What Is a Fraud Audit?

By Jonita Davis

A fraud audit is a meticulous review of financial documents, while one searches for the point where the numbers and/or financial statements do not mesh. Fraud audits are done when fraud is suspected. Some companies do them as a precaution---to prevent fraud from happening and to catch it before the offender takes too much money. There is more to a fraud audit, however.

Not an Investigation

Fraud auditing is used to identify fraudulent transactions, not to figure out how they were created. It is a common mistake that many people make---believing that audit and investigation are the same process. The auditor simply traces every transaction performed by the company, looking for the one that is fraudulent, if any. A regular auditor simply checks the numbers for accuracy.

Looking at All of the Records

Fraud auditors often go outside the ledger of accounts to find fraudulent transactions. This may include reviewing receipts, not only from the company, but from customers as well. Any inconsistencies in these numbers could help uncover an act of fraud. These auditors also interview employees, customers and sometimes clients to find out if a fraud has taken place.

Patterns

There are patterns to every fraud case--these help fraud auditors uncover illegal activity. Many criminals perpetrating a fraud will believe that he is too good to be caught or that the scheme is original. In fact, all fraud has the same indicators that aid the criminal in his crime and the auditor in his search for the same. These include lax management, history of unethical behavior, document tampering and disregard of procedure. These patterns are found wherever there is a fraud crime in progress. Some patterns are less obvious than others, but they are still present.

Types of Fraud

Fraud auditing is designed to look for six types of fraud, according to Business Network's "Recognizing Fraud Indicators." These are embezzling, bribes, stealing, extortion, "fictitious transactions," kickbacks and conflict of interest. Although not all fraud cases can be easily classified, they will always---at the very least---involve one of these categories. Fraud auditors are trained to look specifically for indicators to any of these fraud types.

Become a Fraud Auditor

To become a fraud auditor, you must obtain a bachelor's degree in accounting. Take some forensic accounting classes if available. Next, the accountant goes for a certified public accountant's license or to a special program designed to make him a certified forensic examiner. Depending on the state in which you live, there are specific work-hour and testing requirements to follow. See the resources section for more information.

About the Author

Jonita Davis is freelance writer and marketing consultant. Her work has appeared in various print and online publications, including "The LaPorte County Herald Argus" and Work.com. Davis also authored the book, "Michigan City Marinas," which covers the history of the Michigan City Port Authority. Davis holds a bachelor's degree in English from Purdue University.