The application of internal forensic auditing in Maltese banks : a follow up study

Abstract

Purpose: The purpose of this study is to understand to what extent forensic auditing is being applied internally within local banks and if the recent changes in the industry, both regulatory and organisational, have enhanced its applicability. Through analysing the prevention, detection and investigative measures in place when deterring fraud, a deeper understanding of the application of forensic auditing shall be explored and whether an internal forensic audit is possible or if the need of external help is always required. Design: The research method chosen in order to satisfy the objectives of the study is that of semi-structured interviews with heads of the internal audit function within the chosen banks as well as interviews with audit firm representatives who manage the forensic department within their firm. Both sets of interviews prompted questions relating to the experience with fraud prevention, detection and investigation that is related to forensic auditing. Findings: The findings gathered through the study have shown that firstly, the developments of fraud within banks have caused several changes in the way prevention, detection and investigation is approached. Banks have pursued the use of forensic auditing more in recent times due to different applications and scopes it can provide. However, banks have found resource challenges when attempting to conduct forensic audits thus they are less frequent than desired. Regulatory changes within the industry have also had an effect on the approach taken with fraud with more procedures and compliance to be taken into consideration even though the regulatory presence with regards to feedback has only recently been noted. It was also found that banks prefer to carry out such audits themselves unless further specialization is needed, due to maintaining their reputation. Finally, the findings have also suggested that forensic auditing is able to be carried out in a more efficient manner through the technological advancements made. Conclusion: The study has brought about findings which suggest that even though banks have been incorporating forensic audits within their audit plans, further application is possible. The practice is constantly updating itself according to the needs of the industry and banks are always on the lookout for fraud and potential measures which will help deter fraud and eliminate it as much as possible in their organisation. Value: This study has provided insight for banks when considering the further application of forensic auditing and the wide range of valuable aid it provides in deterring fraud. Both banks and firms providing forensic auditing services can use this study to further understand the need of forensic auditing and help enhance the awareness of forensic auditing.