Running head: DIFFERENCES BETWEEN FRAUD EXAMINATION AND AUDITING

Differences between Auditing and Fraud Examination

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Differences between Auditing and Fraud Examination

Auditors’ primary role involves checking for misstatements in financial statements that

could be due to fraud (Carmichael, 2018). In addition to auditors, a company can consult the

services of fraud examiners when it detects fraudulent behaviors. These two functions, auditing,

and fraud examining, help in detecting fraud but they differ in their objective, predication,

methodology, scope, and how they relate to stakeholders (Carmichael, 2018).

According to Auditing Standard (AS) 1001, the auditor is expected to conduct an audit

and establish a reasonable assurance whether there is material misstatement in financial

statements due to fraud or error (Carmichael, 2018). The first difference between these functions

is in the scope where the auditor has to go through all the financial statements presented to them

while a fraud examiner targets the specific accounts and transactions suspected of fraud

(Carmichael, 2018). Secondly, they vary in their objective where a fraud examination aims to

identify if fraud took place and who might have conducted it while the goal of an auditor is to

examine financial statements to establish whether they are free of material misstatement, and if

so, whether it was intentional or not.

The third difference relates to predication where the fraud examiner only starts working

when there is a possibility that fraud has happened, is in progress, or may happen, and go beyond

the predication available. On the other hand, an auditor does not work with fraud in mind, they

go on with their work to identify where financial records may be prone to material misstatement

because of fraud (Carmichael, 2018). Fourthly, an auditor is guided by the public company

auditing oversight board (PCAOB) standards and maybe discipline if they do not meet the

standards while a fraud examiner if guided by the association of certified fraud examiners

(ACFE) but are not restricted to conform to such standards in their reports (Carmichael, 2018).
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Lastly, an auditor interacts with a wider group of stakeholders since financial statements are

subject to individuals and institutions outside the company while a fraud examiner’s reports are

only subject to the organization which contracted them for the exercise and tailored to its needs.
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References

Carmichael, D. R. (2018). Audit Versus Fraud Examination: What's the Real Difference? The

CPA Journal, 88(2), 48-53.