There’s a notion in fraud auditing that the auditor should “think like a thief.” I am going to go out on a ledge and raise the question: Is the idea of thinking like a thief a silly suggestion? I ask you, were raised to think like a thief? Did your parents compliment you on your lying skills? Did your teachers praise you on your ability to cheat on a test? Do you and your associates discuss how to steal from your employer at the lunch table? Certainly, the answer is no!
Professional Skepticism… How we can become number one in fraud detection?
If audit desires to be the number one reason for fraud detection, then what does our profession need to do? This blog is written for auditors who desire the audit profession to be the number one reason for fraud detection. I will challenge our current beliefs and methodologies, not to say they are right or wrong but to cause you to think. After all, a key component of professional skepticism is a questioning mind.
Since I started my career in the professional practice of audit, there has been a debate about the auditor’s responsibility for detecting fraud. For some reason, the audit profession has shied away from this responsibility. And yet, whenever an incident of fraud is detected, everyone says “where were the auditors?” Henceforth the fraud detection dilemma, auditor’s responsibility, and public expectation.
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I knew the title would catch your attention. But, I think it is a fair question for discussion. After all, a questioning mind is the cornerstone of professional skepticism.
Did you know that the lack of professional skepticism is cited as one of the main reasons for audit failure? The Cambridge English Dictionary defines audit failure “as a situation in which an audit wrongly states that a company's accounts are correct when they contain mistakes or false statements.”
Let’s start out with a question: Is the audit profession doing a better job today than 20 years ago in responding to the risk of fraud in audits?
Various studies indicate that whistle blowers and accidents are still the number one reason for detecting frauds while the audit process is still on the bottom of the list. So, I guess the answer to the question is “no!”
I do not, however, think this is a reflection on the people working in the profession but rather the tools, or lack there of, that auditors are using in the audit.
In my December 2019 blog, I provided eleven statements in the spirit of causing you to think about your audit plan and helping you create a dialog in your company about improving your ability to find fraud risk statements within your audit. In January and February and this blog, I’m delving deeper into the issues.
In my December 2019 blog, I provided eleven statements in the spirit of causing you to think about your audit plan and helping you create a dialog in your company about improving your ability to find fraud risk statements within your audit. In last month’s and this blog, I’m delving deeper into the issues.
In my December 2019 blog, I provided eleven statements in the spirit of causing you to think about your audit plan and helping you create a dialog in your company about improving your ability to find fraud risk statements within your audit. In the next four blogs, January – April, I will elaborate on them.
Over the last few weeks, I have had the pleasure of hearing from readers who have uncovered fraud schemes in their companies. This includes two chief auditors who attributed their ability to locate fraud schemes to my lectures or my fraud auditing techniques. I want to thank these individuals for contacting me. It was very kind of them.
