JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi)

Vol. 7 No. 2 / August 2023

ISSN 2550-0732 print / ISSN 2655-8319 online
DOI;10.36555/jasa.v7i2.2350

FORENSIC ACCOUNTING AND INVESTIGATIVE AUDIT ON THE EFFECTIVENESS

OF IMPLEMENTING AUDIT PROCEDURES IN FRAUD DISCLOSURE

Dedy Sudarmadi
Universitas Langlangbuana, Indonesia
[email protected]

Abstract : Forensic accounting is a branch of accounting that focuses on investigating,

disclosing, and preventing fraud and illegal activities in the business environment. Its main
purpose is to identify, collect, analyze and present evidence that can be used in legal
proceedings. Meanwhile, an investigative audit is an approach to auditing that is focused
on investigating indications of fraud or non-compliance in the financial statements or
business processes of an entity. The effectiveness of implementing audit procedures in
disclosing fraud involves the application of a careful and careful methodology to identify
signs or evidence of fraud in the financial statements and identify signs of fraud, the auditor
uses knowledge about the mode of fraud and analysis of data to identify potential
indications of fraud in transactions or financial reports, among others, by using forensic
techniques. Auditors can use forensic data analysis techniques, digital examinations, and
interviews to gather more in-depth and accurate evidence. Carry out segregation of duties.
The auditor must examine the internal control system and ensure that there is adequate
segregation of duties to prevent opportunities for fraud as well as test the substance of
transactions to ensure that transactions reported in the financial statements actually occur
and have a valid basis, in collaboration with the forensic team. In complex cases, the
auditor needs to work with a forensic team that has special expertise in fraud analysis to
detect fraud and the auditor prepares a report that provides a clear description of the fraud,
along with recommendations for corrective measures and fraud prevention. The results of
investigative audits are used to identify opportunities for improvement in the internal control
system so that fraud can be minimized. Forensic accounting and investigative auditing
have an important role in helping businesses detect, address and prevent fraud through a
careful and evidence-based approach, effective audit procedures can reveal potential fraud
and provide guidance for necessary improvements in internal controls.
Keywords : Forensic Accounting, Investigative Audit, Effectiveness of Executing Audit
Procedures, Disclosure of Fraud.

INTRODUCTION
Background
In a complex and dynamic business environment, the risk of fraud is a serious threat
that can threaten the integrity of financial statements, corporate reputation and investor
confidence. Fraud can harm stakeholders, result in financial losses, and damage the
company's image. Therefore, the need to identify, disclose and detect fraud is increasingly
urgent, among others due to the imperfection of traditional audit procedures, not being able
to effectively reveal various forms of fraud that are increasingly sophisticated and complex.
Adequacy of knowledge of auditors who have knowledge and understanding of forensic
accounting methods and techniques needed to detect and investigate fraudulent acts as
well as difficulties in identifying fraud. Conduct interdisciplinary cooperation by
collaborating between auditors and forensic accounting experts to integrate investigative
Submitted: August 15, 2023; Revised: August 25, 2023; Accepted: August 26, 2023;
Published: August 30, 2023; Website: http://journalfeb.unla.ac.id/index.php/jasa
400
 JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi)
Vol. 7 No. 2 / August 2023
ISSN 2550-0732 print / ISSN 2655-8319 online
DOI;10.36555/jasa.v7i2.2350

approaches to forensic accounting and investigative auditing to support disclosure of fraud

