Key Insights from UAE Auditors to Detect & Prevent Fraud in Companies
2020 was a tumultuous year not only because of the COVID-19 pandemic but a huge financial fraud that shook the global financial systems. Yes, we are talking about the collapse of NMC Health in the UAE, which serves as a stark reminder for the need to spot and prevent financial statement frauds. All frauds are deliberately hidden, which makes it tough for the auditors in Dubai to spot. Also, there is a pertinent question of whether identifying fraud is the responsibility of the management or the UAE auditors.
Related: Auditing Fraud
Fraud in most companies occurs in the form of financial statement fraud, asset misappropriation and corruption. To prevent such fraud from happening, the management, board of directors and the auditors can contribute in their own capacity. In this article, we discuss strategies for management and auditors to spot and prevent fraud in the companies. Read on for more:
Invest to Build Strong Internal Controls
Management should make focussed investments to enhance the organisation’s internal controls, along with establishing a strong corporate culture that promotes ethical behaviour. The management should make itself ‘fraud-proof’ by showing zero tolerance for misconduct within the organisation. If management takes the initiative to identify frauds and discipline the perpetrators, the issue will not become material.
The company can prevent itself from being at the centre of a large financial scandal, just like how NMC Health caught itself in an embarrassing scandal. Consult with the best audit firms in Dubai to get robust advice on how to make the internal controls stronger before things go out of hand.
Internal Audit: The First Line of Defense
Internal audit is often hailed as a company’s first line of defence, which helps the management to prevent misappropriation of assets and inaccurate accounting of transactions. By availing internal audit services in Dubai, a company can evaluate the efficacy of its risk management systems apart from ensuring compliance with corporate policies. Internal auditors in Dubai assist the businesses to implement strong internal controls within the organisation to shield the company from fraud. Consult with the best audit firms in Dubai to conduct an effective internal audit in the company.
Set a Tone of Compliance from Top
The board of directors should possess an oversight about the company’s accounting and ethics policies to avoid potential fraud in the financial statements. The directors should set a tone of compliance starting from the top down through the lower ladder of the management. The board can also set effective compensation policies in the company to prevent manipulation by management. The board of directors should be able to critical questions of management to ensure that the organisation has adequate systems to prevent the occurrence of fraud.
Role of External Auditors
The role of external auditors in protecting the financial statements from fraud is widely debated as the general public goes by the misconception that auditors prepare the financial statements. That may partly explain why the names of audit firms are often dragged into infamous financial scandals. The auditors instead perform a series of tests that enable them to express its opinion of reasonable assurance that the financials are free of error.
Using insights gained from their experience in various industries, the external auditors in Dubai can help the companies identify specific areas that are susceptible to fraud. In this way, the management will be able to prevent or spot if the fraud has already occurred. The best auditors in Dubai focus on the following areas to identify fraud:
A) Management style
Auditors deduce useful information by observing the tone of operation set at the top by senior leaders and directors. The style with which the company operates gives a hint to the auditors whether the organisation is vulnerable to fraud or not. Consulting with approved audit firms in Dubai will come handy for the companies to identify the likelihood of fraud.
B) Motivations and Pressures
Auditors from the best audit firms in Dubai are trained to focus on what motivations and pressures they can observe within an organisation. By analysing these factors, they get knowledge about the factors that prompt the employees to manipulate the numbers.
C) Behavioural Controls
It is important for auditors to know about the behavioural controls implemented within an organisation by the management to get an indication about potential fraud. For example, the auditors will observe how the companies encourage policy and openness.
Ensure Compliance with the Help of Audit Firms in Dubai
The collapse of high-profile companies due to fraud is a matter of serious concern that necessitates the need for increased scrutiny. The management, board of directors, internal auditors and external auditors can play a crucial role in preventing the fraud from happening. Scandals like the collapse of NMC Health are a black spot that erodes the public’s trust in the financial system, but it could be avoided with the assistance of the best audit firms in Dubai such as Jitendra Chartered Accountants (JCA).
JCA’s highly qualified auditors in Dubai are not only experts in audit but possess the skills and necessary training to detect fraud. JCA can provide robust advice to the companies about the weaknesses in internal controls and recommendations to rectify the same. With years of experience in auditing the financial statements of thousands of companies, JCA’s auditors are able to help the companies to prepare financial statements that are free from material misstatement and fraud. Consult with JCA today itself to ensure the companies are complying with all the accepted accounting standards.