Using Fraud Assessment Questioning to Detect Fraud

The increasing opportunity for employee fraud is a significant problem for all businesses. Fraud is often discovered through tips or complaints from individuals—most employees are willing to reveal fraud if asked the right questions. Fraud assessment questioning (FAQ) is a technique that CPAs can use to uncover problems and determine where to start looking for fraud.

The authors provide sample fraud assessment questions and advice on how to interpret employee responses—both verbal and nonverbal. If properly utilized, FAQ not only can uncover the suspected fraudster, but it can identify other high-risk individuals, expose internal control weakness, and build a perception of detection that contributes significantly to a fraud-free environment.

The complexity of business transactions and information systems has created increased opportunity for employee fraud. A 1998 KPMG survey suggests that some employees are taking advantage of these opportunities, resulting in a median loss of $116,000 per incident. As awareness has increased, businesses have engaged CPAs as fraud investigators. The likelihood of detecting fraud increases if the CPA is adept in asking relevant questions and understanding the responses. The interviewing technique known as fraud assessment questioning (FAQ) can help bring an investigation to a successful conclusion.