Auditor Fraud Resources

Auditor Fraud Resources

The Inspector General Act of 1978, Section 8 (c)(3), requires the Inspector General of the Department of Defense to "provide policy direction for audits and investigations relating to fraud, waste, and abuse."

This guidance and the scenarios with the associated indicators should increase an auditor's awareness of possible risk factors as well as their responsibilities for audit planning, executing, reporting, and referring the matter to the appropriate investigative organization when an auditor identifies fraud indicators.

The guidance highlights key Generally Accepted Government Auditing Standards (GAGAS) requirements, overall DoD expectations, and best practices. The various scenarios and the accompanying fraud indicators describe situations related to some common fraud schemes that DoD auditors might encounter.

The Contract Audit Fraud Scenarios and Resources page contains scenarios and other information specific to contract audits performed by the Defense Contract Audit Agency (DCAA). Other auditors could also find this information useful. DCAA auditors should review the other sections of this Auditor Fraud Resources page, including the other scenarios and indicators, for information that could be useful in their audits.

The scenarios are meant to get the auditors thinking about how they might identify or discover certain fraud indicators and under what circumstances they might make a fraud referral. While the scenarios and indicators in this guidance are organized by audit types, many of the fraud indicators described in the scenarios are general in nature or management-related and may be found in any type of audit.

Auditors should familiarize themselves with the basic knowledge provided by the scenarios and creatively use it while performing any audit. This process should also help an auditor link or associate certain fraud indicators with specific audit steps or procedures. When auditors are able to consciously relate fraud indicators or risk factors with an audit step(s) or procedure(s), they should be able to properly plan and execute an audit and adequately document compliance with GAGAS.

During 2014, Audit Policy and Oversight (APO) published a report identifying approaches for establishing fraud risk assessment programs and conducting fraud risk assessments within the DoD. A fraud risk assessment is an evaluation of potential instances of fraud that could impact an organization's ethics and compliance standards, business practice requirements, financial reporting integrity, and program goals and program performance. Fraud risk assessments support DoD efforts to prevent and detect fraud through analyzing internal controls, considering fraud schemes and indicators, and developing recommendations for management to reduce the likelihood of fraud. To learn more about fraud risk assessments, click here.