In order to ensure the implementation of Clause 10.3.4, “Conducting master classes based on audits performed by leading auditors,” of the 2026 Work Plan of the Chamber of Auditors, in accordance with the Schedule “On Conducting Master Classes Based on Audits Performed by Leading Auditors,” approved by Order No. 10-1/3-3-20/2026 of the Chairman of the Chamber of Auditors dated 15 May 2026, a master class on “Forensic Audit and Risk-Based Audit: Detection of Fraud Schemes and Damage Assessment” was held online on 23 July 2026.
The master class was moderated by Gasham Bayramov, Adviser to the Chairman of the Chamber of Auditors on Scientific and Methodological Affairs, while Rufat Aliyev, Director-Auditor of “A Audit and Consulting” LLC, delivered the presentation as the speaker.
Opening the master class with introductory remarks, Gasham Bayramov, Adviser to the Chairman of the Chamber of Auditors on Scientific and Methodological Affairs, highlighted the relevance of the topic “Forensic Audit and Risk-Based Audit: Detection of Fraud Schemes and Damage Assessment” and emphasized the need for proper compliance with the requirements of the International Standards on Auditing, including ISA 240 “The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements,” ISA 315 (Revised) “Identifying and Assessing the Risks of Material Misstatement,” ISA 330 “The Auditor’s Responses to Assessed Risks,” ISA 500 “Audit Evidence,” and others, as well as the requirements of the “International Code of Ethics for Professional Accountants (including International Independence Standards).”
Gasham Bayramov noted that ISA 240 addresses the auditor’s responsibilities relating to fraud arising in an audit of financial statements. In particular, ISA 315 (Revised) and ISA 330 provide detailed guidance on their application in relation to risks of material misstatement due to fraud. ISA 500 explains what constitutes audit evidence in an audit of financial statements and addresses the auditor’s responsibility to plan and perform audit procedures to obtain sufficient appropriate audit evidence to enable the auditor to draw reasonable conclusions on which to base the auditor’s opinion.
The Code of Ethics provides a conceptual framework that auditors are required to apply to identify, evaluate and address threats to compliance with the fundamental principles and to take appropriate measures.
Gasham Bayramov then gave the floor to Rufat Aliyev to make a detailed presentation on the topic.
In his presentation, Rufat Aliyev noted that forensic audit is a specialized type of examination conducted to detect fraud, misappropriation, corruption and other forms of financial abuse, establish an evidentiary basis, and calculate the damage incurred. The evidence collected must be suitable for use by courts and investigative authorities.
In the modern business environment, financial fraud, corruption, asset misappropriation and financial statement misstatements pose serious risks in both the private and public sectors. Therefore, auditors are expected not only to know auditing standards, but also to identify risks in a timely manner, recognize suspicious indicators and exercise professional skepticism.
The participants of the master class became familiar with the key principles of the risk-based audit approach, fraud risk assessment, identification of “red flags,” analytical procedures, evidence gathering, damage assessment methods, and forensic audit methodology based on real-life practical examples.
In an audit of financial statements, the auditor expresses an opinion on the fairness of the financial statements, whereas in a forensic audit, the auditor detects fraud and substantiates it with evidence.
Under the risk-based audit approach, the auditor directs resources to areas with the highest risk of misstatement. The auditor identifies and assesses risks, develops and presents responses to address them, and forms the final opinion by assessing the materiality of identified misstatements.
ISA 240 provides the framework used for assessing fraud risks. When three components — pressure, opportunity and rationalization — are present simultaneously, the likelihood of fraud increases.
Typical fraud schemes are classified into three main categories: asset misappropriation, financial statement fraud and corruption.
One of the final outputs of a forensic audit is a quantitatively substantiated assessment of damage. The damage incurred is mainly calculated using four methods: the direct loss method, lost profit method, restoration cost method and comparative method.
The master class concluded with interactive discussions, during which the participants’ questions were answered, and the topic was met with great interest by the participants.
A total of 89 members of the Chamber of Auditors participated in the event.
The materials presented can be viewed below:
