We did this work as part of our 2007 Annual Audit Program as approved by the City Council. While the term “fraud” has a specific legal meaning we use the term in this report to mean a variety of wrongdoing. It includes white-collar crime and embezzlement. Fraud in this report includes theft of cash or other assets with active concealment of the theft.
Because of many well-publicized frauds in the corporate world (e.g. Enron, WorldCom), internal and external auditors are under greater pressure to help their organizations and clients avoid such situations. The latest edition of Sawyer’s Internal Auditing, the “bible” of internal auditors, says: “Because of the enormous sums involved and the potentially disastrous effects of fraud and associated wrongdoing, internal auditors are being expected to put such unsavory activities under the spotlight of their audit surveillance.”
Not all frauds can be uncovered even by the best auditors. Wrongdoing such as kickbacks, forgery, collusion, and other unrecorded transactions can be difficult to discover without a tip. Neither are auditors expected to be handwriting experts. According to Sawyer’s Internal Auditing, “When skillfully prepared false documents are presented to auditors who have no reason to doubt their validity, it is reasonable for the auditors to rely on them.” Nevertheless, internal auditors are expected to be alert to the “red flags” or indicators of possible fraud. According to the International Standards for the Professional Practice of Internal Auditing section 1210.A:
-
“The internal auditor should have sufficient knowledge to identify the indicators of fraud but is not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.”
This audit report represents over 100 hours of direct audit time. Most of our direct audit time is being used for the four audits described in our 2007 Annual Audit Program: cash handling, construction projects administration, Washington Pavilion management contract, and purchasing/procurement.
Read the full report from the link on the right...
