Journals Proceedings

Abstract

Fraud is a global problem, often prompting the question “Why did the auditors not detect the fraud?” after corporate fraud disasters have occurred. Despi te the exi s t enc e o f several risk assessment methodologies that can be used by internal auditors to help identify fraud risks, these methodologies provide little guidance for internal auditors who are grappling with their perceived role in fraud risk management. The purpose of the research under taken for this study was to provide a conceptual framework outlining the various fraud risk assessment methodologies that may be used by internal auditors to detect financial statement fraud. The two main st rategies ident i fied in the l i terature review for recognising the r isk of fraud are the ident i ficat ion of red flags and the assessment of fraud r isk. The study identified the primary characteristics of risk assessment methodologies such as interviewing, brainstorming and financial analysis, as methods that can be successfully applied by internal auditors. The findings of the study are useful in informing the continued professional training needs of internal auditors, as they provide a framework that internal auditors can use for conducting generic fraud risk assessments, particularly where financial statement fraud is involved.