Fraud Auditing Theoretical And Practical Thinking

In recent years fraud commitment has developed more rampantly in world wide economic life regarding the complexity as well as the scale and even has come to possess a global element. According to the relevant statistics, some economies suffer from frauds a loss of more than 100 billion dollars every year. And it was reported in 1995 by ACFE that the USA economy had incurred a loss estimated at 400 billion dollars annually for the sake of frauds and financial manipulation. Nor the situation is optimistic in China. It was estimated that during the ten-year economic reform, from 1982-1992, the state-owned capital which had drained amounted to hundreds of billions of dollars, a considerable part of which was ascribed to frauds via power abuse. The Year-1997 annual economic inspection in our country had detected the illegal capital totaling 203 billion yuan. All the above manifests that police in the economic field as CPAs are, some of them, instead of fulfilling their responsibilities, provide false auditing reports, avoid detecting financial problems in practice and even help audited companies to conceal and handle false data. And the cases of Enron and Sunlight companies of USA , as well as of China's listed companies such as Oiongminyuan, Hongguang, Zhengbaiwen and Yinguangxia, indicate that frauds exist not only in China's CPA circle but also in the CPA profession in other countries. The severe consequences of those cases have rendered frauds as a "malignant tumor", which greatly obstructs the economic development. The rigorous reality has made the author well aware of the necessity of reviewing the problems of auditing object andresponsibility encountered in ungovernmental auditing And any delay in studying fraud auditing will be anyway intolerable.This paper starts with the concept, classification and formation of fraud, tracing and analyzing the formation of fraud from different aspects. And it proceeds discussing the responsibility of fraud auditing from the historical perspective, arguing that contemporary CPAs of our country should take active part in auditing frauds. Further, the primary steps to prevent frauds regarding internal control are rendered here. And finally the author makes the relevant discussions about the procedures and methods of fraud auditing in the hope of stimulating the study of enhancing the responsibility of fraud auditing and strengthening the construction of professional ethics and the formulation of auditing principles and methods by outlining the frame of fraud auditing. Fraud auditing is a multi-disciplinary science related to accounting, auditing, law, management, psychology and criminology. It is possible that there exist no obvious auditing trails to fraud. Therefore what counts more for CPAs than auditing methods do is thinking ways. CPAs have to go along with the chain of internal control that is the most vulnerable part in the accounting system in order to track down the key trails. To summarize, we should study the fraud auditing from different respects and perspectives to allow greater importance to be attached to fraud prevention and detection. And this is definitely a vital progress that will improve the CPA career and contribute to standardizing the market rules for China's WTO membership.