Corporate fraud is not an unfamiliar term today. Several large fraud schemes in the past have led to the downfall of prominent organizations and made headlines. Organization is rarely free from fraud risk. With heightening regulatory focus, senior executives are increasing concern about the vulnerability of their organisations to frauds and whether it is adequately protected. While the 1896 Kingston Cotton Mill case’s argument of “watchdog vs bloodhound” may still applicable, the expectation on what auditors can do in fraud detection and investigation has changed considerably since. Practice guidelines of most accounting and auditing associations around the world have included requirements for auditors to consider fraud risks in their engagement and execution of audit.
While auditors may not need to have the same expertise of a person whose primary role is to detect and investigate fraud, the auditors are expected to have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization. At times, the auditors may also need to pursue further on red flags and bring to closure allegations that the company received. Hence, a certain level of understanding and skills on forensic auditing will assist auditors to discharge their responsibility in this area.