Responding to Fraud Risk Exploring Where Internal Auditing

Responding to Fraud Risk: Exploring Where Internal Auditing Stands Farah G. Araj, CIA, CPA, CFE, QIAL Available free of charge: www. theiia. org/goto/CBOK

CBOK 2015 Practitioner Study • CBOK is the Global Internal Audit Common Body of Knowledge: – The global practitioner survey is the largest ongoing study of internal audit professionals in the world. – More than 25 free reports about practitioners and the profession will be released from July 2015 to July 2016. – Download free reports from the CBOK Resource Exchange at The IIA website at any time (www. theiia. org/goto/CBOK).

CBOK 2015 Practitioner Survey • Practitioner Survey Results – Survey completed April 1, 2015 – 14, 518 usable survey responses • Participation Levels – 100% representation from IIA institutes – Responses from 166 countries – 23 languages

CBOK 2015 Practitioner Study

CBOK 2015 Practitioner Study Age was obtained from 12, 780 respondents; Organization Type was obtained from 13, 032 respondents; Gender was obtained from 14, 357 respondents; Staff Level was obtained from 12, 716 respondents.

Responding to Fraud Risk: Exploring Where Internal Auditing Stands Research Objectives • How important is fraud risk to internal audit and its stakeholders? • To what extent are internal auditors responsible for fraud prevention and detection? • Are internal auditors capable of responding to fraud risk?

The IIA’s Standards • 1210: Proficiency (1210. A 2) – Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization… • 2120: Risk Management (2120. A 2) – The internal audit activity must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk. • 2210: Engagement Objectives (2210. A 2) – Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives.

A Closer Look 1. The Global Focus on Fraud Risk 2. Internal Audit’s Responsibility for Fraud Prevention and Detection 3. Internal Audit Capabilities in Responding to Fraud Risk 4. Five Ways to Improve Internal Audit’s Approach to Fraud Risk

Section 1: The Global Focus on Fraud Risk

Section 1: The Global Focus on Fraud Risk

Section 1: The Global Focus on Fraud Risk

Section 1: The Global Focus on Fraud Risk

Section 2: IA’s Responsibility for Fraud Prevention and Detection

Section 2: IA’s Responsibility for Fraud Prevention and Detection

Section 2: IA’s Responsibility for Fraud Prevention and Detection

Section 2: IA Responsibility for Fraud Prevention and Detection • Privately held organizations: – All or Most Responsibility for Fraud Detection 36% (Global Average 29%) – All or Most Responsibility for Fraud Prevention 35% (Global Average 26%) • IA Departments with More than 50 Internal Auditors: – All or Most Responsibility for Fraud Detection 37% (Global Average 29%) – All or Most Responsibility for Fraud Prevention 33% (Global Average 26%)

Section 3: IA Capabilities in Responding to Fraud Risk

Section 3: IA Capabilities in Responding to Fraud Risk

Section 3: IA Capabilities in Responding to Fraud Risk

Section 4: Five Ways to Improve IA’s Approach to Fraud Risk 1. Establish internal audit’s role regarding fraud. 2. Educate management about fraud risk. 3. Be proactive in addressing fraud risk. 4. Build a database of lessons learned. 5. Create access to the right skills.

Conclusion: Responding to Fraud Risk • More than 80% of internal auditors globally indicate they have some or most of the responsibility for detecting and preventing fraud in their organizations. • On average, only 3 out of 10 CAEs chose fraud as one of their top five risks. • Fraud risk is more likely to be chosen as a top five risk by internal audit than by management. • Internal auditors in privately held organizations are more focused on fraud than other organization types.

Conclusion: Responding to Fraud Risk • 94% of internal auditors do not have fraud examination certification. • Yet about half of internal auditors believe they are competent or better at supporting fraud awareness and incorporating fraud considerations in audit engagements.

CBOK 2015 Releases IIA International Conference Governance, Risk, and Control Conference South Africa Conference IIA Financial Services Exchange ECIIA Conference All Star Conference Southern Regional Conference ACIIA Conference IIA Midyear Committee Meetings Jul. 2015 Aug. 2015 Sept. 2015 Oct. 2015 Nov. 2015 Dec. 2015 Driving Success in a Changing World: 10 Imperatives for Internal Audit Navigating Technology’s Top 10 Risks: Internal Audit’s Role A Global View of Financial Services Audits: Challenges, Opportunities, and the Future Who Owns Risk? A Look at Internal Audit’s Changing Role Auditing the Public Sector: Managing Expectations, Delivering Results Measuring Internal Audit Value and Performance Staying a Step Ahead: Internal Audit’s Use of Technology Combined Assurance: One Language, One Voice, One View Responding to Fraud: Exploring Where Internal Auditing Stands Core Competency Levels for Internal Auditors

CBOK 2016 Releases GAM Conference So. Pac Conference Leadership Conference IIA International Conference Jan. 2016 Feb. 2016 Mar. 2016 Apr. 2016 May 2016 Jun. 2016 The Skills Most Desired by IA Managers for Their Staffs CAE Career Path Maturity Levels for IA Dept. Around the World Certifications Held by Internal Auditors IIA Standards: Conformance and Trends Integrated Reporting Ethical Pressures Faced by Internal Auditors Quality Assurance and Improvement Program Trends Use of Third Parties by Internal Audit Interacting with Audit Committees Women in IA: Representation and Trends How to Evaluate and Motivate Your Staff Organizational Governance: Internal Audit's Role

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