（2009）Internal Audit Responsibilities in Auditing Financial Systems Fraud.pdfVIP

Business e-Bulletin Vol. 1, Issue 1, 2009, 25-32 INTERNAL AUDIT RESPONSIBILITIES IN AUDITING FINANCIAL SYSTEMS FRAUD DHIA’A SHAMKI INTRODUCTION Using red flags wherever financial statements fraud exist is not a new procedure in financial reporting; what is new is the rapid changes which occur in technology, businesses, and markets that require awareness to understand the unstable environment. This demands that the main parties in auditing (internal, external, and committee) to have high skills, experiences, and responsibilities in detecting financial reporting fraud. This study tests whether there are relationships between these parties especially between internal auditors and audit committee and between internal and external auditors. Red flags in accounting refer to a set of diagnostic checks to determine the riskiness of a client or a registrant filing financial statements (Feroz, 2008). The Australian Auditing Standard (AUS 210) defines fraud as “an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage” (AUS 210, 2004, p. 6). AUS 210 has been amended a number of times in recent years to increase the external auditor’s responsibility in this area. Fraud is real and has so many branches now that modern day fraudulent activities go undetected for most of the time and or until it is too late (Enyi, 2008). The importance of red flags in auditing has been highlighted by the U.S. National Commission on fraudul