Deterrence consists of those actions taken to discourage the perpetration of fraud and limit the exposure if fraud does occur. The principal mechanism for deterring fraud is control. The organizational environment fosters control consciousness. Realistic organizational goals and objectives are set. Appropriate authorization policies for transaction are established and maintained.
Communication channels provide management with adequate and reliable information.
Detection consists of identifying indicators of fraud sufficient to warrant recommending an investigation. These indicators may arise as a result of controls established by management, tests conducted by auditors, and other sources both within and outside the organization. This knowledge includes the need to know the characteristics of fraud, the techniques used to commit fraud, and the types of frauds associated with the activities audited. Be alert to opportunities, such as control weaknesses, that could allow fraud. If significant control weaknesses are detected, additional tests conducted by internal auditors should include tests directed toward identification of other indicators of fraud.