к.е.н., доцент Дмитренко І.М., студент Редько І.А.

Донецький національний університет економіки і торгівлі імені Михайла Туган-Барановського

INTERVIEWING AS AN AUDITING TOOL

In response to the increased emphasis on fraud prevention, deterrence, and detection connected with recent corporate failures, the AICPA issued Statement on Auditing Standards (SAS) 99, Consideration of Fraud in a Financial Statement Audit. SAS 99 is effective for periods beginning on or after December 15, 2002, and it significantly changes how CPAs must consider fraud in their audits of financial statements. In light of this increased emphasis on uncovering fraud, auditors may want to consider the benefits of interviews as an audit tool.

Interviews are a useful audit tool to gather information about internal controls and fraud risks for several reasons. First, employees involved in the day-to-day operations of a functional area possess the best knowledge of that area. They are in an excellent position to identify weak internal controls and fraud risks. Second, although most employees are not directly involved in fraud, they may have knowledge of suspected, or actual, frauds that interviews can bring to light. Third, employees may be reluctant to tell management about needed internal controls and suspected or actual fraud When interviewed, however, employees are often willing, even relieved, to talk about these issues.

Making inquiries of management is important because senior management is often in the best position to perpetrate and conceal fraud. In obtaining information necessary to identify the risk of fraud in a financial statement audit, SAS 99 requires auditors to ask the following questions:

· Does management communicate its views on ethical business behavior to its employees?

· Does management have programs and internal controls designed to prevent, deter, and detect fraud?

· Does management discuss with the audit committee of the board of directors how its internal control system serves to prevent, detect, and deter fraud?

· Does management understand the fraud risks specific to its business?

· Does management monitor fraud risks relevant to specific components or divisions within the entity?

· Does management have any knowledge or suspicion of fraud?

The interview should have a tone that is formal, friendly, and nonthreatening; should follow a predetermined structure; and should result in meaningful fact-finding. An interviewer should prepare a set of questions and an introductory statement that explains the purpose of the interview. This preparation will set the tone for a serious, purposeful, and effective interview.

The interviewer should be matched to the interviewee. Building a rapport with an interviewee is partially a function of who interviews whom. For example, it is more difficult for a staff auditor to build rapport and connect with an intimidating CEO or CFO than for the engagement partner to do so. But for the engagement partner to conduct every interview is simply not cost-effective, so partners or experienced audit managers might interview most senior management. Managers, seniors, and staff accountants can be matched to other interviewees, as appropriate.

The interview should always be conducted in private. If the interviewee’s workstation is not sufficient, then the interviewer should use a meeting room. An interview is most successful when the subject is comfortable and at ease. Most people are more comfortable in their own work environment and when they can answer questions without concern that a coworker might be eavesdropping.

It is essential in the early part of the interview for the auditor to build a rapport with the interviewee in order to encourage an open discussion. Structuring questions to progress from the general to the specific allows the interviewer to first build a rapport, and then observe changes in an interviewee’s behavior that may signal a suspicious or sensitive topic as the questions become more focused. Skilled interviewers are always cognizant of indicators of deception that may be displayed by any individual attempting to mislead the interviewer. False statements, however, are not always indicators of fraud; they may be covering up an individual’s perceived personal or professional deficiencies.

Making a false statement during an audit interview is stressful for most people. When a false statement is made, the interviewee releases the stress verbally, nonverbally, or in both ways. Indicators of deception vary from individual to individual. A skilled interviewer must be trained to identify these indicators and have a thorough understanding of their potential significance.

Because the main purpose of the fact-finding interview is to seek information, open-ended questions should be emphasized. Questions should be structured to encourage the interviewee to volunteer information. For example, “What internal control problems do you have in your department with respect to cash receipts?” will likely provide more information than the closed-ended question, “Are all daily cash receipts deposited intact?” One of the last questions asked in each interview should be very open-ended; for example, “Is there anything else you would like to tell me regarding the operations of your department?”.

To minimize legal risk, auditors should gear the discussion solely toward fact-finding questions or statements and away from accusatory questions or statements.

Once all interviews have been completed, the audit manager should read all of the interview documentation memos, looking for themes and patterns. If the interview results indicate a lack of internal controls, overrides of internal controls, potential fraudulent activities, or other specific risks of material misstatement due to fraud, the auditor should expand procedures in the identified areas. In addition, according to SAS 99, paragraph 83, “specific risks of material misstatement due to fraud that were identified … and a description of the auditor’s response to those risks” should be documented.