Where's the beef? Developing a Deeper Understanding of Potential Fraud Schemes

Where's the beef?

The new IIA (Institute of Internal Auditors) global internal auditing standards focus on internal auditors proactively assessing and mitigating fraud risks within their organizations, requiring them to take a more proactive approach to detecting fraud and incorporate

(FYI, this will be my last blog on the new IIA standards for a while. Next month, I will discuss the new considerations added to fraud risk assessments.)

So, where's the beef?

Fraud Risk Program”

I interpret these illustrations to be examples of what our profession means by the expression “deeper understanding”. But honestly, what I see is a lot of bun! Let’s take a closer look at what’s missing.

But what is a fake seller? What is the billing plan? I suppose the assumption is that the internal auditor is all-knowing regarding the various permutations of a phony vendor or a billing scheme. Personally, I doubt it.

Take the term “fake vendors” for example. From my count, there are easily 20 distinct types of phony vendors. As to billing schemes, depending on how you count the schemes, you may have over 50 of them.

go deeper

my example Conspiracy to take over the identity of a real company in the marketplace, but not in the master file, and cause the real company to be added to the master file accounts payable, to process false invoices for goods or services that were not provided, resulting in the misappropriation of company funds.

Details matter. Let's look at another one:

my example: The controller deliberately overstated assets and recorded real supplier operating expenses incurred by real suppliers as capitalized expenditures through journal entries, resulting in a serious misstatement of capitalized advertising expenses.

There is a difficulty with the statement “deeper understanding”. How many companies are going to realistically document the deeper understanding concept? I understand their intention; however, if the statement is not in your workpapers, then you did not consider the fraud risk.

It's time!

Speaking on The Lion King: Baboons, Rafiki said: “It's time! It's time, in my opinion, for the industry to give us better guidance or better examples on how to understand fraud risk statements more deeply.”

Fraud trivia

Last month's answer

1. 90% fraud use generated

2. According to reports, a set of manipulation tactics used by fraudsters to exploit human psychology and trick individuals into revealing sensitive information, is another important tactic powered by artificial intelligence.

3. Scammers are also leveraging voice cloning technology, with 60% of professionals citing this as a major problem, followed by 59% citing AI-powered SMS and phishing scams to trick victims.

4.

AI-driven fraud tactics, including deepfakes, social engineering, and voice cloning, often lead to account takeovers and scams, which act as unauthorized fraud, are typically repayable in most cases, and are more difficult to detect. While deepfakes by themselves do not provide direct access to an account, they play a key role in establishing trust during the deception phase of the scam, in which criminals trick victims into believing they are dealing with a legitimate party.

“The scam technologies we’re seeing feel very human because they were designed by AI with that intention. But now, financial institutions must also deploy advanced AI technology to fight fraud in kind. Today, scams don’t come with misspellings and obvious red flags, they feature perfect grammar, realistic cloned voices, and videos of people who never existed.” explain “.

Monthly trivia

1. Who invented artificial intelligence?
3. What is Bill Gates’ focus on artificial intelligence?
4. Who is called the “father” of artificial intelligence?
5. Who is called the “godfather” of artificial intelligence?
6. AI Romance Schemes: How Do They Work?