K
  • Audit vs Frauds

    By Monica Hubler, DBA
    Full-Time Faculty, Kaplan University

    Introduction 

    The accounting profession is one that is responsible for the accuracy in presenting financial statements and to ensure that the statements are free of any misrepresentation. To ensure accuracy is present, each year these numbers are reviewed and analyzed by an external auditor. 

    An auditor is also required to assess the internal controls of the organization and management and how they are implemented to protect the assets of the business. These auditors are usually hired from an outside accounting firm, familiar with the industry, and licensed professionals. The fraud examiner, on the other hand, is one who is called to detect fraud. Both an auditor and fraud examiner shares some common attributes, but their roles are different and it is important to know and understand those differences.

    Auditors  

    An external auditor is contracted to provide an independent and objective assessment of the company’s operations and has a major focus on their internal controls. The auditor helps to review and analyze how effective the company assesses risk management. In addition, the auditor is looking to ensure that the financial information under review is accurate and without material errors. There main purpose it to ensure all transactions and activities are without error or misrepresentation. 

    An auditor will also evaluate the antifraud and internal controls over financial reporting and will issue an opinion on management’s assessment of internal controls. However, auditors will not look for fraud—their focus in the internal controls and financial statement—but if there is a discrepancy upon review of any transactions or samples, they should notify management. Additionally, they should notify management of any red flags that may become evident.  

    Fraud Examiner 

    While fraud examiners can have an accounting degree (or several), they have a specific knowledge and resource for fraud detection. Fraud examiners are usually invited to a company when there is an issue and potential fraud present. These individuals do not express opinions on the financial statements or assess the internal controls of the business—they have been asked to help the company to resolve a specific allegation of fraud. Fraud examiners assess the weakness in internal controls and locate the perpetrator of the fraud. Their focus is not on a report for shareholders but reports of the findings, which can eventually become part of civil or crime proceedings.  

    Conclusion   

    As we analyze the differences between an auditor and a fraud examiner, we see that an audior is not required to look for fraudulent activities within the accounting records, but if for some reason there is something that does not match, they do need to report this irregularity to management. Management, in turn, will make the decision to take the next step to invite an fraud examiner to review the items in questions. Another difference is that auditor exams are planned and preformed yearly, while a fraud examiner is a spontaneously decision. The auditor is reviewing financial information for accuracy and materiality while the fraud examiner has a different focus: to determine the fraud and its extent and gather information for the next step. Each role has a defined skill set and plays an important role in the accounting field.   

    Links for Additional Information

     
     
    • ACFE: http://www.acfe.com/career-path-internal-auditor.aspx
    • Whose Responsibility is it to Deter and Detect Fraud: http://www.jgbm.org/page/5%20Marge%20Allen.pdf
    • How Does a Fraud Exam Compare With an External Audit?:http://news.cpamerica.org/salberg/newsletter/article.asp?a=142

     Interested in this career? Check out Kaplan University's business resources here.

    Monica Hubler, DBA, is a full-time faculty member at Kaplan University. The views expressed in this article are solely those of the author and do not represent the view of Kaplan University. 

     

    Back to Center for Excellence

  • Accounting - Ethics Thumb

    Keep Your Organization From Going Down the Road to “Ethical Collapse”!


    By Cynthia Waddell, PhD, CPA, CFE

    Read More
    GeoffreyVanderPal Thumb

    Identity Theft and Privacy


    By Geoffrey Vanderpal,  Full-Time Faculty

    Article by Faculty
    Angel Investors Thumb

    Do you believe in angels? (Angel investors, that is…)

    By Richard Carter, PhD

    Article by Faculty
    Stanley Self Thumb

    Revised GAAP Treatment for Goodwill

    By Stanley W. Self, CFE

    Read More
    Risk and Reward thumb

    Risk and Reward


    By Jerry Taylor

    Article by Faculty
    Career Resources Thumb

    Accounting

    By Rachel Byers, Full-Time Faculty, School of Business

    Accounting firms are taking advantage of some emerging trends.

    Career Advice
    Career Resources Thumb

    Investments and Wealth Management

    Change is the name of the game in wealth management!

    Career Advice
    Career Resources Thumb

    Real Estate

    Most people do not realize there are a variety of jobs in this field.

    Read More
    Career Resources Thumb

    Risk Management and Insurance

    According to the BLS, employment of insurance sales agents is projected to grow.

    Career Advice
    Definitions Thumb

    Accounting

    Access definitions and FAQs related to accounting.

    Read More
    Definitions Thumb

    Investments and Wealth Management

    Access definitions and FAQs related to investments and wealth management.

    Read More
    Definitions Thumb

    Real Estate

    Access definitions and FAQs related to real estate.

    Read More
    Definitions Thumb

    Risk and Insurance

    Access definitions and FAQs related to risk and insurance.

    Read More
    Toby Talks

    Toby Talks: Is Now a Good Time to Start a Real Estate Career?

    Kaplan Real Estate Education's Toby Schifsky looks at the factors to consider when pursuing a real estate career.

    Watch Now
    RE_Tips

    Toby Talks: Do I Need a Business Plan?

    Toby Schifsky talks about the importance of goals and action steps for achieving them.

    Watch Now
    Study Tips

    Tips for Insurance Licensing Exams

    Access preparation and practice advise from Kaplan Financial Education experts Mary Orn and Julie Ramsey.

    Wach Now
    Maylee Testimonial

    Maylee's Success Story

    Maylee talks about her experiences with Kaplan Financial Education and preparing for her exams.

    Wach Now