By Leonard W. Vona
Supplying a complete framework for development an efficient fraud prevention version, Fraud probability evaluation: construction a Fraud Audit Program offers a readable review for constructing fraud audit systems and development controls that effectively reduce fraud. a useful reference for auditors, fraud examiners, investigators, CFOs, controllers, company lawyers, and accountants, this ebook is helping enterprise leaders reply to the danger of asset misappropriation fraud and discover fraud in center company platforms.
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Additional info for Fraud Risk Assessment: Building a Fraud Audit Program
Sample text
3. Identify the concealment strategies and the associated red flags. 4. Identify the fraud opportunities. 5. Develop the fraud scenario. 6. Build a data profile of the fraud scheme. 7. Use data-mining techniques to search for the transactions consistent with the data profile. 8. Design the audit procedure. 9. Consider the sufficiency, reliability, and authenticity of the collected evidence. 10. Formulate a fraud conclusion. The basis of a fraud audit differs from that of a traditional audit in the following ways: • The fraud audit does not test for the existence of controls.
There is evidence of the control procedure occurring, but the control does not function as stated. Nonperformance of control procedures can occur because employees lack time, understanding, and training. Other reasons include: employees are fatigued, failure of the management approval process, lack of organizational commitment to control procedures, and lack of separation of duties. • Physical Separation of Duties versus Logical Separation of Duties. Inherent in the control concept is that one individual does not have excessive control over an activity.
For example, the red flags of a fictitious company or a false billing scheme would differ from the red flags of a bid-rigging scheme. 1) Types of Events These types of events will vary by the nature of the fraud scheme or the industry. indd 22 ᭺ Document files ᭺ Document condition ᭺ Data on documents ᭺ Signature lines ᭺ Electronic meta data identifying information 3/12/08 4:30:02 PM The Audit Response 23 • Control access or visibility ᭺ Changes to audit trail ᭺ Control flow of information ᭺ Timing of event • Economic substance of the transaction ᭺ Existence of the event ᭺ Occurrence of the event • Employee behavior either consistent with control or changes ᭺ Lifestyle changes ᭺ Workplace Types of Patterns The types of patterns typically are: • Anomalies, extreme deviations from the norm • Missing information, lacking pertinent factual data • Vagueness/specific, either unclear or overly specific • Unusual or abnormal, irregular or uncommon • Illogical, contrary to what seems reasonable • Frequency, consistent and habitual actions • Ranges, extent or scope of an action • Trends, actions that tend to progress in the same general direction • Change, a difference that appears distinctly different • Error, information is incorrect • Arithmetic, calculation error Linking the Event with the Pattern The audit process must link the observable event with the pattern of activity.