What does fraud assessment questioning seek to identify during an audit?

Fraud assessment questioning primarily aims to reveal employee perceptions of ethical practices within an organization. This is crucial for understanding the culture and ethical environment that can influence the likelihood of fraud occurring. When employees believe that ethical behavior is valued and enforced, they are less likely to engage in fraudulent activities. Conversely, if there’s a perception of lax ethical standards or acceptance of questionable practices, the risk of fraud increases.

The questioning during an audit helps to gather qualitative insights about how employees view the ethics of their workplace, which is critical for assessing risk areas and developing a comprehensive fraud prevention strategy. Engaging employees in discussions about ethics can uncover potential vulnerabilities where unethical behavior might be tolerated or overlooked.

While evidence of financial losses, statistical patterns of fraud, and the company’s financial history are important for understanding certain aspects of fraud, they do not directly address the ethical climate that can signal potential fraud risks. The attitudes and perceptions of employees are foundational elements that contribute to a robust fraud risk management framework.