so that early prevention can be carried out on the results of forensic accounting
examinations and investigative audits. Fraud or what is often known as fraud is something
that is now being widely discussed in Indonesia. The definition of fraud itself is a fraud that
is intentionally carried out, which causes losses to other parties and provides benefits for
the perpetrators of fraud and/or their groups. In accounting, there are two types of errors,
namely errors and fraud. The difference between these two types of errors is only
distinguished by a very thin gulf, namely whether or not there was an element of intent.
Often detecting fraud is more difficult when compared to mistakes because management
or employees will try to hide the effectiveness of implementing audit procedures in
disclosing fraud is very important in maintaining the integrity of a company's financial
information. An effective audit process will help identify signs or indicators of fraud that may
be hidden in the financial statements. The following is a detailed explanation of the factors
that influence the effectiveness of audit procedures in disclosing fraud.
The auditor needs to have an in-depth understanding of the business of the company
being audited as well as the characteristics of the industry in which the company operates,
this helps in identifying fraud risks that may be higher in certain contexts before starting
the audit process, the auditor must carry out a risk analysis to identify areas which have a
higher potential risk of fraud. By understanding where fraud is likely to occur, the auditor
can design more specific audit procedures, by establishing relevant audit procedures,
based on risk analysis, the auditor designs relevant audit procedures to test specific
transactions and account balances. This process involves selecting a representative
sample for testing and the use of appropriate auditing techniques as well as Substantial
Testing in identifying fraud, substantial and detailed testing is essential. The auditor must
conduct an in-depth examination of transactions and related documents to identify
fraudulent transactions, manipulation of numbers, or embezzlement of assets. Using
technology and data analysis, through examining documents and supporting evidence, the
auditor needs to collect and analyze evidence that supports transactions and account
balances. This includes examining invoices, contracts, receipts of payments, and other
documents to ensure the legitimacy of transactions and identification of non-conformances
as well as effective internal controls and effective audit procedures involving an
assessment of a company's internal control systems. The auditor will assess whether the
existing internal controls can prevent or detect fraud properly.
After conducting an audit, the auditor must produce a clear and comprehensive report
on their findings. This report should include indicators of fraud that have been identified,
as well as recommendations for actions to be taken to address the problem.

Literature Review
Theory of Fraud
The definition of corruption according to the Asian Development Bank (ADB), namely
activities involving inappropriate and unlawful behavior by public and private sector
employees to enrich themselves and those closest to them. These people, continued
ADB's understanding, also induce others to do these things by abusing their position.
Article 3 Law No. 31 of 1999, Corruption is any person who, with the aim of benefiting
himself or another person or a corporation, abuses authority, opportunities or existing
facilities because of his position or position which can harm state finances or the country's
economy. According to Indonesian law, corruption is categorized into 7 types, namely loss
Submitted: August 15, 2023; Revised: August 25, 2023; Accepted: August 26, 2023;
Published: August 30, 2023; Website: http://journalfeb.unla.ac.id/index.php/jasa
401
 JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi)
Vol. 7 No. 2 / August 2023
ISSN 2550-0732 print / ISSN 2655-8319 online
DOI;10.36555/jasa.v7i2.2350

to state finances, bribery, extortion, embezzlement in office, fraud, conflicts of interest in

the procurement of goods and services, and gratuities (Law No. 31 of 1999 in conjunction
with Law No. 20). of 2001 concerning the Eradication of Corruption Crimes, according to
the 30 articles in it). Corruption is a form of fraud such as fraud, concealment, or breach of
trust (The IIA's, 2015). The International Standards on Auditing (ISA) defines fraud as an
activity carried out intentionally by someone in an organization, be it staff, managers or
third parties who commit fraud for personal or group gain and violate the law.

Investigative Audits
An investigative audit is a special form of audit conducted by internal or external
parties to investigate incidents or suspected non-compliance that could harm the company
financially, operationally or reputationally. The role of the investigative audit within the
company is very important in disclosing violations, fraud in the organization. Some of the
main roles of an investigative audit within a company are to identify and uncover fraudulent
acts or violations of law that can be detrimental to the company, including misuse of funds,
falsification of documents, manipulation of financial reports, and others. Minimizing risks
and losses by identifying non-compliant or adverse actions early, investigative audits
helping companies to take corrective actions quickly can help in minimizing the financial
and operational impact. Supporting investigative audit oversight and management
responsibilities provides a powerful tool for the management team and the board of
directors to monitor internal company activities. By identifying areas prone to fraud,
companies can strengthen internal control and oversight systems and develop and improve
policies and procedures: The results of an investigative audit can provide valuable insights
into designing company policies and procedures.

