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Common Pitfalls – Fraud Risk Assessment


Risk assessments are part of the discipline of risk management, where enhanced frameworks and techniques have emerged. Risk management comprises the identification, assessment, and prioritization of risks followed by the coordinated and efficient use of resources to monitor, minimize, and otherwise control the organization’s risks.

Risks arise in many forms and range from uncertainty in financial markets, operational failures, natural disasters, and pandemics to legal liabilities and reputational harms.

Copyright 2021 Jonathan T. Marks CPA

Why Conduct a Fraud Risk Assessment?

Here are some general protocol issues relating to risk assessments.

Understand the difference between Inherent and Residual Risk

An Example

Therefore, ABC believes their “residual” risk is low.

Inherent risk is the risk that exists in an environment without the benefit of controls.  In other words, what is the risk that an event or activity could materially impact the company if management did not have activities in place to manage the risk?

Understand Risk Factors

Does the Risk Assessment Take into Account One or More of the Following Areas?

Next is a list of questions that a prosecutor might ask and require you to defend your risk assessment.

The following list contains some of the common pitfalls I have seen in risk assessments and the overall process.

If you have a common pitfall that is not included above, send it to me, and I will add it to the list.

Click here for more on the fraud risk assessment process.

Bes safe and stay well,

Jonathan T. Marks, CPA, CFF. CFE


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