30 June, 2010


Internal fraud is a very delicate issue that has capability of wrecking a company within a period of two days. It only takes two to conspire and the business is down. Internal fraud is a killer that every success thinking company should do all within its reach to keep at bay.

Auditing for internal fraud is the process of critically evaluating the internal control systems of a business to give reasonable assurance that frauds will not be perpetrated by insiders without being detected. Auditing for internal fraud does not only have to be a detective tool, it also has to be preventive and deterrent tool. This is part of the risk fraud analysis that organizations carryout to ensure that all is moving well. This means that auditing for internal fraud has one aim and that is to protect the asset of an organization.

As an auditor in this modern world, you will have to be concerned with issues that are beyond compliance with accounting rules. You must recognize that finding fraud is part of your responsibility too. Auditing for internal fraud will sharpen your existing skills and teach you new skills / techniques that are necessary for effective fraud detection.


Evaluate the objectives of the company in the light of its objectives: the first thing that you must do in auditing for internal fraud is to have a working knowledge of the objectives of an organization. After gaining a working knowledge of the internal control of a business, the next thing that must be done will be to evaluate the actual operations in the organization.

Chances are that a company may have a high level internal but still do not implement the letters of the laid down procedures. A deviation will give you a clue on the likely crimes that could be perpetrated in this kind of control environment. The control environment in a business environment is in many cases more important than the controls themselves.

Review past incidents of frauds and financial crimes: understanding the kinds of frauds and financial crimes that have taken place in a company will give insight into how effective an organization’s internal control is in the area of fraud and crime prevention.

Test your internal controls: occupational frauds and other forms of frauds mostly occur in relatively weak controls. Testing your internal control is one way of finding out if your organization is prone to fall victim of frauds and economic crimes.

Evaluate the knowledge and competencies of responsible officers: you will get insight into how strong a company’s internal control is in respect to controlling internal control. You will be reasonably sure that fraud is likely to occur in a place where the head of internal control unit is being headed by a non-qualified and ill-experienced person.

As forensic accountants, we should endeavour to learn the basics of auditing for internal controls. Bear in mind that the content of this blog you are reading will not be enough for you to effectively hone your skills as an internal fraud auditor. In addition, you must have working knowledge of computer forensics.

You will immensely benefit from the amazon books displayed below:

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