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FRAUD
What’s your fraud IQ?

See how much you know about these red flags.

By Andi McNeal, CPA

raud can wreak havoc on businesses. Beyond financial could lead to potential fraud. Consequently, they must under-
loss, it can erode trust, damage an organization’s stand the underlying factors behind fraud and the red flags of
Freputation, and hinder its ability to attract and retain dishonest practices throughout every audit engagement.
clients. Fraud can also threaten a company’s ability to In recent years, the JofA has published a series of quizzes,
maintain its competitive advantage. Small businesses, called “What’s Your Fraud IQ?,” for CPAs to test their knowl-
which may lack the resources for proper controls, are edge of fraud risks, investigations, and areas of concern, such as
especially vulnerable. employee embezzlement, procurement, and financial reporting. IMAGE BY SEAMARTINI/ISTOCK
Although many CPAs will not encounter fraudulent Here are five key questions from the series for you to
financial reporting or be formally asked to lead an investigation answer to learn how your knowledge about fraud risk manage-
during their careers, they are likely to encounter scenarios that ment, investigations, and red flags measures up.

16 | Journal of Accountancy March 2022