Question

Discuss in your own words why internal auditors often fail to detect frauds. You should discuss, in detail, a minimum of three reasons.

Answer 1

Reasons why do Internal Auditors fail to detect fraud:

Internal audit is a system of systematic checking and inspection of financial records to detect any misappropriation or fraud if any. Very often the internal auditors fail to detect fraud in conduting a internal audit. There are several reasons for thet.

Auditors are not properly trained for fraud detection: Very often internal audit is conducted by some personnel who is not having that much expertise in the auditing works. They lack various accounting principle knowledge. They need more knowledge and training to be expert in the respective field.

Lack of knowledge about the Fraud scheme: They lack the knowledge about the ways in which the Fraudulent activities can be executed. So they need to be more aware about the various ways in which the personnel of the client can involve in any fraudulent activities.

Connection with the management: Internal auditors are in constant interaction with the management so, they build a relationship with them and as a reason they may hide some fraud activities.

They need to learn more fraud analysis technique and also they need to learn more about the types of fraud and the ways in which they can be executed.

Overall we can say that the internal auditors are not that much expert in fraud detection and as they are working in collaboration with the mansgement sometimes they intentionally hide some facts.

Thank You..!!