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In June 2009 came the news of the alleged fraud in Countrywide Financial, one
of the largest mortgage loan providers in the US before the credit crunch hit.
The allegation against Countrywide reminded people of an unfulfilled role of
auditors in the financial market: fraud detection.
Considering previous literature, the majority of which focuses on accounting
fraud, this paper focuses on the misappropriation of assets.
Research into this area is key, according to a 2010 survey by the Association
of Certified Fraud Examiners nearly 90% of the reported fraud cases in the US
involve some form of asset misappropriation (Association of Certified Fraud
Examiners 2010).
A model is formulated to emphasise the fraud detection role of auditors in the
financial market and relate the role to audit and financial reporting delays.
In the model, an auditor considers whether to perform extended audit procedures
after observing a red flag generated from regular audit procedures.
The full article is available for you to read below. What do you think? Should
the role of auditors focus more on fraud detection?
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