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CS Professional · Internal and Forensic Audit · Emerging Issues and Challenges

An internal auditor at Rohan Foods Ltd discovers that a senior executive may have been involved in a suspected expense fraud. What is the most appropriate first step in line with sound practice?

The auditor should confidentially report the suspicion to the audit committee or designated higher authority and preserve the evidence. Confronting the executive or discussing with colleagues risks tipping off and tampering, while ignoring it neglects the auditor's duty to escalate suspected fraud involving senior management.

  1. AConfront the executive immediately and demand repayment
  2. BDiscuss the matter informally with the executive's team members to gather opinions
  3. CReport the matter confidentially to the audit committee or designated higher authority and preserve the evidenceCorrect
  4. DIgnore it because fraud investigation is never the auditor's concern

Explanation

Suspected fraud involving senior management should go confidentially to the audit committee or other appropriate authority, with evidence preserved. Confronting the person or spreading talk can tip off the suspect and taint evidence. Ignoring it fails the auditor's duty to communicate significant risks.

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