Fraud Risk Factors
Common Red Flags
Auditors identify fraud risk factors during planning and throughout the engagement. These indicators do not prove fraud but may require additional audit procedures.
- Unusual year-end transactions.
- Weak internal controls.
- Management override of controls.
- Significant related-party transactions.
- Aggressive earnings targets.
- Complex or unexplained accounting estimates.
Note
Multiple fraud risk factors together generally require increased audit attention.
Summary
Fraud risk factors help auditors identify areas requiring additional professional skepticism and testing.