The Significance of Assessing Money Laundering Risk as a Part of Auditing Operations

Abstract

In addition to the ever attractive financial sector, the effect of globalisation on the development of money laundering and terrorist financing process has gradually been including the non-financial sector, namely, independent legal professions. The specific nature of the auditing profession, providing a full insight into financial operations and analysis of individual business entities' transactions, can result in a detection and prevention of money laundering, theft and other criminal activities. Auditor independence is the auditor's main tool when performing basic auditing tasks, controls and reporting on suspicious transactions in accordance with the adopted code of ethics. The risk-based approach is omnipresent in auditing even though auditors often focus on low-risk business entities. However, some business processes result in events and circumstances which increase the risk of fraud and errors. The risk of failure in detecting fraud is significantly greater than the risk of failure in detecting material misstatement that is objectively present in financial statements, due to the fact that fraud is deliberately misleading statement, while error is unintended failure, most commonly caused by negligence. Due to the implementation of international standards into a national framework, focusing on permanent training and control of the non-financial sector, the auditing profession has earned its role of “gatekeeper” in the anti-money laundering and counter-terrorist financing system.

Keywords

• money laundering
• terrorist financing
• auditor
• risk
• suspicious transactions
• fraud