Fraud Investigation for the Auditor

This chapter focuses on guidance to auditors on how to respond to the risk of fraud. Understanding the difference between the auditing profession and the investigation profession is critical. While they sound similar, audits and investigations are different. Internal fraud investigations typically occur because of a reaction to an event. An allegation may have occurred through a hot line, accidental disclosure, and internal controls or through an audit finding. The first step is to determine whether the allegation is credible. If the allegation is not credible, the reasons for not performing the investigation should be documented. The second step is to investigate all credible allegations. The investigation process is intended to document the facts and circumstances of the allegation. The policy should indicate the need for prompt action to investigate and resolve allegations of fraud.