FOR2601/ASSIGNMENT 01/2024
Tutorial Letter 101/3/2024
Forensic Methods and Techniques Module A
FOR2601
Semesters 2
Department of Police Practice
, FOR2601/ASSIGNMENT 01/2024
QUESTION 1
1.1 Discuss in your own words the detection techniques that can be used by auditors to detect fraud in
an organisation.
Auditors employ various techniques to detect fraud within organizations, aiming to uncover irregularities
or suspicious activities. Here are some common detection techniques used by auditors:
1. Data Analytics and Forensic Accounting: Auditors use advanced data analytics to identify
unusual patterns, anomalies, or trends in financial transactions. Forensic accountants delve deep
into financial records to detect discrepancies that may indicate fraud.
2. Internal Controls Evaluation: Auditors assess the effectiveness of internal controls, including
segregation of duties, authorization processes, and access controls. Weaknesses in these controls
can increase the risk of fraud.
3. Document Examination: Auditors scrutinize documents such as invoices, receipts, contracts, and
bank statements for inconsistencies, alterations, or forged signatures that may indicate fraudulent
activities.
4. Interviews and Interrogations: Auditors conduct interviews with employees, management, and
stakeholders to gather information and assess the integrity of responses. Inconsistencies or evasive
answers may raise suspicions.
5. Financial Ratio Analysis: Auditors analyze financial ratios over time to identify unusual
fluctuations or deviations from industry norms. Significant deviations may indicate financial
statement manipulation or fraud.
6. Surprise Audits and Inventory Checks: Unannounced audits and physical inventory counts can
uncover discrepancies between recorded and actual inventory levels, revealing potential theft or
misappropriation.
7. External Confirmations: Auditors may send confirmation requests to third parties, such as
customers and vendors, to verify the accuracy of account balances and transactions recorded in
the organization's books.
8. Benford's Law Analysis: Auditors apply Benford's Law, which predicts the frequency distribution
of digits in many datasets, to detect anomalies or potential fraud in numerical data like invoices or
expense claims.
Tutorial Letter 101/3/2024
Forensic Methods and Techniques Module A
FOR2601
Semesters 2
Department of Police Practice
, FOR2601/ASSIGNMENT 01/2024
QUESTION 1
1.1 Discuss in your own words the detection techniques that can be used by auditors to detect fraud in
an organisation.
Auditors employ various techniques to detect fraud within organizations, aiming to uncover irregularities
or suspicious activities. Here are some common detection techniques used by auditors:
1. Data Analytics and Forensic Accounting: Auditors use advanced data analytics to identify
unusual patterns, anomalies, or trends in financial transactions. Forensic accountants delve deep
into financial records to detect discrepancies that may indicate fraud.
2. Internal Controls Evaluation: Auditors assess the effectiveness of internal controls, including
segregation of duties, authorization processes, and access controls. Weaknesses in these controls
can increase the risk of fraud.
3. Document Examination: Auditors scrutinize documents such as invoices, receipts, contracts, and
bank statements for inconsistencies, alterations, or forged signatures that may indicate fraudulent
activities.
4. Interviews and Interrogations: Auditors conduct interviews with employees, management, and
stakeholders to gather information and assess the integrity of responses. Inconsistencies or evasive
answers may raise suspicions.
5. Financial Ratio Analysis: Auditors analyze financial ratios over time to identify unusual
fluctuations or deviations from industry norms. Significant deviations may indicate financial
statement manipulation or fraud.
6. Surprise Audits and Inventory Checks: Unannounced audits and physical inventory counts can
uncover discrepancies between recorded and actual inventory levels, revealing potential theft or
misappropriation.
7. External Confirmations: Auditors may send confirmation requests to third parties, such as
customers and vendors, to verify the accuracy of account balances and transactions recorded in
the organization's books.
8. Benford's Law Analysis: Auditors apply Benford's Law, which predicts the frequency distribution
of digits in many datasets, to detect anomalies or potential fraud in numerical data like invoices or
expense claims.
