The Auditor's Role in Preventing Accounting Manipulation

Given the complexity of corporate financial reporting and the increasing risk of fraud, the role of auditors in preventing accounting manipulation is becoming increasingly important. Auditors not only verify the accuracy of financial statements, but also act as watchdogs to help prevent and detect fraud. According to Apandi and Nasution (2022), "Internal auditors help management achieve good performance by taking a systematic approach in assessing and improving the effectiveness of internal control".  This shows that auditors are responsible for identifying weaknesses in the internal control system.

Financial statement fraud can harm various parties, including shareholders, creditors, and the wider community. Therefore, auditors must use appropriate audit techniques to identify signs of fraud, such as unusual transactions or inconsistent accounting policies. Mursalin's (2021) study highlights that "auditors have a responsibility to discover and detect internal fraud," emphasizing the importance of the auditor's role in maintaining the integrity of financial statements.

Implementing effective audit procedures can help companies reduce the risk of fraud. By understanding the operating environment and applying appropriate audit techniques, auditors can make recommendations to improve the internal control system. Therefore, the role of auditors in building transparency and accountability in today's business world is very important.

Definition of Accounting Manipulation

Accounting manipulation is an action deliberately taken by management to make financial information available to the public appear better than it actually is. Forms of accounting manipulation include fictitious revenue recognition, asset inflation, and liability concealment.

According to Jones (2011), accounting manipulation is also often used to achieve performance goals, increase stock prices, or avoid paying higher taxes. Such behavior directly affects public trust in the company and damages the company's reputation.

Examples of types of accounting manipulation:

• Revenue Manipulation: Obtaining revenue before it is realized or in an improper manner.
• Cost manipulation: Avoiding cost recognition to increase net income.
• Asset Manipulation: Inflating the value of assets with the aim of creating the impression that the financial condition of a company is better.

Auditors' Role in Preventing Accounting Manipulation

Auditors play a central role in maintaining the integrity of financial statements through a systematic and risk-based audit process. Their job is to provide an objective opinion on the financial statements of a company after thoroughly examining the accounting data presented by management.

Auditors use several methods to detect accounting manipulation, including risk analysis. Auditors identify areas with a high risk of manipulation, such as revenue, cost, and asset valuation reports.

In addition, technology also plays an important role in modern auditing. By using data analysis and artificial intelligence (AI)-based technologies, auditors can identify unusual patterns in financial transactions that may indicate manipulation. According to Bhasin (2016), the use of this technology allows auditors to detect anomalies that are difficult to find using traditional manual methods.

Accounting Fraud Cases in Indonesia as Many as

Accounting fraud cases in Indonesia show the importance of the auditor's role in detecting and preventing fraud. One example is the Garuda Indonesia case in 2018, where the company recognized unrealized revenue to cover financial losses (Suryanto, 2019). In this case, external auditors played a key role in identifying the difference between reported revenue and actual realization.

Another incident involving PT Tiga Pilar Sejahtera in 2017 also shows how important audits are in detecting financial manipulation (Widodo & Anggrani, 2018). The company manipulated assets and profits, which led to the bankruptcy of the company. In this case, the auditor found significant discrepancies between the data presented and the actual facts, which ultimately required further investigation by the tax authorities.

Challenges for Auditors

Auditors often face various challenges in preventing accounting manipulation. One of the biggest challenges is pressure from management not to disclose adverse audit findings (Bhasin, 2016). These pressures can affect auditor independence and objective audit results.

Another challenge for auditors is the increasing complexity of financial transactions. With the development of technology and sophisticated financial systems, auditors need a deeper understanding of various types of complex transactions. In addition, limited time and resources are also an obstacle for auditors to conduct more detailed audits.

Solutions to Strengthen the Role of Auditors

To overcome these challenges, there are several solutions that can be applied to strengthen the role of auditors in preventing accounting manipulation. First, continuous training for auditors on modern auditing technologies, such as data analytics and AI, is essential to improve intrusion detection skills (Bhasin, 2016). Second, regulators need to implement stricter regulations and increase audit transparency to ensure sufficient auditor independence.

In addition, there is a need to improve coordination between auditors, management, and regulators. According to Widodo & Angraini (2018), auditors need to work more closely with financial regulators to ensure important audit findings can be followed up immediately. These steps aim to further protect the financial system from the risk of accounting manipulation that can harm many parties.

Conclusion

Auditors play a critical role in maintaining the integrity of financial reporting and preventing accounting manipulation. However, auditors face a variety of challenges, including: As operational pressures and transaction complexity increase, solutions such as training on the latest technology and increased regulation can help strengthen their role. Quality audits can minimize the risk of accounting manipulation and maintain public confidence in financial statements.

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Dan, P. I. A. D. P. (2014). PERAN INTERNAL AUDITOR DALAM PENCEGAHAN DAN PENDETEKSIAN KECURANGAN (FRAUD) PADA PERUSAHAAN Mursalin* ABSTRAK. Jurnal Media Wahana Ekonomika, 11(1), 32-52.

Jones, M. J. (2011). Creative Accounting, Fraud, and International Accounting Scandals. John Wiley & Sons.

Suryanto, T. (2019). "The Role of Auditors in Detecting Fraud: Evidence from Indonesia." Asian Journal of Accounting Research, 4

The author : Ika Ayu Lestari and Heberyani Br Tarigan