Considerations on the internal audit role in fraud preventing and detecting

Author:Nadir ALI, PwC



Keywords:fraud risk, reputation risk, fraud scheme, anti-fraud mechanisms, fraud evidences, and necessary conditions for fraud occurrence, motivation, opportunity and judgment

The last years demonstrated that the fraud can not be considered anymore an anomaly or an exception with random occurrence and limited effects within an organization. The big scandals related to fraud which scattered the financial markets, imposed a rethinking for the organization and control mechanisms of the entities in order to maintain intact the investors trust. \r\n\r\nThe fraud can not be ignored or treated as an exception. The companies acknowledged that the collateral effects of fraud related to reputation, business relationships or image can go much beyond the direct financial losses provoked by the fraud. \r\n\r\nIn this context, the author makes a synthesis of the internal audit role in fraud preventing and detecting. The role of the internal audit is determined by the unique position it has within an organization being situated between the audit committee and the board of directors. Having this particularity, the internal audit is often considered as being the front line in the battle with the fraud. The article reviews the aspects related to defining the internal audit roles and responsibilities as part of the anti-fraud measures within an organization, the continuous professional development requirements for the internal auditors, as well as the ways for fraud risk identifying and assessment. \r\n\r\nThe internal audit should be considered as a profitable investment, because the related benefits, especially a diminishing of the direct and collateral losses provoked by the fraud is much beyond its cost.