Types of audit - part 1

In this lesson

1. 0:00 Types of internal audit assignments
2. 0:28 Systems audits and compliance audits explained
3. 1:29 Fraud investigations and the Cressy Triangle
4. 2:07 Understanding fraud motivation, opportunity and rationalisation
5. 3:49 Ghost employee and collusion fraud types
6. 5:15 Asset theft and financial statement manipulation
7. 6:51 Pyramid schemes and Ponzi schemes
8. 8:34 Teaming and lading and advance fee fraud

About this lesson

This video also covers fraud investigations, exploring the Cressey Triangle framework that explains why fraud occurs, and then examines the specific types of fraud you need to recognise for your exam: ghost employees, collusion, expense claim inflation, asset theft, financial statement manipulation, pyramid schemes, Ponzi schemes, teaming and lading, and advance fee fraud. Understanding these audit types is essential for AA (Audit and Assurance) papers, as examiners expect you to distinguish between different audit approaches and recognise fraud schemes in real-world scenarios. Systems audits focus on whether controls are efficient and effective; compliance audits check whether systems ensure adherence to laws, regulations, policies, and contracts. Fraud investigations go deeper, examining not just individual incidents but systemic vulnerabilities that could allow similar frauds to recur. The video emphasises that internal audit can address fraud through three angles: eliminating opportunity by strengthening controls, reducing pressure through fair employment practices, and minimising rationalisation by maintaining strong workplace relationships. You'll see practical examples of how each fraud type works—from a payroll clerk creating a ghost employee to sophisticated schemes like Ponzi arrangements where investor capital is recycled rather than genuinely invested. This foundation prepares you to identify fraud risks in case studies and explain how internal audit can prevent or detect them.

Duration: 9m