As stated in SAS NO. 99, Consideration of Fraud in a Financial Statement Audit, paragraphs 20 through 26 outline the kind of questions auditors should ask management and others when assessing the likelihood of fraud. The difficulty is that persons involved in illegal activities and fraud are capable of lying to auditors and managers, which they often do.
Advance SAS Interview Question – Find the second max value for each of the category using PROC SQL
You might also warn them that the word ‘fraud’ will be used frequently during your inquiry. The word “fraud” tends to get people upset. In the government-auditing world, the acronym FRA was used to label some engagements. FRA stands for Financial Related Audit and it was a GAO term during in the 80s and 90s. When I used it in entrance conferences with clients, you should have seen them freak out! They thought I was saying that I was conducting a fraud audit (fra… fraud…) After a few anxious calls from auditees, audit management sent an urgent memo, “Never use that term AGAIN!”
It is always a good idea to give the client a minute to think, and ask them to share their concerns or ask any questions. Say, “What questions do you have about this interview?” Check out the phrasing of that question. I recommend that you phrase your question that way because if you say something else like “Do you understand?” They will automatically respond affirmatively as they don’t want to look stupid. And asking, “Do you have any questions?” implies that they shouldn’t have any. So saying, “What are your questions?” lets them know that they naturally should have some and you welcome their questions!
If you are an audit client, you might be thinking, “I’m not answering those questions! No one said I had to and I am going to call my lawyer!” You can do that, but realize that good auditors go where their gut leads them. And a thorough auditor could interpret your resistance as a red flag that you know something, and that further investigation is needed. Not always, but that is the risk you take by making a big deal of this. It is probably better to just play along, unless of course, you are guilty. J
I was talking to a San Francisco taxi driver recently and he told me that he hates working on Saturday nights. Drunks think it is funny to walk away after a ride and not pay. If the taxi driver calls the police, it consumes hours of his time, and time is money. So, he pretty much has to let them get away with it.
You might start with, “This is an uncomfortable part of my job. I am sure you have heard of all of the scandals, like Enron, WorldCom, Bernie Madoff, involving fraud. And I have a professional responsibility to do my best to detect fraud in every organization that I audit. The standards that I adhere to require that I ask you some pretty pointed questions, and they are going to sound very rude. But another thing my standards require is that I ask these questions without softening them or altering them.”
Suspects an interview response is fishy. For example, the subject gives answers that conflict with known information, attempts to direct the questioning away from a sensitive area or topic, or changes his attitude or cooperation level in response to certain questions. The subject also might suddenly avert his eyes, make hand or other movements or change posture, facial expression or speech patterns. Don’t overreact to a discrepancy between body language and what a subject says, but do take the time to question more deeply.
A fraud-based interview comes after the auditor has identified problems and needs to clarify their cause and quantify their impact. It presupposes the subject has important information and possibly may be misleading the questioner or lying. In general, two types of subjects are of interest: people who are suspected of committing fraud and those who may have knowledge of wrongdoing but aren’t involved in perpetrating it. The second group often is a good source of information.
Use silence to your advantage. A long period of silence after a question has been answered, or during the time it takes the interviewer to record the answer, creates a vacuum that people tend to want to fill. That tension may provoke a subject to reveal cues that he or she is lying or withholding information. Quiet periods also give the interviewer an opportunity to assess the progress of the interview and change an upcoming question as needed.
DOES THAT ANSWER THE QUESTION? A well-planned audit interview is an important way to gather and confirm operating data, answer questions, influence behavior and lay the groundwork for presenting findings and recommendations. Professional standards require CPAs to sharpen their skills to increase the likelihood of uncovering fraud if it exists.
At an early stage of the audit, auditors seek background information on an entity’s systems, procedures and controls. They may base queries on checklists or transaction flowcharts and ask clients and employees questions that require a simple “yes” or “no,” such as, “Do you reconcile the bank statement promptly at the end of each month?” Answers help establish the record of procedures a client claims to use and normally are validated by other information. At the other end of the skills scale, the forensic interviewer, experienced at designing and conducting interviews, tries to get subjects to reveal information they are attempting to shade or withhold.
Why did you decide for a career of a pilot?
Say them that you enjoy flying, and that you believe to be a responsible person. You can also say that you have all skills and strengths needed for this type of work. Alternatively you can refer to an experience that motivated you to pursue the career, such as meeting a pilot when you were young, or having passion for aircraft models since childhood.
The key is to convince them that you really want the job, and did not apply just because you’ve already spent a small fortune on your studies and training.
Requires ‘brainstorming’ sessions to discuss how and where the entity’s financial statements might be susceptible to material misstatement due to fraud.[edit]
This requirement is a new concept in audit standards and it has two primary objectives. The first objective is so the engagement team will have an opportunity for the seasoned team members to share their experiences with the client and how a fraud might be perpetrated and concealed. The second objective is to set the proper “tone at the top” for conducting the engagement. The brainstorming session is to be conducted in a manner that models the proper degree of professional skepticism and sets the culture for the entire audit.
FAQ
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