Forensic Accounting
The forensic accounting profession was originally used by the CIA, FBI and IRS in
uncovering large-scale fraud cases, while in Indonesia, the forensic accounting profession
became known in the early 2000s. Forensic accountants can play a good role in aspects
of prevention and investigation related to various types of frau. It is undeniable that fraud
has occurred and resulted in losses for Forensic Accounting and Investigative Audit as well
as business, including owners, management and other stakeholders. Forensic accountants
can play a good role in the aspects of prevention and investigation related to various types
of fraud. Forensic accountants can play a good role in the aspects of prevention and
investigation related to various types of Fraud. It is undeniable that fraud has occurred and
resulted in business losses, including owners, management, and Forensic Accounting and
Investigative Audit stakeholders, Nur Sayidah, et al.2019. Forensic accounting comes from
two words, accounting and forensics. The word forensic comes from the Latin "forensic"
which means collecting facts or evidence used to support an argument in court
proceedings. Forensic accounting aims to detect fraud related to proving accounting facts
in legal proceedings. In other words, that the scope of forensic accounting consists of
accounting, law, and auditing (Tuanakotta, 2010).

The Role of Forensic Accounting

In detecting or disclosing fraud, forensic accounting plays a major role not only in
gathering evidence but in finding out who the perpetrators of the fraud are. The evidence
obtained will be presented to the court to serve as the basis for punishment for the suspect.
Submitted: August 15, 2023; Revised: August 25, 2023; Accepted: August 26, 2023;
Published: August 30, 2023; Website: http://journalfeb.unla.ac.id/index.php/jasa
402
 JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi)
Vol. 7 No. 2 / August 2023
ISSN 2550-0732 print / ISSN 2655-8319 online
DOI;10.36555/jasa.v7i2.2350

Problems
In preparing this research, problems in forensic accounting and investigative auditing
related to the effectiveness of implementing audit procedures in disclosing fraud
(embezzlement or fraud) are complex and important matters in the world of finance and
business. These issues cover various aspects, including methodology, technology and law,
here are some of the main issues that may arise:

1. Understanding fraud as one of the biggest challenges is identifying the signs of fraud
which are sometimes very complicated and hidden. Auditors must have an in-depth
understanding of the types of fraud that may occur, and know how to identify them in
various business situations.
2. Limitations of conventional audit procedures Conventional audit procedures are not
always able to detect complex or well-hidden fraud, a special and more in-depth
approach is needed, such as forensic data analysis, in-depth interviews, and
examination of more specific evidence.
3. Technological incompatibility Technological developments have provided great
opportunities in detecting fraud through massive data analysis. However, not all
companies or auditors have adequate access or understanding of this technology,
which can reduce the effectiveness of fraud detection efforts.

Research Objectives
1. Understand the impact of fraud.
2. Identify signs of fraud which are sometimes very complicated.
3. Have an understanding of the types of fraud.

The research results can be used as information so that it can be used as a basis for
determining employee performance and used as feedback.

Research Methods
Research Design
Research design can be defined as a framework that is systematic and can be
applied in conducting research, research design can provide an outline of the steps to
obtain information in answering research questions (Nurdin and Hartati, 2019: 27).
Research design is an overview of what researchers will do by designing hypotheses
and operational involvement up to data analysis (Tanjung and Muliyani, 2021:26).

