Fraud can be one of the most significant consequences of failure to exercise skepticism.
It can often be overlooked in mitigating the risk of fraud and misconduct, which illustrates why it is important that companies and their stakeholders should recognize the significance of and challenges associated with exercising an appropriate level of skepticism.
The word skepticism comes from the Greek word skeptikos, which means “inquiring” or “reflective.” Simply put, skepticism is a questioning mindset, and it requires an understanding that even the best organizations can be susceptible to fraud.
It is important to note that skepticism is not an end in itself and is not meant to encourage a hostile atmosphere or micro-management. Management, audit committees, and internal auditors, at a minimum, should take a “trust but verify” approach with systems, methods, and communications rather than accept critical information at face value.
Embracing skepticism throughout the financial reporting supply chain increases not only the likelihood that fraud will be detected but also the perception that fraud will be detected, which reduces the risk that fraud will be attempted.
The Anti-Fraud Collaboration provides resources that hone the skill of skepticism in the financial reporting chain and that explore the benefits of embracing a skeptical mindset.
See below for resources on skepticism:
Shifts in the economy, geopolitical landscape, and technological developments have created an environment in which companies are potentially more vulnerable to fraud. In recent years, as major corporate failures and scandals continue to be in the spotlight, fraud has...
Fighting financial fraud is a shared responsibility that requires vigilance from all members of the financial reporting ecosystem, including public company management, the audit committee, and internal and external auditors. Every member has unique skills that can be...
The Anti-Fraud Collaboration has developed a successful series of case studies centered around hypothetical fraud scenarios. Each case study starts with a set of facts about a fictional company, and through the case, members of the financial reporting supply chain and...
Failure to exercise skepticism can result in significant consequences, including fraud. An appropriate level of skepticism can help members of the financial reporting supply chain and other relevant stakeholders enhance their effectiveness in mitigating the risk of...
This free webcast promotes the importance of skepticism and how it can be critical in detecting fraud and errors made during the financial reporting process. An expert panel of financial reporting supply chain members provides practical insights into how to enhance...
This report by the Anti-Fraud Collaboration explores the importance of more critically assessing the potential for fraud and examining some of the biases that can leave organizations vulnerable to deceptive activities. Skepticism is key when investigating potential...