Fraud Prevention and Detection

APPENDIX A: SUMMARY OF RED FLAGS

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• A signicant decrease in the audit budget

• Unexplained or unexpected changes in external auditor or sig-

nicant changes in the audit program

• Internal or external auditors relying heavily on the other’s conclusions

• Audit reports not addressing identied internal control weaknesses

• Signicant deciencies in internal controls noted in audit reports

that have not been corrected

• A qualied, adverse, or disclaimer opinion from an external auditor

• The inability of management to provide timely and accurate

nancial, operational, and regulatory reports

• Dominance of top management by one individual or a small

group of individuals, which leads to blocking of controls by other

members of senior managem ...