Fraud Examination in Auditing

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1. In auditing or fraud examination, what determines whether an area is of great importance or critical function for an organization?

It depends on what event prompted the audit or fraud investigation. The reason for the audit or the fraud investigation will guide the process. This would determine whether an area is of importance or a critical function of the organization. All fraud events are considered of importance to some area or critical function for an organization, which show up in the audit of the financial statements (audit) or through a fraud investigation (see steps below).

By definition, a fraud examination is the discipline of resolving allegations of fraud. On the other hand, an audit is a general examination of financial data for the purpose of expressing an opinion on the financial statements.

The fraud examination methodology is logical steps, which are taken to narrow the focus from the general to the specific. Beginning with a hypothesis, additional evidence is used to amend and refine the hypothesis as the fraud examination progresses. Predication are made -the totality of circumstances that would lead a reasonable, professionally-trained, and prudent individual to believe a fraud has occurred, is occurring, and/or will occur. There must be proper predication in order to initiate a fraud examination (e.g. a tip or complaint from a third party) (http://people.ucsc.edu/~dgusarso/lecturenotes1to14.pdf).

Specifically, fraud is any crime for gain ...