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Compliance : Sarbanes Oxley : Fraud : Risk Management

Five Steps to Fighting Fraud with Professional Skepticism

Crowe Horwath LLP offers tips to auditors, board members and financial executives

By Jonathan Marks
Jonathan Marks
Crowe Horwath

Deterring and detecting fraud within an organization is the responsibility of several groups: financial executives, boards of directors, audit committees, internal auditors and external auditors. To avoid complacency, Crowe Horwath LLP, one of the largest public accounting and consulting firms in the U.S., recommends that each of these groups practice professional skepticism.

(Related white paper: “Skepticism: A primary weapon in the fight against fraud.”

Professional skepticism occurs when those responsible for fighting fraud take nothing for granted, continuously question what they hear and see, and critically assess all documents and statements, according to Jonathan Marks, a partner and the leader of Crowe fraud, ethics and anti-corruption services.

“Trust is a professional hazard and a fraudster will prey on it,” said Marks. “For example, a cunning fraudster will take advantage of audit deadline pressure by diverting an auditor’s time and attention to areas that are unlikely to raise concerns and saving problematic areas until the engagement’s end, when time is short. Recognizing and resisting this tactic requires the application of professional skepticism – not only on the part of the external auditor but by the others involved in the process as well.”

Marks suggests all stakeholders take the following steps to encourage professional skepticism:

  • Play the role of the independent reviewer or inspector, particularly of your own assumptions. A professional skeptic continuously challenges his or her beliefs and belief-based risk assessments. Critical self-assessment is necessary to demonstrate to others why and how beliefs and assessments are justified.
  • Make an effort to resist complacency. Question whether you are placing undue weight on prior risk assessments or discounting evidence inconsistent with your expectations.
  • Be alert to pressure. Pay particular attention to pressure to truncate risk assessment procedures or make unwarranted assumptions to beat time constraints. This step is especially important as deadlines approach.
  • Understand the sources of evidence. Identify and assess audit risks from multiple perspectives, using multiple sources of evidence.
  • Be aware of the relative reliability of various types of evidence. In general, documentation from internally generated documents – particularly those that are generated manually or not linked to other reporting systems – is less reliable as evidence than documents generated by external sources such as banks or suppliers.

“Informed, knowledgeable skepticism is a professional asset for auditors, board members and financial executives. By challenging their own assumptions – and creating an environment in which challenges are encouraged and supported – companies will not just deter fraud but make its detection more likely,” Marks said.

Marks will be speaking on fraud at the 25th annual ACFE (Association of Certified Fraud Examiners) Global Fraud Conference in San Antonio, Texas, June 15-20.

About Crowe Horwath

Crowe Horwath LLP is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe and its subsidiaries have offices coast to coast with more than 3,000 personnel. The firm is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world, consisting of more than 150 independent accounting and advisory services firms in more than 100 countries around the world.




Jonathan Marks
Crowe Horwath

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