According to the American Institute of Certified Public Accountants, fraud is basically the deliberate

concealment or misrepresentation of a material fact for the intention of depriving another of money or
property. The key objective of auditing is to ensure the financial reliability of the organization. It is the
role of an auditor to ensure that the account books are kept in accordance with the policies stipulated in
the Companies Act. They also ensure that the books of accounts indicate an accurate analysis of the
state of affairs of the company or not. This paper will discuss the two types of fraud, the Fraud Triangle,
as well as the responsibility of auditors in identifying and assessing fraud. Additionally, it will also cover
the specific risks, the benefits, and internal controls linked with the IT functions.

There are two significant types of audit fraud. Fraudulent financial reporting is one of the significant
types of audit fraud. According to (), fraudulent financial reporting is an intentional omission or
misstatement of financial accounting information projected to deceive clients. The motives for
fraudulent financial reporting comprise of not limited to pressures from, employers, creditors, and the
market in large, fraud opportunities and personal conflicts of interest and incentives. Asset
misappropriation fraud is the other type of audit fraud. Third parties are mainly involved in this sort of
fraud, and in most cases, it can be committed by –people entrusted to hold and manage the assets.

The Fraud Triangle is a structure formulated to illustrate the reasoning behind an employee's
resolution to commit workplace fraud. The three components of the fraud triangle include
pressure, rationalization, and opportunity. Financial pressure is a common pressure that triggers
people to commit fraud. External sources such as addictions, gambling, and drugs are significant
causes of pressure. Opportunity is the second leg of the fraud triangle. Normally, opportunities
occur as a result of a lack of internal controls in a company. For instance, the violator feels and
thinks that he or she can take advantage of the circumstance without being noticed. Lastly but not
least, rationalization is the third component of the Fraud Triangle. However, this is mainly a
cognitive level and entails the violator to have the ability to substantiate the crime in a manner that
is acceptable to their internal moral compass. Rationalizations are habitually found on external
factors like the need to live a good life or a fraudulent employer.

There are three conditions that result from the misappropriation of assets and financial

reporting fraud. These three conditions make up the Fraud Triangle. The first condition is the

incentives/pressure. In this condition, the person performing the fraudulent act has the incentive

or has been pressured into committing the fraudulent act. The second condition is opportunities.

In this condition, the person committing the fraud sees an opportunity due to circumstances. The

final corner of the Fraud Triangle is attitudes/rationalization. In the final condition of the Fraud

Triangle, the mindset, personality, or the person's ethical value exist that allows them to perform
the deceitful deed or they are pressured into it act and try to rationalize the reasons for

committing the fraud.

In all organizations, the management is, and the team entrusted with governance are principally
responsible for detecting and preventing fraud. However, auditors are accountable for executing an
audit in line with international auditing standards. They are responsible for obtaining enough and
correct audit evidence concerning the assessed risks of a material misstatement by formulating and
implementing suitable responses. Auditors are also accountable for responding appropriately to any
fraud or suspected fraud throughout the audit process. Based on the audit measures performed
and the audit evidence acquired, auditors are responsible for evaluating whether the appraisal of
the risks of material misstatement at the affirmation point remains appropriate.

There are definite benefits that Information Technology can present for an organizations’ internal
controls. Nevertheless, some risks surround it. According to Auditing and Assurance Services, the
risks include not limited to the reduction of audit trail. Financial statements Misstatements are not
easily noticed using IT and thus leading to noticeable audit trail loss. The risk to software and
hardware is another risk. It is essential to ensure proper protection of both the software and
hardware. This guarantees the safety of crucial data. Lastly, since computers can execute many of
the works that were initially done separately, this triggers separation of IT responsibilities and thus
demanding for an experienced personnel

The internal controls definite to IT can assist in reducing the risks linked with the functions of IT. These
controls majorly involve application controls and general controls. Within the general .controls of the IT
functions, separation of duties, the administration, system development affect the entire organizations.
Generally, the application controls apply to process transactions.

Because fraud is the deliberate deception for financial or personal reasons, the key to curbing it is to be
responsive and ensure that internal controls are in play. Auditors are required to have enough
knowledge and understanding of fraud in general to avoid any misappropriation of assets or fraudulent
financial reporting. Organizations should also be alert of the specific risks, the benefits, and internal
controls linked with IT functions like the ones discussed above.