Detection of Creative Accounting Related Frauds in the Zimbabwean Cotton Industry-The Internal Auditor’s Role: Evidence From One Large Cotton Company

Abstract

Prompted by behavioural manifestations of massive creative accounting and fraud perpetration in the Zimbabwean cotton industry, particularly in the pre-dollarisation era, the research identifies the need to assess the value of the internal audit function in detecting creative accounting related frauds in this busy industry which is characterized by seed cotton procurement as a key activity. The study employed the quantitative research design, studying one large cotton company in Zimbabwe. Data was collected from ten out of twelve depots in one region and sampling was random. The study defined creative accounting related fraud as rule bending, falsification or manipulation of accounting information, loophole seeking, and systematic misrepresentation of the income and assets of the company. Statistical tests for relatedness between the internal audit function and fraud detection were done. Empirical evidence suggests that the more internal audit visits the more the reported frauds.

Keywords: Internal audit; Creative accounting; Fraud detection