Swiss Fraud Detection Techniques Under Scrutiny Amid Calls for Enhanced Auditor Role
A reevaluation of traditional auditing procedures is underway in Switzerland as experts recognize the need for more effective fraud detection methods.
The Current State of Auditing Procedures
According to Sir Donald Brydon’s 2019 report on audit quality and effectiveness, fraud remains a complex and misunderstood issue for auditors. While company management bears primary responsibility for preventing and detecting fraud, auditors play a crucial role alongside other members of the corporate governance and reporting ecosystem.
The Auditor’s Role in Fraud Detection
Auditors are currently tasked with providing reasonable assurance to shareholders that financial statements are free from material misstatement, whether caused by fraud or error. However, public opinion suggests that auditors should play a more significant role in fraud detection beyond providing this reasonable assurance.
The Need for Improved Measures
Despite the rarity of major corporate failures due to fraud, recent instances have highlighted the need for improved measures to deter and detect fraudulent activity. The EY organization has acknowledged the need for audit evolution to better address fraud and is committed to leading the profession in addressing stakeholder concerns about auditor involvement in fraud detection.
Strategies to Enhance the Audit Process
A new report outlines strategies to enhance the audit process, including:
- Mandating data analytics for fraud testing: Mandating the use of data analytics for fraud testing in audits for all listed entities globally
- Utilizing additional internal and external data: Utilizing additional internal and external data to respond to external risk indicators, such as short sellers and whistleblowers
- Implementing electronic confirmations: Implementing electronic confirmations for audit evidence wherever possible
- Developing a proprietary fraud risk assessment framework: Developing a proprietary fraud risk assessment framework for audit committees and those charged with governance
- Requiring annual fraud training: Requiring annual fraud training for all audit professionals
- Targeted use of forensic specialists: Targeted use of forensic specialists in the audit process
The Importance of Collaboration
Experts emphasize that auditors cannot succeed alone, and the EY organization is calling on the corporate governance and reporting ecosystem to work together to address these issues. As Switzerland continues to refine its approach to fraud detection, it remains essential to strike a balance between ensuring transparency and maintaining confidence in the financial sector.
By working together, we can ensure that the auditing process is more effective in detecting and preventing fraudulent activity, ultimately protecting investors and maintaining the integrity of the financial sector.