What’s a Fraud Audit?

Almost every businesses is susceptible to both internal and external fraud and could benefit financially with a thorough audit by an independent Certified Fraud Examiner, a proactive step that financial institutions view favorably when considering the viability of a company. The question most company executives will have is: “What is a fraud audit?”

A fraud audit is a comprehensive investigation of almost every operational aspect of a business, searching for vulnerabilities to the financial health of the company. The methods vary depending on the scope of the audit, which is defined by management, but there are general procedures a fraud examiner will pursue. The Association of Certified Fraud Examiners describes a fraud audit as: A proactive approach to detect financial frauds using accounting records and information, analytical relationships, and an awareness of fraud perpetration and concealment schemes.

The general areas of focus are:

Financial Analysis (bank records, deposit procedures, company policy, corporate financial statements)

Accounting Analysis (Quickbooks data, CPA interviews, company policy)

Human Resources Analysis (employment records, vacation policies and practices, employee duties)

Asset Analysis (inventory policies and procedures, inventory records)

Accounts Payable Analysis (fictitious vendors, duplicate payments, expense accounts)

Receivable Analysis (customer verification, invoice payment verification, vendor refund review)

Procurement Analysis (inventory records and processes, vendor vetting process)

This is all scalable by executive management and can be initially reviewed in a phased or tiered process, with the requisite non-disclosure agreements preferred by corporate counsel, but broader access to the internal data increases the likelihood of ferreting out the damaging and deeply hidden fraud.

Brought to you by the Certified Fraud Examiners at Fittz & Associates.