Something to Consider November 2018 – Auditing the Auditors
It seems a reasonable assumption that an audit should identify fraud risk and occurrence.
After all, it is the auditors who go through company files, documents and records with a fine tooth comb. However, evidence would suggest that the opposite is true. Audits almost never find fraud: external audits find it 4% of the time, and internal 15%.
It’s even worse for big companies. Audits are designed only to find anything that could ‘materially affect’ the financial results. For many Fortune 500 firms this threshold can be as high as 20 million dollars. Taken on an individual basis, fraudulent transactions are rarely at this scale.
This article from CFO magazine reminds us of some of the other factors that affect the effectiveness of audit on fraud risk. For many organisations who have been subject to fraud recently, this is a timely reminder. You can find the article here
We recently held a discussion on this with a professor of fraud and we have put together some key takeaways, and a more holistic view of fraud here
Our ‘Something To Consider’ snippets are framed as small, digestible, ‘dashes of insight’ around the pillars of what we define as “World Class Finance” – Process Optimization, Financial Control and Compliance, and Risk Assurance, all underpinned by technology enablement and integration.