G. R. Cluskey JR., CPA - Specializing in: SOX, Fraud Audits, and Internal Control <meta name="keywords" content="Fraud Audit, Fraud Examination, Forensic Accounting, SOX, IC, Internal Control, Sarbanes-Oxley Act, Audit, Fraud" />







	FRAUD AUDIT

		Public Accounting is tasked to seek out financial statement fraud - SOX sections 302, 404, 906 and Title XI. Their responsibility for discovering occupational fraud, however, (embezzlement, asset misappropriation, and corruption - a major source of business failure) is less defined - AU 316 “The auditor should plan and perform the audit to obtain a reasonable assurance that the financial statements are free of material misstatement caused by error or fraud.” Auditors do not seek out occupational fraud. Occupational Fraud related to asset misappropriations is accomplished through three sources: (1) Income - embezzlement of cash or accounts receivables thru skimming; (2) Expense - billing schemes using fraudulent vendors, phony consulting contracts, or ghost employees; and (3) Contracts - bribery and corruption. Employees in positions of trust are able to short circuit internal controls to steal. A Fraud Audit is a preventive measure to reduce business risk. A Fraud Audit’s first priority is to thwart fraud through strengthening internal controls. A Fraud Audit can discover fraud, identify the fraudster, and provide evidence for prosecution. Fraud Audits are designed to test vendors, employees, manual journal entries, cash and accounts receivable collections, and other accounts typically targeted by fraudsters.