Detecting Asset Misappropriation: A Framework for External Auditors

Fraud is a major concern for investors, regulators, and external
auditors. Of particular concern is asset misappropriation because it was given
less attention in prior audit literature as well as the audit practice though it is
the most common type of occupational fraud. This motivated the current study
to examine areas related to asset misappropriation that had never been
examined before and alert external auditors in Egypt to a type of fraud which
was given less attention. The current study also proposed a framework for
external auditors that might help them properly assess and respond to fraud risk
factors arising from asset misappropriation. This framework was designed after
careful consideration of prior audit literature, Egyptian auditors’ perceptions of
the most important red flags of asset misappropriation, and their experience on
the most effective fraud risk response. Study data was gathered using prior
literature, a questionnaire, and a semi-structured interview.