SEE NO FRAUD, KNOW NO FRAUD
The president of the German Regulator BaFin has described the Wirecard scandal as a “complete disaster” and said “a whole range of private and public entities including my own have not been effective enough...”
In a training session delivered to a large group of auditors on detecting and investigating fraud, the first question I asked of the group was ‘ Is it the responsibility of auditors to detect fraud?’
There was a mixed and nuanced response.
Here are the 4 key considerations that I identified are:
1. SCEPTICISM - auditors should have a very healthy dose of scepticism about the information being provided by the company and not accepting it at face value;
2. POSSIBILITY- auditors should always be alive to the possibility that fraud has occurred or is occurring;
3. PAST EXPERIENCES- not being over reliant on past experiences with clients especially where there is long-term relationship; and
4. MINDSET- concluding with the need for a change in mindset when undertaking an audit.
In some jurisdictions, there is a rotation cycle for auditors on a yearly or biennal basis. Is it time for this to become widely accepted practice for auditors?