Use random sampling.
Auditing a patternless
selection of items makes it impossible for
fraudsters to determine which will be
Conduct surprise visits.
Showing up unannounced to
count inventory prevents employees from
fraudulently moving goods from one
location to another just to fool
Change the timing.
At clients where accounts
receivable traditionally are confirmed
at fiscal year-end, try performing this
audit procedure two months early.
Vary your technique each year.
If you’ve always tested a
sample of transactions posted to an
account, switch to an analytical test
that compares account activity with
production data. That might make fraud
easier to spot.
Evaluate low-profile accounts.
Selecting accounts that
are not normally audited might reveal
items being hidden in them for just that
Test small accounts.
Checking them could reveal
fraudulent transactions spread over
several accounts of relatively
Look for bogus patterns.
Use Benford’s Law, a
statistical formula for evaluating the
frequency of given values in a random
sample, to expose implausible numeric
data. (See “
I’ve Got Your Number, ” JofA
, May99, page 79.
Observe operations discreetly.
traffic or vendor deliveries from a
nearby vantage point may reveal
discrepancies in recorded revenue.
Review whistleblower files.
Look over employee reports
of company mal- or misfeasance for
indications of fraud.
Use audit software.
Test large electronic
transaction files for duplicate
payments, invoices or addresses for
multiple employees or vendors that often
escape notice when checked manually.
Get a clearer view of the
numbers. Use graphs to
display daily, weekly or monthly
data—such as the number and dollar
amount of transactions or journal
entries—on key cycles or processes to
make it easier to spot abnormal amounts
and address the risk of management
Embed software monitors.
Get the client’s
permission to design and plant a program
to capture, encrypt and record key data
for auditors to analyze later.
Check the Web.
Visit Internet chat groups
in which employees who own the client’s
stock discuss operational or other
issues that might merit consideration as
part of an effective audit.
Use alternative models.
evaluation models and assumptions,
instead of using those supplied by
management, to verify clients’ estimates
of warranty costs and other charges.
Editor’s note: SAS no. 99
(product no. 060701JA) can be ordered at