Fraud Detection and Investigation

Fraud Detection requires specialized techniques to identify red flags and investigate suspicious activities. While prevention is primary, detection capabilities are essential.

🚩 Common Fraud Red Flags

Unusual transaction patterns or anomalies
Lifestyle inconsistent with compensation
Reluctance to take vacation or share duties
Excessive control over processes without oversight
Vendor relationships lacking proper documentation
Unexplained reconciliation differences

🔍 Detection Techniques

Data Analytics: Identify outliers and patterns using tools
Trend Analysis: Compare metrics over time for anomalies
Benford's Law: Test for number distribution irregularities
Duplicate Testing: Find suspicious duplicate payments
Interviews: Conduct conversations with key personnel

⚖️ Investigation Considerations

When fraud is suspected:

Involve legal counsel and forensic specialists
Preserve evidence and maintain chain of custody
Limit disclosure to need-to-know basis
Document all investigation steps meticulously
Follow organizational protocols and legal requirements

⚠️ Important

Fraud investigations require specialized expertise. Internal auditors should identify potential fraud, but forensic specialists should conduct detailed investigations.