Can Internal Auditors Perform Investigations into Irregularities and Fraud?
In discussions among peers, particularly internal auditors and corporate investigators, a common question arises: can internal auditors effectively pivot into an investigation role? This topic is relevant as internal auditors are already deeply involved in evaluating risk, processes, and controls within organisations. Let us delve deeper into understanding the distinctions and potential overlaps between internal audit and investigation roles, as well as the pivot from internal audit to fraud investigations.
The internal audit function is integral to organisations, providing systematic and disciplined reviews aimed at improving risk management, processes, and controls. The primary objective is to provide independent and objective assurance to management and the Board about the adequacy and effectiveness of internal controls and compliance with regulations. This proactive role highlights control lapses and gaps that management will address and monitor.
Investigations can involve a range of functions, potentially involving Internal Audit, Compliance, Human Resources, Legal, Security, and Risk Management, depending on the nature of allegations. These investigations can sometimes necessitate collaboration across various organisational functions or the engagement of external investigators. Unlike internal audit, investigations are typically reactive, aiming to validate allegations of misconduct, improprieties or unethical behaviour through evidence gathering, interviews, and data analysis.
While not all irregularities are due to fraud, fraud remains a persistent challenge for organisations globally, and it is estimated that organisations lose approximately 5% of revenue to fraud. Regardless of an organisation’s size or industry, some required skill sets for performing fraud investigations effectively are distinct from internal audit. These include forensic accounting, digital forensics, fraud examination, performing effective interviews and preserving the chain of evidence should the investigation be challenged in court.
I have seen firsthand how internal auditors uncover gaps in internal controls through internal audit engagements. By embracing the responsibilities and techniques inherent in fraud investigations, internal auditors can expand their professional horizons and contribute to organisational resilience and integrity.
When pivoting into a fraud investigation role, internal auditors can leverage the following:
- Business Insights: Knowledge of business processes, controls and risks is relevant when performing fraud investigations.
- Analytical Skills: The ability to analyse data and detect anomalies is crucial in identifying fraudulent activities.
- Report Writing: Clear and precise documentation is essential to communicate investigation findings and recommendations.
There is also a need to further develop investigative techniques, in particular:
- Interviewing Skills: Effective interviewing techniques to gather information and evidence from witnesses and subjects.
- Evidence Handling: Proper procedures for collecting, preserving, and presenting evidence.
Lastly, internal auditors looking to move into a fraud investigation role can gain relevant experience from the following:
- Internal Opportunities: Identify opportunities within the current organisation to participate in fraud investigations or investigative projects.
- Cross-Functional Projects: Volunteer to participate in cross-functional projects that focus on compliance, legal, or risk management issues.
- Networking: Build relationships with professionals in the fraud investigations field to learn from their experiences and potentially find mentorship opportunities.
Transitioning into fraud investigation roles allows internal auditors to diversify their expertise and play a crucial role in safeguarding their organisations against misconduct and fraud. This career pivot enhances their value and supports organisational integrity and resilience.
Mark Lim is currently fighting fraud in Asia Pacific at A.P. Møller – Mærsk. He pivoted from his previous roles which include Compliance, Risk Management, and Internal Audit.
