Fraud in Accounting Estimates: An Analysis of Fraud in Accounting Estimates and how these can be Reduced

Abstract

Originating from the rising focus on fraud in companies the purpose of this thesis is to investigate auditors’ responsibilities in identifying fraud risks for accounting estimates as well as how to reduce these fraud risks. Despite auditors’ role is to make sure that a financial statement does not consist of material errors regardless of this being regular errors or fraud, auditors are still struggling to identify material fraud risks. The thesis seeks to analyze the requirements for auditors’ actions in the regulation and standards compared to the actions taken in practice. To conclude on this the regulation and standards have been examined and an interview with relevant parties have been conducted. Furthermore, by using the theory of the fraud triangle by Donald R. Cressy to determine the risk elements which leads to fraud, the thesis focus on the coverage of these risk elements in the regulation and standards. Based on the obtained data the analysis concludes that the auditors in practice are performing the same actions as required in the regulation and standards. In fact, more actions are performed by auditors to identify any fraud risks than required. However, the required actions in the regulation and standards are not covering all risk elements in the fraud triangle. Hence there is a gap between actions which could mitigate the fraud risks and the required actions in regulation and standards. The thesis seeks to propose actions to be taken in order to minimize the fraud risks. A total of three suggestions have been made. These suggestions have been outlined on the basis of the obtained knowledge in the thesis.