The applicability of forensic auditing in selected government departments : an analysis

Abstract

Purpose: 'No country or institution in the world is safe from cases of corruption or breaches of their responsibilities by their officials', and with the rise in fraudulent activities on a global basis, the need to prevent and deter fraud has increased. Additionally, the VAT fraud case has deteriorated the perception of the general public towards accountability and transparency in government departments. The main objectives of this study are to: 1. Assess the current use of forensic auditing methodologies in a selection of government departments. 2. Analyse the extent of benefits arising from the cost of forensic auditing. 3. Determine the most adequate structure of forensic auditing application. Design: To achieve these objectives, interviews were conducted with the IAID, NAO, with the selected government departments' directors and a with a private audit firm which provides forensic auditing services to the government. Findings: The general findings suggest that there is awareness of the negative effect of public sector fraud. Some interviewees believe that proactive action is always better than reactive. However, forensic auditing is still used only on a reactive basis because the mindset of government departments is that action is taken only after something happens. Conclusions: The main conclusion derived from this study is that forensic auditing is still a relatively new term amongst the majority of the interviewees. Government departments need to start addressing fraudulent activities before they are brought to light and the fact that nothing suspicious comes to the general auditor's attention, does not mean that there is no fraud taking place. Additionally, forensic auditing training needs to be improved to increase the level of expertise. Value: Fraud leaves a financial burden on the society in general. So, it is the government's responsibility to mitigate this risk and improve transparency and enhance the internal controls' effectiveness.