Question

Fraud Examination: Discuss the basic steps of fraud examination.

Answer 1

In simple terms, Fraud examination is a process involving the resolvement of allegations of fraud from its start to its end. There are a lot of reasons for which any organization conduct fraud examination. It can be a mandate by law also.

There are generally four basic steps involved in Fraud examination. These common steps are -

1. Obtaining Evidence

The entire result of any fraud examination depends upon the quality of evidence gathered by the examiner. The evidence should be relevant to the case and should be enough to make a judgement clear. Evidence should also be free from bias to make the examination independent. Evidence of fraud usually takes the form of documents or statements by witnesses; therefore, fraud examiners must know how to properly and legally obtain documentary evidence and witness statements.

2. Reporting

After the required evidence has been obtained and findings has been drawn from them, the next step involves reporting of findings to the designated individuals. The designated individuals can be an audit committee or management or board of directors. It is also important to note that when the fraud examiner is reporting the results of fraud examination, the results should be clear, precise, accurate and unbiased. The examiner should also ensure confidentiallity in reporting any result and the results should be kept secret untill reported.

3. Testifying to Findings

Generally, all fraud examinations hearing takes place in court rooms. So this step simply states that whenever the need arises for testifying the fraud examiner shall testify by taking the truth oath and should communicate completely unbiased results based on the evidence achieved.

4. Assisting in Fraud Detection and Prevention

The duty of fraud examiner doesn't ends with the reporting or testifying of the fraud examination findings. In order to prevent any such action in future the examiner is responsible for assissting the ordering committee for future prevention of any fraud. The fraud examiners are expected to actively pursue and recommend appropriate policies and procedures to prevent fraud. Because of their sepcific domain knowledge they always suggest the mitigating controls and remedies timely to detect and precent any fraud in future.

The above are the basic steps involved in fraud examination.

Hope it is clear, Thank You