Development of a system of indicators for the risk of falsification of financial statements

Abstract

The theoretical and methodological issues of determining the risk of falsification of financial statements during the audit process are studied in the article. The need to move from the unsystematized use of individual signs of fraud to a complex system of interrelated risk indicators was justified. An author's classification of indicators of the risk of falsification of financial statements was proposed, which includes five groups: external, organizational-management, financial, accounting and behavioral indicators. Taking into account the importance and level of manifestation of each indicator, an evaluation procedure was developed, and a formula for calculating the integrated risk index was proposed. Risk classification ranges and corresponding audit activities are defined. Implementation of the proposed system allows formalizing the professional judgment of the auditor, increasing the validity of the assessment of the risk of serious violations caused by dishonest behavior, and providing a more targeted selection of audit procedures.