The public sector of the Federation of Bosnia and Herzegovina (FBiH) from the aspect of complexity and comprehensiveness, includes all levels of government established within the state government, public companies, and the insurance system including: pension, health and social. The importance of performing duties and obligations in a transparent manner, and the possibility of detecting warning factors for corrupt activity are especially important in the public sector. Corrupt activities at all levels of the state structure of Bosnia and Herzegovina (BiH), as well as fraudulent behaviour and abuses within it, are precisely the consequences of the complexity of the state system, and the impossibility of efficient and rational use of public funds. Adequately organized, in accordance with the law, and accepted as such by employees within a certain public sector organization, internal auditing contributes to more efficient operations and prevention of corrupt practices. The aim of the subject research is to look at the process of functioning of the internal audit in the public sector of FBiH in the field of prevention of corrupt activities. The results of the research indicate the non-functioning and non-establishment of the internal audit in the manner specified by law, as well as the inadequate implementation of its recommendations, degrading and derogating its role, importance and contribution in the prevention of corrupt activities in the public sector of FBiH.

Abstract Banks and banking business are exposed to the influence of numerous risks, of which the importance of credit risk management stands out, because credit risk is the only risk that banks are obliged to measure, record in accounting and report. Banks monitor credit risk through the segmentation of the credit portfolio according to the level of risk. This paper is focused on research related to the management of the riskiest category of the credit portfolio, for which we will use the term special credit risk (SCR) in this paper.

Abstract Aware of the danger that the risk of money laundering and terroist financing has on the whole society, and with the aim of increasing awareness of the effective fight against the same risk in Bosnia and Herzegovina (BiH), the paper deals with the research of mechanisms for managing the risk of money laundering and terrorist financing activities. The research of this work will be focused on determining the degree of application of the requirements of the legislative and institutional framework for the fight against money laundering and terrorist financing by those obliged to apply law. Also, the paper points to the cooperation of state institutions with entities of the BiH, and examines the degree of compliance of the BiH system with international standards related to the fight against money laundering and terrorist financing. In order to assess the management of this risk as efficiently as possible, the paper will cover financial and non-financial money transfer systems, and indicate the level of measures taken in this fight by the competent institutions. For the purposes of research in the paper, the data published by the competent institutions through their reports/publications will be used, with a special focus on the data published by the Banking Agency of the Federation of Bosnia and Herzegovina as the legal entity that reported the largest number of suspicious transactions in the analyzed period. The results of the research indicate that there is no concern regarding the management of the risks of money laundering and terrorist financing in BiH, and that the risk can be quantified in the category of moderate risk.

The financial reports, as the final product of the accounting information system, need to be accurate in order to maintain the main purpose of financial reporting. Applied methods and techniques of recognition and measurement of financial positions should be in the purpose of realistic and transparent presentation of the financial performances of the entity. However, creative accounting techniques are often used in the process of preparing and presenting financial statements in order to manage earnings and manipulate financial values. Manipulation of financial statements seems to be a generally present phenomenon, and the paper aims to identify the criteria used by members of the accounting profession in the Federation of Bosnia and Hercegovina (FBiH) to distinguish earnings management techniques from fraudulent financial reporting. The research reflects the perception of accountants and auditors in the FBiH regarding the possibility of recognizing suspicious accounting practices in business entities. The research is based on distinctive criteria used in developed economies of the world: measurement subjectivity, the materiality of financial item and compliance of financial reporting with generally accepted accounting principles, but identifies specific distinctive measures used by respondents, too. The results of the research reveal that the accounting professionals in the FBiH rely on distinctive criteria: materiality and compliance of reporting with International Financial Reporting Standards, including two additional measures: compliance of financial reporting with generally accepted practices and confidence of financial information. Respondents did not recognize subjectivity in assessment as a relevant measure of the distinction between earnings management and fraudulent financial reporting.

Abstract Large corporate scandals in the US and Europe, from the early 21st century, such as Enron, Parmalat, WorldCom and many others, have seriously shaken public confidence in the auditors’ work. Consequently, many countries have recognized the need for introduce the forensic accounting as a more advanced and reliable form of protection against manipulative financial reporting by companies, and have completed the accounting profession with the forensic accountant title, as an active fighter against various types of frauds in companies.

