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Audit Test Impact on Fraud Detection: A Study in Albania

A recent study published in the European Journal of Economics and Business Studies has shed light on the impact of audit tests on fraud detection in Albania. The study surveyed 56 auditors in Albania to rate the impact of different audit tests on fraud detection.

Hypothesis Testing

The researchers tested two hypotheses: “Only a small percentage of respondents believed that the type of audit test elected affects fraud detection” and “Fraud detection is auditor’s responsibility.” To investigate these hypotheses, they conducted a Chi-Square test and found that:

  • The variables were independent (p-value = 0.353 > 0.05), suggesting that the type of audit test elected does not have a significant effect on fraud detection.
  • Only a small percentage of respondents believed that auditors should assess management style to determine if it may lead to fraudulent financial reporting.

Study Findings

The study found that:

  • 54.57% of respondents did not think that the type of audit test had an impact on fraud detection, while 46.42% believed it did.
  • Only a small percentage of respondents agreed that due to pressures to meet market expectations or desire to maximize compensation, management may intentionally take positions that lead to fraudulent financial reporting.

Conclusion

The study concludes that:

  • Audit tests do not have a significant impact on fraud detection.
  • Auditors should focus on expressing an opinion whether the financial statements are prepared in accordance with applicable financial reporting frameworks.
  • The primary responsibility for prevention and detection of fraud lies with those charged with governance of the entity and management of the entity.

Recommendations

The study recommends:

  • Intensifying auditors’ training, especially for exchange of experiences on audit procedures in detecting material misstatements.
  • Conducting more studies to identify fraud cases in Albania to increase the efficiency and effectiveness of audit engagement.

References

[1] Adenji, A. (2004). Auditing and Investigation. Lagos, Value Analysis. [2] Adeduro, A. A. (1998). An Investigation into Frauds in Banks. [3] Bostley, R. W. & Drover, C. B. (1972). Sheldon’s practice and law of banking, 10th edition. London: Macdonald and Evans. [4] Boynton, W., Johnson, R. & Kell, W. (2005). Assurance and the integrity of financial reporting, 8th edition. New York: John Wiley & Son, Inc. [5] Carter, R. & Stover R., (1991). “Management ownership and firm value compensation policy: Evidence from converting savings and loan associations”. Financial Management (Winter), 80–90. [6] Latham C., Jacobs F., (2000). Monitoring and incentives factors influencing misleading disclosures. Journal of Managerial Issues (Summer), 27-38.

About the Author

The author is a journalist with extensive experience in covering economic and business-related topics. He has a strong background in finance and accounting and has written numerous articles on auditing, financial reporting, and fraud detection.