Internal audItInG and Fraud - Office of Internal Audit

A2 – Internal auditors must have sufficient knowl- edge to ..... audit techniques, including data mining, to detect par- ...... documents/sample_fraud_policy.pdf.
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IPPF – Practice Guide

Internal Auditing and Fraud

December 2009

IPPF – Practice Guide

Table of Contents Introduction.................................................................................................................................................................... 1 Executive Summary....................................................................................................................................................... 2 Definition of Fraud........................................................................................................................................................ 4 Fraud Awareness............................................................................................................................................................. 5 A. Reasons for Fraud................................................................................................................................................... 5 B. Examples of Fraud.................................................................................................................................................. 7 C. Potential Fraud Indicators...................................................................................................................................... 8 Typical Roles & Responsibilities for Fraud.............................................................................................................. 10 Internal Audit Responsibilities During Audit Engagement................................................................................... 13 A. Conducting Audit Engagements........................................................................................................................... 13 B. Internal Auditor Skepticism.................................................................................................................................. 13 C. Communicating With the Board........................................................................................................................... 14 Fraud Risk Assessment................................................................................................................................................ 16 A. Identifying Relevant Fraud Risk Factors............................................................................................................... 16 B. Identifying Potential Fraud Schemes and Prioritizing Them Based on Risk.......................................................... 17 C. Mapping Existing Controls to Potential Fraud Schemes and Identifying Gaps.................................................... 17 D. Testing Operating Effectiveness of Fraud Prevention and Detection Controls..................................................... 17 E. Documenting and Reporting on the Fraud Risk Assessment................................................................................ 18 Fraud Prevention and Detection............................................................................................................................... 19 A. Fraud Prevention.................................................................................................................................................. 19 B. Fraud Training...................................................................................................................................................... 20 C. Fraud Detection................................................................................................................................................... 21 Fraud Investigation...................................................................................................................................................... 23 A. Investigation Process............................................................................................................................................. 23 B. Internal Auditing’s Role in Investigations................................