How to Build a Fraud Audit Program

Fraud costs the global economy over $5.127 trillion each year, but that’s not the worst part. What’s even more alarming is that despite the growth of sophisticated fraud prevention tools and advanced fraud modeling, the cost of fraud continues to grow annually. 

For example, a recent report from Digital Commerce 360 found that merchants have experienced a 7% increase in fraud, which now costs them $3.36 for every $1 of fraud. The 2019 Identity Fraud Study from Javelin Strategy & Research also revealed that while the number of victims of fraud is falling, victims are bearing a heavier financial burden. 

What’s more, the rise of omnichannel is giving fraudsters more places to focus their attention. Loyalty and rewards programs, new financial accounts, online loan applications, chatbots, and mobile apps are all prime targets for fraud.

All of the above underscore the importance of building and maintaining a fraud audit program. Because criminals are becoming increasingly skilled at avoiding detection methods, auditing your fraud prevention tools and processes can help you detect potential gaps in the defense and strengthen your detection efforts. 

What is a Fraud Audit Program?

Auditing transactions, applications, new accounts, and other activities are par for the course for many businesses. A fraud audit adds an extra layer to these processes to proactively and intentionally look for signs of fraud.

Fraud audit programs play an important role in today’s organizations. Because many audits are not geared toward fraud detection or prevention, profit-damaging activities can fly under the radar because they appear seemingly harmless on the surface. Building fraud prevention tools into your current auditing processes can strengthen the outcome of every audit.

The Challenges of Auditing for Fraud

Some audit programs do not include a fraud detection element, and there are many reasons for this.

First, it’s not always easy to know what fraud looks like. If auditors do not understand how fraud can occur or what to look for, fraud can easily go undetected. 

Also, without a good fraud security tool, fraud can be hard to prove. Many of the traditional tools used in fraud detection are limited in scope and function and are difficult to use. When not enough fraud is captured, it can seem like wasted effort and resources. 

Last but not least, many organizations aren’t sure what to do with their findings. Once they audit for fraud, they also need to take the next step to prevent similar fraud instances from occurring.

Simplifying Your Fraud Audit Program

Given the growing and expensive fraud landscape, not having a designated fraud audit program is a huge missed opportunity to support your company from within. Overcoming the challenges associated with auditing for fraud can be a worthwhile endeavor if it means protecting your employees, your customers, your reputation, and your bottom line.

What does it take to integrate fraud detection into your auditing processes? Download the guide: 6 Steps to Building a Fraud Audit Program to find out.