Audit Fraud

Question 3

Slide #1

Speaker’s notes

1. Fraud has always been a threat to any organizations

2. IIA defines fraud as: any illegal act characterized by deceit, concealment, or violation of trust. These acts are not dependent upon the threat of violence of physical force, Frauds are perpetrated by parties and organizations to obtain money, property, or services, to avoid payment or loss of services, or to secure personal or business advantage

3. internal auditor must watch for situations that increase the risk of fraud

4. one of the internal auditor’s responsibilities is to assess whether management practices and internal controls are adequate and effective , and whether assets are safeguarded

Slide #2

Speaker’s notes

1. The goal of internal audit group and the board in preventing fraud should be to make sure that appropriate protection is in place and up- to-date, not to delve into each aspect of every transaction that could possibly become fraudulent

2. potential impacts on the organization suffering from the effects of fraud might include:

• financial loss: cash or other item stolen; frauds on record

• Reputation: SERI suffers a fraud will lose some of the trust the public generally confers on it. People will decide the organization has no credibility whatsoever

• Damaged morale: for employees who decide to stay with the organization, there will be a definite decline in morale, employees may feel the organization has failed them and failed the mission

Slide #3

Speaker’s notes

1. Cost-benefit is an import factor in determining the extent to which fraud can be controlled and deterred

2. It is management’s responsibility to put into effect a system of controls to ensure prevention and detection. However, management does need assistance from the internal auditor.

3. The responsibility to identify all risk and reduce those risks to an acceptable level is that of senior management. Through...