კონფერენცია

∘ Tea Udesiani ∘ Tatia Udesiani ∘
FRAUD PREVENTION, DETECTION AND INVESTIGATION IN AUDITING PROCESS

Summary

In accordance with international standards of audit, the notion of “fraud” means the intentional act of the enterprise’s management, employees or one or more representatives of the third party, which resulted in misstatement in the financial statements. For its part, misstatement in the financial statements means incorrect data reflection and their misrepresentation. The mentioned inaccuracies may result from fraud or errors. The difference between them is that fraud is an act, which may result from intentional misrepresentation of information in the financial statements, but the error is not intentional. There is also another type of fraud, which is associated with misappropriation of assets.

To prevent fraud, the leadership of an organization should consider the risk-factors for fraud. The fraud risk-factors do not have to point to the existence of fraud, often, they are represented at the time when fraud arises.

The management has to identify and analyze significant changes, as well as to respond to them, in order to ensure the effective functioning of the internal control.

In fact, it is very difficult to determine whether an act is intentional or not. Despite fact that an auditor may be in doubt, or he/she may even detect the fraud, according to international standards, he/she has to make clarification of legal nature whether the fraud was established or not. An auditor has to assess the risk associated with fraud and errors, detect and determine the likelihood of them.

Auditing for fraud detection is a process of identifying evidence of fraud, which includes the collection analysis of evidence to detect and prevent these cases.

The cases of professional fraud become increasingly significant problems not only in our reality, but in the developed world as well. It is unfortunate that cases of fraud detected by accident are more frequent than cases detected by internal auditing, internal control or by the external auditors. This confirms the assertion that anyway, the organizations need again to work better to plan actively the control and audits, for the purpose of detecting the fraud. In the past, the mechanisms of internal control had rarely been considered by the auditors, but today, they are checking in detail, because the mechanisms of a stable internal control are the most effective tools against the errors and frauds in the organizations.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Tea Udesiani ∘ Tatia Udesiani ∘ FRAUD PREVENTION, DETECTION AND INVESTIGATION IN AUDITING PROCESS Summary In accordance with international standards of audit, the notion of “fraud” means the intentional act of the enterprise’s management, employees or one or more representatives of the third party, which resulted in misstatement in the financial statements. For its part, misstatement in the financial statements means incorrect data reflection and their misrepresentation. The mentioned inaccuracies may result from fraud or errors. The difference between them is that fraud is an act, which may result from intentional misrepresentation of information in the financial statements, but the error is not intentional. There is also another type of fraud, which is associated with misappropriation of assets. To prevent fraud, the leadership of an organization should consider the risk-factors for fraud. The fraud risk-factors do not have to point to the existence of fraud, often, they are represented at the time when fraud arises. The management has to identify and analyze significant changes, as well as to respond to them, in order to ensure the effective functioning of the internal control. In fact, it is very difficult to determine whether an act is intentional or not. Despite fact that an auditor may be in doubt, or he/she may even detect the fraud, according to international standards, he/she has to make clarification of legal nature whether the fraud was established or not. An auditor has to assess the risk associated with fraud and errors, detect and determine the likelihood of them. Auditing for fraud detection is a process of identifying evidence of fraud, which includes the collection analysis of evidence to detect and prevent these cases. The cases of professional fraud become increasingly significant problems not only in our reality, but in the developed world as well. It is unfortunate that cases of fraud detected by accident are more frequent than cases detected by internal auditing, internal control or by the external auditors. This confirms the assertion that anyway, the organizations need again to work better to plan actively the control and audits, for the purpose of detecting the fraud. In the past, the mechanisms of internal control had rarely been considered by the auditors, but today, they are checking in detail, because the mechanisms of a stable internal control are the most effective tools against the errors and frauds in the organizations.