Chapter 1

What Is a Fraud Audit?

The debate is over; auditors have a responsibility to respond to the risk of fraud. The stockholders, board of directors, and management of organizations are looking to their internal auditors to detect fraud before it undermines the vital operations that are referred to herein as the core business systems. Auditing standards now require auditors to respond to the risk of fraud. Phrases such as professional skepticism, identified fraud risk, fraud risk assessment, and fraud audit procedures are now found in use within organizations of all types to meet the current standards. Unfortunately, this change seems to be an agonizing effort for all involved. Just say the very word fraud and everyone seems to react as though someone has contracted the bubonic plague. Therefore, all parties involved in the effective, efficient, and healthy operation of an organization, such as the aforementioned auditors and various stakeholders, need to recognize what fraud is, where it is found, and how it is found. So, when we speak of fraud in the context of auditing, it denotes a distinct body of knowledge, the mastery of which is needed to address the risk of fraud. The title of auditor does not immediately confer knowledge regarding fraud, and it certainly doesn't infer the mastery of identifying the risk. Auditors need to possess this specialized knowledge to solve the difficulties in addressing fraud that perplex the profession. So, fear no more, because you, the ...

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