What is the primary responsibility of the internal auditor for fraud deduction?

The internal auditor has manynimportant roles with regard to fraud in all its stages from prevention, detection until the investigation stage (if fraud occurred), I will limit my answer to the primary role as mentioned on your kind question. The internal auditor employs analytical procedures and other tools to find unusal items, and performs detailed analysis of high risk accounts and transactions to identify potential fraud. Also the internal auditor uses the computer assisted audit techniques, including data mining to detect particular types of fraud. The internal auditor has a better understanding about the company and its control system and can assist in identifying fraud risks by evaluating and testing the adquacy and effectiveness of internal control.

While doing risk assessment, IA need to be aware about fraud risk and take fraud risk into account into assessing a risk profile of an entity, a division and a process.

Your Heat Map need to reflect your assessment of fraud risk. This automatically ensures that a fraud risk prone is getting assessed at an appropriate level.

Having said that, fraud occurs due to an opportunity presented. There can be hundreds of reason because of which opportunity arises. 

     Internal auditors evaluate risks faced by their organizations based on audit plans with appropriate testing. Internal auditors need to be alert to the signs and possibilities of fraud within an organization. While external auditors focus on misstatements in the financial statements that are material, internal auditors are often in a better position to detect the symptoms that accompany fraud. Internal auditors usually have a continual presence in the organization that provides them with a better understanding of the organization and its control systems. Specifically, internal auditors can assist in the deterrence of fraud by examining and evaluating the adequacy and the effectiveness of internal controls. In addition, they may assist management in establishing effective fraud prevention measures by knowing the organization’s strengths and weaknesses and providing consulting expertise.

     Internal auditors may conduct proactive auditing to search for misappropriation of assets and information misrepresentation. This may include the use of computer-assisted audit techniques, including data mining, to detect particular types of fraud. Internal auditors also can employ analytical and other procedures to find unusual items and perform detailed analyses of high-risk accounts and transactions to identify potential fraud.

    At the appropriate time when enough information has been obtained, the CAE should keep senior management and the audit committee informed of special investigations in-progress and completed.

Responsibilities for FD:

1. Involvement in risk assessment for fraud
2. System flow analysis, to pinpoint major loopholes leading to fraud
3. Control testing, identifying significant deviation inferring fraud existence
4. Analyses of past incidence of fraud, checking conditions exist for re-occurrence
5. Knowledge of current incidence of fraud in industry, checking for similar instances at their co.

Thanks for invitation

The internal auditor reviews the operations and performs such functions as evaluation, compliance, verification ensure and ensures that policies, procedures, rules and other type of controls of the business are carried out efficiently.

The internal auditor points out irregularities in the procedural aspects and suggest ways and means to rectify the same. He assures that the financial operations and other types of control in force are carried out in conformity with the accounting systems.

In short the internal auditor has a big hand in the prevention and detection of fraud in the company.

1st We should remember that primary responsibility of fraud detection lies with the those charged with governance while internal auditor is responsible to ensure sound system of controls exists to detect fraud in normal course of business. Controls testing are the main weapons that IA use to fire while detecting fraud , apart from other literature like professional skepticism, watch dogs, alertness with question mind. If system of internal controls and risk management does not exist than its also responsibility of IA to document this system and update it to the Audit committee.