CHAPTER 5 The Ground Floor The Fraud Risk Assessment Process

AFTER IMPLEMENTING THE FOUNDATIONAL policies of a sound anti-fraud environment, we can begin erecting the structure of the anti-fraud program. We will begin by laying the floor on the foundation.

My hobbies include home remodeling. I enjoy being able to envision a project from inception to completion and then live in the fruits of my labor. There are certain aspects of remodeling a home that I prefer over others. Laying the floor, whether with tile or hardwood, is the aspect I least enjoy. There are many small wooden planks involved in covering a thousand-square-foot area. When beginning that process, I am overwhelmed. All of the planks have to fit just right. An error early in the process reflects significantly at the end of the project. Similarly, the fraud risk assessment process can be a lot like laying a hardwood floor—an overwhelming task. The majority of frustration comes from not knowing how to think through the process. Additionally, once the thought process is sound, the documentation of the assessment takes over as a source of frustration. “I don’t even want to start because I’m afraid of making a mistake early that will render my work useless.” I hear that statement often.

The objective of this chapter is to calm the overwhelming fears that are so common in performing a fraud risk assessment. We are working on the ground floor, so let’s establish some ground rules—pun intended.

GROUND RULES FOR FRAUD ...

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