing – Performing detailed checks on specific transactions,
especially high-value or irregular ones, to verify authenticity.
6. Surprise audits and spot checks – Visiting branches, departments, or cash
locations unannounced to reduce opportunities for concealment.
7. Review of internal controls – Weak or overridden controls often provide the
space for fraud; auditors examine whether controls are functioning
effectively.
8. Document examination – Checking for alterations, missing authorisations,
forged signatures, or inconsistencies in invoices, contracts, and receipts.
9. Third-party confirmations – Contacting banks, suppliers, or customers
directly to confirm balances or transactions. Differences between their
records and the organisation’s may signal fraud.
