UNIVERSITY OF SINDH

MIRPURKHAS CAMPUS

DEPARTMENT OF BUSINES ADMINISTRATION

Assignment of Auditing

Submitted by
GHULAM IRTAZA
2K18/MKBBA/06
BBA PART-3

Submitted to
Mam Madeeha
Hussain
Q1: How does an Auditor experience serve to gain an
understanding of business knowledge of firms being
audited?

Research has suggest that how experience help the auditors ability to perform
audit task easily and successfully in an organization during auditing. Few
studies have also indicate that indirect relationship by examining the knowledge
and skills that develop with audit experience and may leads to improve task
performance. An Audit experience influenced their audit professionalism and
this have significant impact on their audit efficiency and effectiveness. When an
Auditors gain experience, it’s an indication that; they know more about errors,
frauds; they have more accurate knowledge on error and frauds; they know
more occasional errors, and the causes features of errors and frauds. And
experience Auditor also play important role in internal audit effectiveness in the
public sectors org.

If Auditors have experienced, it’s does not means auditors have the capacity of
detecting fraud and errors but rather its individual experience in fraud and errors
detection that will give him the capability of detecting fraud and errors. The
diversification of such audit knowledge is also fundamental to audit efficiency
and audit effectiveness. An Auditor experience show that specific task
experience can improves auditors’ judgments because auditing is a profession
whose main functions rely largely on the judgments of trained experts.

The Auditor experience on performing a task can be assessed by measuring the

resulting change in the task automatically, despite that experience auditor may
have the ability of identifying the right information that will aid his judgment
because they gain the experience as a result of training and field experience
acquired earlier in their careers. Therefore, experience auditors should make
sure that their judgment in whatever issues is always accurate in order to go
along with the standard.
The auditors unique knowledge, competencies and capabilities that exist from
job practices in auditing profession which lead to the improvements of auditor’s
abilities to process relevant information, make a metal comparisons of
alternative way out, initiate subsequent actions and also provide decision
making efficiency and effectiveness through a good memory of information
necessary and an accurate judgment of audit works. Auditor experience is the
act practice and feedback and can lead to knowledge acquisition.AN audit
experience refers to different kind of knowledge and skills which the auditor
obtain from their job practices in the auditing professions which will enhance
his effectiveness.

END OF QUESTION ONE

Q2: Fraud Detection in a Digital Environment
Exploration of Prospect and Challenges?

The industries that involve financial transactions are suffering from frauds
because of that they face losses and damages. In USA 2016 Fraudsters stole $6
billion from banks. Because industries shifted to digital environment that make
rich environment for fraudsters. So the challenge for industries to implement
real-time claim assessment and improve the accuracy of fraud detection

Here the way of frauds detection

1. Machine learning and rule-based systems in fraud

detection

Machine learning
The machine learning (ML) approach to fraud detection has received a lot of
publicity in recent years and shifted industry interest from rule-based fraud
detection systems to ML-based solutions. Leading financial institutions,
however, already use the machine learning technology to combat fraudsters. For
instance, MasterCard integrated machine learning and AI to track and process
such variables as transaction size, location, time, device, and purchase data. The
system assesses account behavior in each operation and provides real-time
judgment on whether a transaction is fraudulent.

The rule-based approach

Fraudulent activities in finance can be detected by looking at evidence signals.
Unusually, large transactions or the ones that happen in typical locations
obviously deserve additional verification. Purely rule-based systems that
perform several fraud detection scenarios, manually written by fraud analysts.
Rule-based systems remain too straightforward, because Today 300 different
rules on average to approve a transaction
2. Fraud prevention solutions in EСommerce
The eCommerce scam is closely linked to payments. Typical scams here are
identity theft and merchant scams.

Identity theft. In this situation scammer theft another person user account, theft
personal data, and tries to get money or goods from a retailer using this semi-
fake personal information. Nearly all fraud detection tasks here are solved by
behavior analytics. Smart algorithms uncover suspicious activities, analyze
them, and find inconsistencies in the historical sets of personal data.

Merchant scams. These are related to fraudulent companies or merchants

operating through marketplaces. Customers’ choices on marketplaces are often
driven by reviews. Some fraudsters create fake reviews for their accounts to
attract customers.  Machine learning algorithms can eliminate the influence of
such fraudsters through conducting sentimental and behavior analytics and
detecting suspicious activities linked to merchants or their products.

3. Fraud detection in banking and credit card

payments
Payments are the most digitalized part of the banking industry, most of digital
fraudulent activities done here. The rise of mobile payments and the
competition for the best customer experience, banks to reduce the number of
verification stages. This leads to lower efficiency of the rule-based approach.
So, banks and payment companies switch to data analytics, machine learning,
and AI-driven methods.
Modern fraud detection systems solve a wide range of analytical problems to
uncover all scams in the payments streams.

Data credibility assessment. Gap analytics help identify missing values in

sequences of transactions. Machine learning algorithms can reconcile paper
documents and system data eliminating the human factor. This ensures data
credibility by finding gaps in it and verifying personal details via public sources
and transactions history.
Duplicate transactions. A common scam method is creating transactions close
to original or making a copy of a transaction. For instance, a company tries to
charge a counterpart twice with the same invoice by sending it to different
branch rule-based systems currently used constantly fail to distinguish between
error unusual transactions from real fraud. For example, a customer can
accidentally push a submission button twice or simply decide to buy twice more
goods. The system should differentiate suspicious duplicates from human
errors.

Account theft and unusual transactions

Much of fraud detection in payments is focused on user behavior analysis
during transactions.
For example, a client visits a specific supermarket at 9-10 pm every night. It’s
located near the client’s house. The payment sum varies from Rs100 to Rs400.
Every two days the client also drives to a gas station. Once a transaction occurs
in a different part of town in a bar and the sum is Rs400, the algorithm will
consider this activity suspicious and assign a higher level of fraud likelihood.
To check this transaction, the system will send a verification request to a card
owner.

END OF QUESTION TWO