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DETECTING FRAUD IN FINANCIAL SECTOR– ONGOING CHALLENGES FOR INTERNAL AUDIT
Abstract
The legislation of European Union member states is not harmonized in terms of defining, evaluating and addressing fraud, lacking a unique, generally accepted definition. The paper has several aims. First, it has been provided a comprehensive definition of fraud as an unlawful act, by gathering the views of several audit, accountant and fraud examiners professional bodies. Then it has been presented the fraud triangle, the recurrent patterns of fraud committing and the profile of the fraudster by investigating past fraud episodes within the financial industry and the economic field, in general. Further, the paper synthesizes the three main fraud typologies which are widely accepted among practitioners and professional bodies and explains the characteristics of financial statements fraud and respectively of the use of internal IT system for committing frauds. As digital technology is increasingly embedded into traditional financial products and services features, fraud-related risks are imposing more challenges for regulators, financial institutionsВ’ boards and internal audit departments. The paper emphasizes the critical role to be fulfilled by internal audit departments and stresses the need for maintaining a high-quality human resource with updated knowledge and skills related to financial industry specificity and fraud risk detection.
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References12
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