The objective of preparing and presenting financial statements is to provide information about the financial position and performance of an entity, which is useful to a wide range of users of financial statements for business decisions. If information presented in the financial statements is not full disclosure and/or is incorrect, the presented image of the business entity will be wrong, as well as business decisions made on the basis of such financial statements. Unfortunately, many entities knowingly manipulate revenues and expenses to manage earnings in a way that suits the entity management. Detecting frauds in financial statements is the primary task of forensic accountants. This paper analyzes the possibilities of applying Benford’s law in the forensic analysis of income statements of economic entities in Bosnia and Herzegovina, to detect possible earnings manipulation. The results of the research confirm that the positions of revenues and expenses in the income statements of economic entities in Bosnia and Herzegovina generally follow Benford’s law, but also stress the need to increase attention and conduct additional forensic investigations for certain items as indicators of financial statement manipulation.

Abstract We are witnessing an increasing frequency of illegal actions and fraud in the business of legal entities, which directly reflects on the quality of information presented in financial statements. Internal audit does not primarily deal with the audit of financial statements, but through verifying the application of accounting policies and procedures it helps to gain reasonable assurance that the financial statements are reliable and that they are presented fairly. The role of internal audit in the fraud detection process is reflected in the fraud risk assessment in the internal audit planning process, and through performing work engagements to detecting them. In this paper, we will present risk assessment techniques, which the internal auditor can apply in quantitative and qualitative assessment of fraud risk, and in identifying priority areas/audit processes. The aim of this paper is to point out the importance of the role of internal audit, through the application of techniques, tools and prescribed responsibilities for risk assessment, in the process of detecting fraud in companies that cause incalculable damage on a daily basis.

The fair and reliable financial reporting of business entities is extremely im portant for strengthening the confidence among business entities, acting po sitively on the scope of business activities and achieved results. On the other hand, individuals, businesses and the entire society, suffered huge losses, due to the frauds in financial reports, by dropping the confidence in the accoun ting profession. The public’s expectations from the accounting profession are that its professionals consciously reject participation in any fraud activities, and be real fighters for the real financial reporting of the entities. In the light of specified expectations, this paper tries to consider the ability of students of economic specialization in Bosnia and Herzegovina in recognizing cases of false financial reporting among different situations that can(not) include fraud characteristics, and their readiness to take active participation in the fight against frauds in business entities and economic crimes, in general. The results of the research showed that research participants clearly recogni ze cases of false financial reporting among various fraudulent activities, that they have a high level of awareness regarding the seriousness of the fraud type and its negative consequences for entities, and that they express their unreserved readiness to report these cases to the competent authorities with the purpose of prosecution.

Financial statements as the outcome of the accounting system are represented structured view of the financial condition and financial success of the business of legal entity for a specified period of observation. Financial statements should show the accura...

The meaning and purpose of preparing and presenting financial statements of legal entities is collecting true and fair information from different users of financial statements who are on financial positions, which results in cash flows of the legal entity during a determined period. Unfortunately, the practice of financial reporting in the world, and here, largely weighed down by using illegal accounting techniques aimed showing financial position and success in accordance with the interests of the accountant / manager / owner of the company. The public expects auditors to detect all frauds in an entity committed by employees and managers. Unfortunately, the expectation that the auditor detects all accounting fraud committed in an entity is only a utopia for those who do not know the role and task of the audit. Hope for more efficient detection of accounting fraud today is a new discipline of accounting - forensic accounting and a new accounting professional title - forensic accountant. Unfortunately, in Bosnia and Herzegovina’s higher education institutions there is no systematic and scientific study of the discipline of forensic accounting, or an aim to implement the training and certification program for forensic accountant. The consequences of this situation are extremely negative for the whole economy, whereas business scams in the financial statements are followed, detected and prevented by the supervisory authorities and external auditors in accordance with their domain of activity, but research and practice around the world has shown that this is still an insufficient type of prevention. The purpose of this paper is to provide a comparative overview of the roles of various qualifications of accounting profession in the active prevention and detection of accounting frauds in the companies, while the final aim of this paper is the presentation of relevant characteristics of forensic accounting as a relatively young scientific discipline, as well as highlighting the role of forensic accountant as a new accounting professional qualification in the fight against accounting frauds. Keywords: accounting fraud, certified accounting technician, certified accountant, external auditor, forensic accountant.