Fraud Audit Procedures
Fraud auditing is a response to the risk of fraud in core business systems. It uses all the skills of traditional auditing, but with a different aim. The aim of fraud auditing is the application of audit procedures to a population of business transactions to increase the likelihood of locating and recognizing fraud scenarios. Fraud audit procedures by design are intended to recognize the fraud scenario. For recognition to occur, there must be a link between the concealment strategy and the gathering of evidence external to the fraud opportunity. The intent of this link is to refute the validity of the representation made through the concealment strategy.
Basis of Fraud Audit Procedures
When designing fraud audit procedures:
- Do not test the existence of internal controls, but rather the authenticity of the representation of the document or internal control. This may seem like a case of semantics; however, the difference is critical to the understanding of why a traditional audit differs from a fraud audit. Testing for evidence of the control is not always sufficient to detect fraud, whereas fraud audit testing procedures are designed to reveal the truth.
- Do not rely on, or assume that, a falsity on the part of management occurs in the transactions, assertions, and representations.
- Fraud audit procedures are designed to target the concealment strategy. Fraud, by its very nature, involves trickery and concealment. The perpetrator uses concealment ...