The skills demanded in the financial audit overlap with the skills demanded in fraud risk assessment (e.g., competency to assess documentation), however the approaches are divergent. Fraud risk assessment is not about reviewing prior period work-papers and updating as called for in this period’s audit program; it requires nothing short of re-imagining the entirety of the accounting information system because the AIS is developed from the reporting entity’s perspective to corroborate the accounting data and not to challenge the accounting data. That which seems to corroborate in all material respects is not functionally equivalent to that which analyzes impartially the accounting data. As fraud in the general case implicates overstatements to increases in retained earnings / net assets, the key is to take apart and put together independently the sets of contingencies and their assigned monetary values that comprise assets not based on historical / original cost (e.g., derivatives, model- or broker-based fair value investments).
Fraud in the special case implicates understatements of increases to RE, including (falsely) reported net losses. The special case may apply in management buyout or other potential sweetheart deal opportunity structures wherein individuals with more accurate and complete knowledge exploit those whose information is deficient / misleading.
The compartmentalization of the preparation of accounting data means that those who enter the data and maintain the required documentation may not understand much at all of the underlying transactions these accounting data are presumed to represent faithfully and neutrally. Many others within the entity’s leadership may be similarly disabled. Distinguishing the ostriches from the unwitting facilitators from the knowledgeable aiders and abetters… is not a skill ordinarily developed in undergraduate accounting programs. Moreover, it likely cannot effectively be taught in a one-day / one-week annual professional training program.
Individuals desirous of learning these skills should step out of the go-along to get-along ethos in which they practice their day jobs (i.e., uncomfortably, to liberate themselves from the habits responsible for their success). However, being prepared to assess fraud risk is not an end in-itself: Perhaps, it’s best to practice fraud risk assessment as an avocation.