Internal and External Auditors' Roles in Prevention, Detection and Reporting of Fraud

Auditing in UAE
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Auditing in UAE
Both internal and external auditors are often charged with holding a company and its members into account its financial dealings and operations. As a result, any fraudulent activity can be easily unmasked by either internal or external audits. Any malicious move seeking to gain an unfair advantage or jeopardize financial performance in an organization can be regarded as fraudulent behavior (Halbouni, 2015). In whatever case, fraudulent behaviors amount to a crime in an organization regardless of how it is attained. Fraud is often practiced by those seeking to put their interest before their intended role in the corporation; thus, it can be regarded as an agency problem. Agency problems arise where there is a conflict of interest, and an individual or group is willing to forego the corporation’s interests for their interests. Auditing can be viewed as a response strategy aimed at curbing agency problems.
Agency problems are often closely associated with frauds that involve the tweaking of financial documents. Auditors' primary objective is to assess the financial records to unmask any form of malice and dishonesty, leading to a minimized level of fraud and consequently responding to the agency problem. The rigorous manner in which auditors assess the financial documents and company operations has led to the adoption of more sophisticated auditing standards by accountants, further leading to minimized rates of agency problems. Besides, by design, auditing is designed to create conflicting interests between the company and the principal being audited, thus directly serving the purpose of curbing the principal agency problem.
Aside from the primary purpose of acting as a respon...