In light of the economic crisis, internal auditors are under pressure like never before to help protect the mothership from fraud. They might find some new guidance from the Institute of Internal Auditors useful in meeting the new demands.
The IIA has published a new guide, “Internal Auditing and Fraud,” that gives auditors some general guidance to help internal auditors comply with professional standards. Lily Bi, IIA’s director of technology practices, said the economic conditions are ideal for fraud to flourish, making the guidance essential reading for internal auditors, management, and directors alike. “This is a very hot topic,” she said.
The guide discusses how internal auditors should be aware of the risk of fraud, with discussion of potential fraud indicators, and it explains who in an organization has what roles with respect to preventing and detecting fraud. It explains the auditor’s role during audit engagements, and it addresses fraud risk assessment, prevention, detection, and investigation. It also provides reference materials, questions to be considered, and a fraud risk assessment template.
The IIA also published an update to its Global Technology Audit Guide series to address fraud prevention and detection in light of emerging automation technology. The guide, titled “Fraud Prevention and Detection in an Automated World,” focuses specifically on the risk of fraud in the technology environment, providing tips on using technology itself to combat technology-related fraud. It supplements the Internal Auditing and Fraud guide with tips and ideas on how to use technology to help prevent, detect, and respond to fraud.
Bi said the internal auditor’s role is not to prevent, detect, or investigate fraud directly, but to evaluate the risk of fraud and the manner in which management is addressing it. “It is management’s job to prevent, detect, and investigate fraud,” she said.
Given the implications for organizations—risks to financial stability, reputation, and psychological and social repercussions—companies are taking increasing measures to assure fraud risks are addressed, said Bi.
At a March 2009 IIA roundtable of Fortune 250 companies, a majority of chief audit executives said their companies have increased their focus on fraud, particularly as it relates to recession-related risk. The companies said they are embedding additional fraud testing into their audit plans and are expanding their scope using automated data mining tools, the IIA said.
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