According to Nurdin and Hartati (2019:28) the research design includes several processes
including :
1) Identification and selection of research problems
2) Selection of the conceptual framework
3) Formulate research problems and create hypotheses
4) Building an investigation or experiment
5) Selecting and providing definitions of variable measurements
6) Choose the sampling procedure and technique used
7) Develop tools and techniques to collect data
8) Make coding and hold editing and data processing
9) Analyzing and selecting statistical procedures
Submitted: August 15, 2023; Revised: August 25, 2023; Accepted: August 26, 2023;
Published: August 30, 2023; Website: http://journalfeb.unla.ac.id/index.php/jasa
403
 JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi)
Vol. 7 No. 2 / August 2023
ISSN 2550-0732 print / ISSN 2655-8319 online
DOI;10.36555/jasa.v7i2.2350

10) Reporting of research results

Variable Operationalization
According to Nasir (Rukajat 2018: 1) argues that:
Descriptive research method is a method in researching an object, a condition, a system
of thought or an event in the present, which has the goal of making a systematic, factual
and accurate description or picture of facts, characteristics and relationships between
phenomenon being investigated

Validity and Reliability Test

Validity Test
According to Sugiyono (Rukajat, 2018: 8) explains that instrument testing can
factor analysis was carried out, namely correlating factor scores with total scores. When
correlation
each factor is positive and the magnitude is > 0.3, it can be concluded that the instrument
is valid.
The validity formula uses the product moment correlation technique as follows :

Information :
r = Product Moment Correlation
X = Score of question/statement items
Y = Question/statement score

Data Analysis Techniques

Data Analysis Method
Data analysis is a process carried out after data collection. Process This analysis is an
important stage in research because it is used as a basis to answer research questions,
test hypotheses and draw conclusions research (Solihin and Anggraini, 2020: 2)

The t test is usually used to test the significant effect between independent variables (X)
on the dependent variable (Y), then the test is carried out using a test
t statistics, t test formula as follows:

Source: Sugiyono (2021:248)

Information :
r = partial correlation
n = number of samples
Submitted: August 15, 2023; Revised: August 25, 2023; Accepted: August 26, 2023;
Published: August 30, 2023; Website: http://journalfeb.unla.ac.id/index.php/jasa
404
 JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi)
Vol. 7 No. 2 / August 2023
ISSN 2550-0732 print / ISSN 2655-8319 online
DOI;10.36555/jasa.v7i2.2350

Criteria for rejecting the acceptance of the H hypothesis

0 are as follows:
1. If t count < t table, then H 0 is accepted and H a is rejected
2. If t arithmetic > t table, then H a is accepted

CONCLUSION
Forensic accounting has an important role in uncovering fraud through a
comprehensive approach and in-depth analysis of financial and operational data. By
combining accounting, auditing, investigative and legal principles, forensic accounting
plays a significant role in protecting the integrity of financial reports and the credibility of
the business as a whole.

REFERENCES
Achyarsyah, P., & Rani, M. (2018). The Influence of Forensic Accounting and Investigative
Auditing
Arens, Alvin A., Randal J. Elder & Mark S (2005). Beasley..Auditing & Assurance Services
An Integrated Approach. 10th edition.Prentice Education International.
Ghozali, Imam. (2016). Multivariete Analysis Application. Semarang: University Publishing
Agency Diponegoro
Nurdin H. I., dan Sri. 2019. Metodologi Penelitian Sosial. Surabaya: MSC
Rukajat, A. (2018). Pendekatan Peneitian Kuantitatif. Yogyakarta: Deepublish Publisher.
Sayidah, N., et al. (2019), Akuntansi Forensik dan Audit Investigatif, 2019 cetakan ke 1.
Tuanakotta, M. Theodorus, (2010), "Forensic Accounting and Investigative Audit", Jakarta:
Salemba Empat.
The IIA’s, (2015). International Standards on Auditing (ISA
Wella, F., & Pangaribuan, L. (2019). Jakarta Public Accounting

Submitted: August 15, 2023; Revised: August 25, 2023; Accepted: August 26, 2023;
Published: August 30, 2023; Website: http://journalfeb.unla.ac.id/index.php/jasa
405