Fraud Auditing

Types of Fraud

Fraud Definition.

Irregularities & Illegal Acts Characterized by Intentional Deception

Fraud Auditing.

Unlike other types of audits (financial, operational and compliance), the smallest item may become the most significant clue as to the possibilities that fraud may have been committed.

Evidence gathering techniques employed and types of evidenced obtained are critical considerations when investigating the potential for fraud.

Professional Requirements.

"Internal auditors should exercise due professional care in performing internal audits. Due professional care calls for the application of the care and skill expected of a reasonable prudent and competent internal auditor …", per "Standards for the Professional Practice of Internal Auditing".

Internal auditors are required to be alert to possibilities of fraud, waste, abuse, etc.

Types of Fraud.

Fraud is perpetrated either to the benefit or detriment of the organization. Fraud committed to the benefit of the organization is typically perpetrated at the "top" of the organization. Frauds committed to the detriment of the organization normally can be found throughout all levels of management as well as employees.

Fraud committed for the benefit of the organization often times are perpetrated either to take an unfair advantage of or deceive a party outside the organization.

Examples: improper payments; misrepresentations; related-party transactions; etc.

Fraud to the detriment of the organization often are perpetrated for the benefit of an individual.

Examples: embezzlement; fictitious invoices; etc.