Executive Summary
Fraud risk remains a persistent and evolving threat to organizations of all sizes and industries, driven by geopolitical uncertainty, increasing complexity in business models, rapid technological change, and heightened economic and regulatory pressures. As trusted providers of independent and objective assurance, internal auditors play a critical role in helping organizations assess, manage, and respond to fraud risk. This publication examines the internal auditor’s responsibilities in addressing fraud risk, as defined by the Global Internal Audit Standards, and highlights practical considerations for executing that role effectively.
The publication explores how internal auditors contribute to fraud deterrence by evaluating the adequacy and effectiveness of fraud risk governance, management processes, and internal controls. It emphasizes the importance of professional skepticism as a foundational competency in identifying fraud risks, challenging assumptions, and assessing the reliability of information provided by management and other stakeholders. Through real-world examples, the publication illustrates how skepticism, data analysis, and persistence can uncover control deficiencies and fraudulent activity that might otherwise go undetected.
Key topics include how internal auditors evaluate management’s fraud risk assessment, incorporate fraud considerations into audit planning, and conduct fraud brainstorming to identify potential schemes and vulnerabilities. The publication also discusses the application of the fraud triangle—pressure, opportunity, and rationalization—as a framework for understanding how and why fraud occurs and highlights the areas where internal audit can most directly reduce fraud risk, particularly by strengthening controls that limit opportunity.
Finally, the publication underscores the importance of ongoing fraud training, collaboration with fraud specialists, and a strong organizational culture that encourages transparency and questioning. By maintaining professional skepticism, enhancing fraud awareness, and continuously developing their competencies, internal auditors can provide meaningful assurance and insight that helps organizations prevent, detect, and respond to fraud more effectively.