Tuesday, May 27, 2014

DoD-IG Removes "Handbook of Fraud Indicators" from its Website

The DoD-IG (Department of Defense, Inspector General) cancelled and removed its "Handbook of Fraud Indicators for Contract Auditors" from its website due to its age and outdated scenarios. After all, it hadn't been updated in more than 20 years. In its place, the DoD-IG has added a website section entitled "Contract Audit Fraud Scenarios and Resources." This new section is a work in process as it contains only four scenarios so far, with promises of more in the future.

The four scenarios containing examples of what contract auditors should be alert for include:
  • Review of consultant/professional services
  • Subcontractor/vendor kickbacks
  • Adjusting journal entities - labor transfers
  • Material transfers
Obviously, these type of audits represent only a small fraction of a contract auditor's overall audit activities so now, auditors are kind of on their own for determining what types of fraud risks they should be considering when conducting audits.

One reference source is the GAO Yellow Book (also known as GAGAS or Generally Accepted Government Auditing Standards). Follow this link and go to page 183.

Also, the ACIPA Professional Standards, AU-C 240.A75 contain fraud risk indicators that auditors might face in a broad range of situations. These are categorized generally as:

  • Incentives and pressures
  • Opportunities
  • Attitudes and rationalizations

Regardless of the sources for fraud risk indicators or the relevance of published indicators, auditors are still bound by professional standards to consider the risk of fraud in every audit they undertake. Don't be dismayed when auditors ask some penetrating questions. They're just doing their job.

If you would like to have a copy of the now obsolete DoD-IG Handbook of Fraud Indicators, lets us know and we'll email you a copy.

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