Fraud Examination
Definition
The process of resolving an allegation of fraud, from initial fact-finding through evidence collection to a conclusion about what happened and who was responsible. It is a major subset of forensic accounting.
- Relationship
- A major subset of forensic accounting
- Starting point
- An allegation of fraud
- Process stages
- Fact-finding, evidence collection, conclusion on what happened and who did it
- Related credential
- Certified Fraud Examiner (CFE)
Common questions
How does fraud examination differ from a criminal investigation by police?+
Fraud examination is usually conducted by a private practitioner or internal team on behalf of an employer or client, follows accounting and audit methodology, and often runs alongside or before any police involvement. It can inform a later criminal referral but does not itself carry police powers of arrest or search.
Does a fraud examination always end in prosecution?+
No. Many examinations end in civil recovery, employee termination, or an internal control fix, with no criminal referral at all. The decision to prosecute depends on the evidence, the victim organisation's priorities, and whether a prosecutor takes the case forward.
Related terms
- Forensic Accounting
- The application of accounting, auditing, and investigative skills to matters likely to be disputed in a legal or regulatory forum. The word...
- Asset Misappropriation
- The largest Fraud Tree branch, covering schemes in which an employee steals or misuses the organisation's assets. Subcategories include cash schemes (skimming,...
- Forensic Audit
- An examination of an organisation's financial records and systems conducted specifically to gather evidence for legal proceedings. Distinguished from a regular audit...
- Fraud Triangle
- A model, developed by criminologist Donald Cressey, proposing that occupational fraud requires three converging conditions: pressure (financial need or incentive), opportunity (a...
- Litigation Support
- Work done by a forensic accountant to assist counsel in civil or commercial disputes: calculating damages, modelling lost profits, or reviewing opposing...
- Net-Worth Method
- An indirect method of proving unreported income. The investigator establishes opening and closing net worth, adds known expenditures, subtracts documented income, and...
- Predication
- The reasonable basis that justifies opening a fraud examination. The ACFE holds that no examination should begin without adequate predication, meaning a...
- Sarbanes-Oxley Act (SOX)
- US federal legislation enacted in July 2002 in direct response to Enron and WorldCom. Its key provisions include CEO/CFO certification of financial...
- Treadway Commission (COSO)
- The Committee of Sponsoring Organizations of the Treadway Commission, whose 1992 Internal Control framework became the global baseline for evaluating internal controls...
Explained in these topics
- Forensic Auditing: Definition and ScopeThe process, defined by the ACFE, of resolving allegations of fraud from initial predication through evidence collection, interviewing, and reporting. Forensic...
- Scope and History of Forensic Accounting