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AUDIT / FRAUD

CAQ Partnering to Develop Anti-Fraud Tools, Tracking PCAOB Projects

 

May 22, 2011

The Center for Audit Quality is partnering with Financial Executives International, The Institute of Internal Auditors and the National Association of Corporate Directors to develop fraud-fighting training and tools, including a series of fraud hypotheticals to be used as teaching tools.

 

“We will provide a set of facts and circumstances that can be used by each group in the supply chain to help identify areas where they may have missed opportunities to deter or detect a financial statement fraud,” Cindy Fornelli, Center for Audit Quality (CAQ) executive director, said Sunday in a speech to the AICPA Governing Council in Washington. The CAQ is affiliated with the AICPA.

 

The fraud scenarios will be customized for five sectors—financial services, manufacturing, retail, telecommunications, and technology—and will cover different types of frauds. The partners hope to have the tools ready by fall and to offer webcasts and possibly training based on the content.

 

Meanwhile the organizations are developing training to help auditors “ask tough, penetrating questions without communicating a lack of trust or the expectation that the person you’re dealing with is dishonest,” Fornelli said.

 

The partnership is also working to bring together multi-disciplinary groups to discuss fraud-related issues.

 

In her speech, Fornelli also touched on the PCAOB’s consideration of changes to the auditor’s reporting framework. “The CAQ has suggested a number of areas where the auditor’s report could be enhanced. These range from providing additional information relating to a particular audit’s scope and procedures to providing assurance in connection with management’s discussion and analysis,” she said.

 

The PCAOB is expected to issue a concept release on a new auditor’s reporting model next month, she said, followed by roundtable meetings in late summer. A proposed rule is expected in the first quarter of 2012.

 

Against the backdrop of the reporting framework evaluation, the CAQ’s Governing Board is bringing together stakeholders to discuss how the role of the auditor could evolve to better serve the needs of investors. The first event in its “Role of the Auditor” roundtable discussion series will take place in Dallas this week. Other meetings are planned for New York City, San Francisco, Chicago and perhaps in other cities in the United States and abroad.

 

“Some of the issues we plan to raise include identifying the information most needed by investors and who can best provide that information. We also plan to explore the potential for providing some level of assurance around nonfinancial disclosures in annual reports, and association with or some level of assurance on disclosures made by management outside of the annual report,” Fornelli said.

 

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