I first noticed the faint drum beat around internal auditors reengaging on fraud about a year ago. In recent weeks, the drums have become almost deafening. For example, last week, the South Florida Chapters of The IIA and the Association of Certified Fraud Examiners held a joint full-day conference focused on fraud, and more than 230 local professionals turned out to participate. Later today, The IIA will host a one-hour webcast for North American members on “Taking Fraud Awareness to the Next Level: The Risk Universe, Technology, and Internal Audit’s Role.” More than 7,000 internal audit professionals have registered for the event — making it the largest single professional development event The IIA has ever hosted.
So what is going on? Is fraud on the rise, or are internal auditors refocusing on this enduring risk after several years of having their attention diverted to U.S. Sarbanes-Oxley Act of 2002 compliance and financial control assurance? The answer is probably both. There is little doubt that the current economic crisis creates greater financial pressures on management, employees, and vendors. Such pressures have historically given rise to greater fraud risks. However, it is also true that fraud has not been viewed by internal auditors as a risk not warranting the levels of coverage traditionally seen. So in many respects, “everything old is new again,” and internal auditors are reengaging in fraud prevention, detection, and investigation.
Last month, The IIA hosted a roundtable of chief audit executives (CAEs) from leading North American companies to explore internal audit’s role in fraud prevention and detection. The participants agreed that fraud risks are increasing in the current economy. Some fraud schemes that roundtable participants believe are on the rise are: