FOR2601 Assignment 1 (COMPLETE ANSWERS) Semester 2 2025 - DUE August 2025

FOR2601
Assignment 1
(COMPLETE
ANSWERS)
Semester 2 2025 -
DUE August 2025
100% TRUSTED WORKINGS, EXPLANATIONS & SOLUTIONS




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,FOR2601 Assignment 1 (COMPLETE
ANSWERS) Semester 2 2025 - DUE August
2025
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)

Here’s a structured draft answer you could use for Question 1.1 (10 marks):



Detection techniques that can be used by auditors to detect fraud in an
organisation

Auditors use several techniques to identify whether fraudulent activities may be
taking place within an organisation. These include:

1. Analytical procedures – Comparing current financial data with prior
periods, budgets, or industry benchmarks to identify unusual trends,
variances, or inconsistencies that may indicate manipulation.
2. Substantive testing – Performing detailed tests of transactions and balances
to verify their authenticity, for example, checking supporting documents for
sales, purchases, or payroll expenses.
3. Review of internal controls – Assessing the strength and effectiveness of
internal controls to detect weaknesses that fraudsters may exploit, such as
lack of segregation of duties or inadequate authorisation processes.
4. Observation and inspection – Physically observing operations, counting
inventory, and inspecting assets to confirm that records reflect the actual
situation on the ground.
5. Confirmation procedures – Obtaining direct confirmation from third
parties, such as banks, creditors, or customers, to verify balances and ensure
there are no fictitious entries.
6. Data analytics and computer-assisted techniques – Using software tools
to analyse large sets of data, detect anomalies, duplicate transactions, or
unusual patterns that could indicate fraudulent activity.
7. Interviews and inquiries – Asking management and staff questions to gain
insight into business operations, while being alert for inconsistent or evasive
responses.

, 8. Forensic audit procedures – Where suspicion arises, auditors may apply
more detailed forensic techniques, such as tracing money flows, reviewing
electronic records, and reconstructing transactions.
9. Trend and ratio analysis – Examining financial ratios over time (e.g., gross
profit margin, receivables turnover) to identify unusual fluctuations that may
signal fraud.
10.Professional scepticism – Applying a questioning attitude throughout the
audit process, not accepting evidence at face value, and considering the
possibility of fraud when evaluating management explanations.



✅ In summary: Auditors use a combination of analytical, substantive,
technological, and investigative techniques, together with professional scepticism,
to detect fraud and ensure that financial statements present a true and fair view.

Detection Techniques Auditors Can Use to Detect Fraud in an Organisation

Auditors play a crucial role in identifying fraudulent activities within an
organisation. To detect fraud effectively, they use a combination of analytical
procedures, forensic auditing techniques, and technology-driven methods.
Below are key fraud detection techniques:

1. Data Analytics & Forensic Auditing

Auditors use data analytics tools to examine large volumes of financial data for
anomalies. Techniques include:

 Benford’s Law – Checks for unnatural patterns in numerical data (e.g.,
invoice amounts).
 Trend Analysis – Compares financial data over time to detect irregularities.
 Ratio Analysis – Examines unusual changes in financial ratios (e.g., sudden
spikes in expenses).

2. Surprise Audits & Unannounced Checks