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Fraud Risk FrameworksACFE

Fraud Risk Assessment Framework

A framework for assessing fraud risk across the organization, aligned with ACFE methodologies.

Fraud Risk Assessment Framework

A framework for assessing fraud risk across the organization, aligned with ACFE methodologies.

Approach

Fraud risk assessment identifies the fraud schemes to which the organization is exposed, the likelihood and impact of each, and the adequacy of existing controls.

Steps

  1. Understand the business. Objectives, processes, revenue streams and geographic footprint.
  2. Identify inherent fraud schemes. Asset misappropriation, corruption, financial statement fraud — for each business cycle.
  3. Assess likelihood and impact. Consider pressures, opportunities and rationalization (the fraud triangle).
  4. Map existing controls. Preventive and detective controls against each scheme.
  5. Rate residual risk. After controls.
  6. Prioritize and respond. Treatment actions for the highest residual risks.

Inherent fraud schemes to consider

  • Procurement fraud and bid rigging
  • Conflicts of interest and bribery
  • Expense and payroll fraud
  • Revenue recognition and financial statement manipulation
  • Asset misappropriation and theft

Governance

  • The assessment is owned by management and reviewed by internal audit
  • Results inform the audit plan and the anti-fraud programme
  • The assessment is refreshed at least annually and after major change

Fraud risk that is not identified cannot be managed.

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