Preface
Someday, I would like professional studies to indicate that auditing is the number one reason for fraud detection; I believe this goal can be accomplished. However, I also believe that we need to recognize that fraud auditing is different from traditional auditing by using all the methodologies of traditional auditing, but just applying them differently.
Fraud auditing is a methodology to respond to the risk of fraud in core business systems. It is a combination of risk assessment, data mining, and audit procedures designed to locate and identify fraud scenarios. It is based on the theory of fraud, which recognizes that fraud is committed with the intent to conceal the truth. It incorporates into the audit process the concept of red flags linked to the fraud scenario concealment strategy associated with data, documents, internal controls, and behavior.
To illustrate the “different” concept, fraud auditing recognizes that the greatest audit procedure in the world will not detect fraud if the sample does not include one fraudulent transaction. Data mining is the audit tool to build a sample. Fraud audit procedures use the authenticity principle versus the evidence principle for designing test procedures. These fraud audit procedures acknowledge the varying degrees of fraud concealment sophistication that the perpetrator intends to commit in the fraud scenario.
My book is intended to share my professional experiences in studying and performing fraud audits. I hope this is ...
