Fraud auditing has the goal of uncovering fraudulent activity as opposed to financial statement auditing which has the goal of determining the material correctness of the financial statements during the audit period. Of the three types of accounting fraud: “cooking the books” fraud schemes, asset misappropriation schemes and corruption schemes, financial statement auditors are concentrating on “cooking the books” fraud schemes.
Fraud auditing applies a specialized approach and methodology toward fraud looking for evidence of fraud; to prove or disprove a fraud exists. One of the most common frauds perpetrated are billing schemes with many schemes employing the use of shell companies. A common fraud auditing procedure is to look specifically for red flags of shell companies and billing schemes using data analytics.
We look behind the financial statement balances and beyond the transactions and audit trail to focus on the substance of the transactions to identify possible fraudulent transactions hidden in accounting systems that may warrant a forensic investigation.
