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In defence of External Auditors

Updated: Apr 15, 2020

When reading the annual statements of an organisation and the usually clean accompanying External Auditors’ report one tends to believe that there has been no fraud that year. On the other hand, if, by “fraud and corruption”, we mean any type of deliberate and harmful activity done by a handful of unethical suppliers, customers, consultants and agents, criminals and in a few cases dishonest employees, then we just know that “fraud-free” is wishful thinking at best.  

Maybe 50 years ago when organisations were rather less complicated, and an audit entailed a meticulous going over with a fine toothcomb, there was a much bigger chance that fraud would be found. But we should remember that today it is not even the responsibility of external auditors to discover the kind of frauds mentioned above. Some suppliers will always cheat us, customers may do unethical things, bribes can happen, and front companies will pop up in all sorts of business deals. And these avoidable costs this will dutifully be reflected, truly and fairly, of course, in the financial statements.

But thankfully today, the task of finding fraud early and dealing with it effectively does not need to be left to someone else like whistle-blowers, regulators, auditors or the media any more. We are fortunate that information flows more transparently than ever before, giving a much wider group of people working in organisations the chance to spot the early warning signs, if they are given this opportunity and trained on what to look for. As we like to think “Anybody can be a Fraud Detective”.

This post is taken from our Fraud Academy Forum on LinkedIn.

Try our "Spot The Red Flags" game and see if you can spot the red flags on an invoice which could potentially be from your supplier, or send the link to your internal audit team.

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