Frequently asked questions
Most Frequent Questions and Answers
Fraud against an organization can be committed by anyone where the opportunity is present. Most fraud matters are committed internally and thus can be more severe.
According to ACFE Report to the Nation 2020, 4% of fraud is detected by external financial statement audits, 2% by internal controls, 15% by internal audits, 12% by management review, more that 40% by employee tips, and 24% by seven other means.
Financial statement audits are important, however, they serve a different purpose. Results of a financial statement audit include a report by the auditor attesting to the fairness of presentation of the financial statements, and related disclosures, it is designed to provide a picture of financial health and performance. As it relates to fraud, a typical engagement letter will state that the auditor will design their test to detect fraud or misstatement if present, however, it is not the responsibility of the auditor to detect fraud, but that of management. Management is to ensure the safeguarding of assets and the implementation of a robust fraud risk management program to reduce or eliminate those risks.
Forensic Accounting is the use of accounting, auditing and investigative skills to conduct special purpose examinations. It involves two main areas:
Litigation – provides a factual presentation of issues related to an existing or pending litigation in the form of a report. A forensic accountant provides expert testimony to the court.
Investigations – making a determination of whether a criminal matter occurred, including but not limited to, employee theft, securities fraud, insurance fraud, civil disputes, and asset tracing.
Usually, forensic accountants are engaged after suspected fraud or misconduct. The aftermath of fraud can leave an organization reeling, regardless of size. The extent of the damages can have a lasting impact, and recovery can be difficult. It is often overlooked, that forensic accountants can be engaged proactively. The best defense against fraud is a good offense. A vital but neglected area of Forensic accounting involves developing fraud risk management strategies and employing a robust fraud risk management plan to mitigate fraud through prevention and deterrence efforts.
