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
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
- 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.