Managing Fraud Risk
In order to achieve its goal of combating financial fraud, the audit committee must have an unwavering mandate for financial statements that meaningfully portray the company’s circumstances. Some steps to follow in doing this are:
- Review the company’s annual report to shareholders before it is released externally. The committee members should clearly understand the following:
- The significant accounting judgments made and estimates included in the financial statements
- The accounting treatment of significant or unusual transactions
- The impact of changes in accounting rules
- The disclosures required
- Evaluate the appropriateness of management seeking a second opinion on significant accounting or auditing issues.
- Be alert to “red flags” which may signal improper earnings management or, worse, fraudulent financial reporting, misappropriation of funds or illegal acts.
- Review audit adjustments made and those waived because of immateriality.
- Review the interim results.
- Ensure that the financial reports clearly reflect true company performance.
Our recommendations aim to address weaknesses and gaps while supporting your organizational governance and compliance needs. We can assist boards and management by reviewing current governance practices and benchmarking them against best practices and ensuring they adhere to all relevant legal rules and requirements.
