What is the engagement hypothesis in fraud examination?

The engagement hypothesis in fraud examination refers to a starting point of suspicion based on preliminary information. This concept acknowledges that when examining a situation for potential fraud, the investigator begins with a certain level of skepticism based on the initial facts or indicators that suggest irregularities may exist. This foundational skepticism is crucial in guiding the investigation, allowing the fraud examiner to remain vigilant and focused as they gather further evidence.

In fraud examinations, adopting an engagement hypothesis means that investigators are not necessarily convinced of fraud's occurrence, but they are open to the possibility, which shapes their inquiry. This approach helps in identifying and understanding the context of behaviors or transactions that may not be immediately apparent.

Other choices do not accurately reflect the engagement hypothesis's focus on initial suspicion. For example, the belief that fraud does not occur or the expectation for all cases to be fraud-free would lead to an overly optimistic view and potentially result in missed indicators of fraud. Similarly, a presumption of innocence until proven otherwise is a legal principle that applies within the judicial system rather than serving as an investigative strategy in fraud examination. Hence, starting the examination with a cautious approach, or a hypothesis grounded in suspicion, is essential for effective fraud detection and prevention.