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Governance, Risk, Audit & Privacy · Intermediate

Fraud Risk

Risk of intentional deception for gain, including asset misappropriation, corruption, and financial statement fraud.

Definition

The fraud triangle explains fraud as arising from pressure, opportunity, and rationalization. Controls such as SoD, mandatory vacations, job rotation, and data analytics reduce opportunity. Auditors are not responsible for detecting all fraud but must consider fraud risk and be alert to red flags.

Example

Mandatory vacation exposes a clerk's kiting scheme when a backup processes the work.

Exam tip

Mandatory vacations and job rotation are detective controls against fraud.

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