Why Do You Need A Fraud Review Or Examination?


  1. Let our experts explain what Is Fraud?
  2. We will educate you in the three Types of Fraud
  3. We can determine if Fraud has been committed by Employees
  4. We Can determine if Fraud has been committed by Vendors
  5. Explain what Causes People to Commit Fraud
  6. How Fraud Affects You and Your Organization
  7. Test your financial/tax system for Red Flags of Fraud
  8. Give you a checklist of what to Do if You Suspect Fraud
  9. See below for the differences between Financial Auditing and Fraud Examination


F&Q about Fraud

What are some red flags I should look for in my coworkers and managers?

Perpetrators display certain behaviors or characteristics that might indicate they are committing or at risk of committing fraud. These indicators can vary depending on the perpetrator’s level of authority. Examples include living beyond means, financial difficulties, an unwillingness to share duties, divorce/family problems, addiction problems, refusal to take vacations, FAQcomplained about inadequate pay, and excessive pressure from within organization. However, you should never assume someone displaying these red flags is guilty of fraud. Innocent people can also exhibit similar behavior.

How do offenders get caught?

According to the Association of Certified Fraud Examiners’ Report to the Nations, tips have been consistently the most common way to detect fraud. Employees are the most common source of fraud tips, but customers, vendors, competitors, and non-company sources also submit tips. Other detection methods include internal audits, management review, account reconciliation, by accident, document examination, surveillance/monitoring, external audit, IT control, notification by police, or confession by the perpetrator.

In what areas or departments is fraud most likely to occur?

More than 80 percent of frauds in the ACFE’s study were committed by individuals in the following six departments: accounting, operations, sales, executive/upper management, customer service, and purchasing.

What type of occupational fraud costs an organization the most?

Asset misappropriations are those schemes in which perpetrators steal or misuse an organization’s resources. Examples include skimming or forging company checks. These types of schemes are the most frequent but least costly form of occupational fraud. Financial statement fraud occurs in fewer cases but is by far the most costly to an organization. Financial statement fraud schemes include recording fictitious revenues or inflating reported assets.

Is there a correlation between the perpetrator’s position and the likelihood of them committing fraud?

There is a strong correlation between the perpetrator’s position of authority and their ability to commit fraud. Employees and managers are more likely to commit wrongdoing than owners/executives. However, the median loss in owner/executive fraud is much higher than losses in employee fraud cases. Frauds committed by those at a higher level also take longer to detect. 

Auditing vs. Fraud Examination

Although fraud examination and auditing are related, they are not the same discipline. 

The following table lists some of the principal differences.

Issue
Auditing
Fraud Examination
Timing
Recurring
Audits are conducted on a regular, recurring basis.
Non Recurring
Fraud examinations are non recurring.  They are conducted only with sufficient predication
Scope
General
The scope of the audit is a general examination of financial data.
Specific
The fraud examination is conducted to resolve specific allegations.
Objective
Opinion
An audit is generally conducted for the purpose of expressing an opinion on the financial statements or related information.
Affix Blame
The fraud examination’s goal is to determine whether fraud has/is occurring, and to determine who is responsible.
Relationship
Non Adversarial
The audit process is non-adversarial in nature.
Adversarial
Fraud examinations, because they involve efforts to affix blame, are adversarial in nature.
Methodology
Audit Techniques
Audits are conducted primarily by examining financial data.

Fraud Examination Techniques
Fraud examinations are conducted by:

(1) documentation examination;

(2) review of outside data such as public records; and

(3) interviews.

Presumption
Professional Skepticism
Auditors are required to approach audits with professional skepticism.
Proof
Fraud examiners approach the resolution of a fraud by attempting to establish sufficient proof to support or refute an allegation of fraud.


​​Call: +1 (802) 893-6624
Stephen S. Polak, CPA - PLC