Fraud Auditing

Who will benefit from this course?

This course will advance participants’ understanding of identifying fraud through an audit risk assessment. This course is designed for internal auditors with a basic understanding of fraud, who would like to dive deeper into assessing fraud risk at the engagement level.  This course is also for those who have been involved in internal audit engagements that require an understanding of how to manage organizational risk related to fraud.

Course Objectives

• Assess various roles and responsibilities for preventing, detecting, assessing, and investigating fraud at the organizational level.
• Understand the benefits of utilizing a fraud risk management framework.
• Assess and apply fraud risk management techniques to mitigating organizational fraud.
• Identify the most prevalent fraud schemes perpetrated across organizations.
• Leverage professional skepticism to mitigate fraud within an organization via appropriately designed internal controls.
• Evaluate sources of fraud typically identified during an audit engagement (e.g., cyber, third party, AI).
• Develop techniques to enhance the assessment of fraud risk at the engagement level.
• Determine innovative ways to identify potential fraud risks (e.g., AI, analytics).

Course Topics

Fraud Overview: Preventing, Detecting, Assessing and Investigating

• Introduction to fraud and fraud auditing, including lessons from notable fraud cases across eras, fraud from an audit perspective, how the Global Internal Audit Standards address fraud risk, and key fraud-related terms.
• The Fraud Triangle, including its three elements (pressure, rationalization, and opportunity), its limitations, and how internal auditors can apply it to identify potential fraud scenarios during planning.
• The IIA’s Three Lines Model, including how the governing body, management, second-line functions, internal audit, and external providers share responsibility for fraud risk, and the safeguards that protect internal audit independence.
• Types of fraud internal auditors may encounter during an audit engagement, including:
  • o Asset misappropriation: cash theft, fraudulent disbursements, billing or payroll schemes, expense reimbursement fraud, misuse of inventory and other assets.
  • o Corruption: bribery, conflicts of interest, illegal gratuities, economic extortion, payments to government officials hidden in financial records.
  • o Financial statement fraud: false revenue recorded to fictitious or real customers, understated allowance for bad debt, overstated assets, understated liabilities and expenses.
  • o Management override of controls: journal entries posted outside normal processes, unexplained changes to allowance assumptions, unusual access or approval activity.
  • o External fraud: identity theft, account takeover, payment redirection, ransomware-enabled extortion, theft or misuse of data, vendor fraud.
  • o Emerging and technology-enabled fraud: AI-enabled fraud, synthetic identities, deepfake impersonation, collusion through digital channels, automated control override.

 Common Sources of Fraud

• Categories of fraud. Explore the three primary categories of occupational fraud (asset misappropriation, corruption, and financial statement fraud) and other categories that may apply based on industry, organization, and regulatory oversight.
• Different fraud schemes. Examine how a perpetrator could commit fraud, circumvent controls, and make transactions appear proper, using payroll, procurement, and AI-enabled vendor payment examples.
• Sophistication of concealment. Consider concealment from both the perpetrator’s and the internal auditor’s perspectives, and connect simple, coordinated, digital, and AI-enabled techniques to red flags, audit responses, and useful data.
• The Fraud Tree. Use the ACFE’s Fraud Tree to explore selected schemes, including fraudulent disbursements, ghost employees, fictitious expenses, theft of cash receipts, and corruption.