Fraud risk analysis has improved, but vigilance is still required

 

In a harsher environment, fraud risk analysis is even more important

The social context is becoming harsher, with geopolitical tensions, technological developments such as AI and economic uncertainty increasing the risk of fraud. Such times require particular vigilance. Fraud often only comes to light when the tide goes out. That makes good fraud risk analysis even more important.

Visible progress

The AFM reviewed six PIE audit firms and 12 statutory audits and examined how the deficiencies highlighted in the publication ‘More attention for fraud risks!’ had been adressed. We note that progress has been made and we have a positive view of the measures taken. The quality of fraud risk analysis has improved, guidelines and procedures have been tightened and organisations are focusing on awareness, coaching, training and the involvement of fraud experts.

Further improvement needed

Further tightening is required. There is a need for better monitoring and impact assessment to assess whether measures are genuinely contributing to improvement. A thorough root cause analysis with a focus on behavioural and cultural aspects is important in this regard. There is a need for even greater professional scepticism when gaining an understanding of the entity and its environment. It is also important that audit firms take steps to identify the assumed fraud risk in revenues.

The AFM calls for the existing actions to be continued and further improved

The AFM calls on all audit firms to continue the actions taken and to apply the recommendations in the report, thereby maintaining the rising trend in the quality of fraud risk analyses. Hanzo van Beusekom, Member of the Executive Board of the AFM: ‘Fraud risk analyses are improving.
In a more complex and riskier environment, it is crucial that audit firms not only take measures but also assess whether their approach is working.’

More information

Towards improved fraud risk analysis (pdf, 390kB)