[Ethical Responsibilities of the Fraud Examiner] While, a Certified Fraud Examiner (CFE). was hired to conduct a fraud examination She did not find…

According to the professional standards and ethical guidelines governing Certified Fraud Examiners, a CFE has a responsibility to exercise due professional care. This duty extends beyond simply identifying committed fraud to also include identifying and communicating significant risks and internal control deficiencies that could facilitate future fraud. Including an opinion on control weaknesses in a report to management is not only permissible but is a fundamental aspect of a comprehensive fraud examination and a key component of fraud prevention and deterrence services. The report serves to inform management of the examination's findings, which includes conditions that could enable fraudulent activity, thereby allowing the organization to take corrective action.

The alternative, "False," is incorrect because it would imply that a CFE's role is strictly limited to reporting on confirmed fraudulent acts. This contradicts the broader mandate of a CFE, which includes advising on fraud prevention and deterrence. Failing to report observed, material control weaknesses would be a breach of the CFE's duty of due professional care, as it would leave the client vulnerable to the very risks the CFE was retained to address.

1. Association of Certified Fraud Examiners (ACFE). (2023). Fraud Examiners Manual

International Edition.

Section 4.401

"Contents of a Fraud Examination Report": This section outlines the typical components of a formal report. It explicitly includes a section for "Recommendations

" stating

"The recommendations section of the report suggests actions that the client can take to eliminate the internal control weaknesses that allowed the fraud to occur or that might permit it to happen in the future." This directly confirms that reporting on control deficiencies

even if no fraud is found

is a standard and appropriate practice.

Section 2.203

"Internal Controls": This section details the importance of internal controls in preventing and detecting fraud. It implicitly supports the CFE's role in evaluating and reporting on these controls as part of a comprehensive examination.

2. Association of Certified Fraud Examiners (ACFE). (2012). Code of Professional Ethics.

Section II: "A CFE

in conducting examinations

will obtain evidence and other information in a legal and ethical manner and will exercise due professional care in the performance of his or her services." Exercising due professional care includes identifying and reporting on significant risks

such as the internal control deficiencies noted in the scenario.

3. Association of Certified Fraud Examiners (ACFE). (2012). Code of Professional Standards.

Standard IV.B.1: "Fraud examiners shall disclose all material matters discovered during the course of an examination which

if omitted

could cause a distortion of the facts." Significant internal control deficiencies are material matters that must be disclosed to the client. Omitting them would distort the client's understanding of their fraud risk environment.