How can new fraud combination theory help forensic auditors and external auditors in fraud risk assessments?

Abstract

The International Standards on Auditing (ISA) 240 requires auditors to assess the risk of material misstatements due to fraud. The ISA (240:4) further notes that the three factors of the Fraud Triangle theory propounded by Donald Cressey should be incorporated into the audit plan. It appears that auditors’ knowledge and understanding of fraud is limited due to inadequacies of ISA 240. This article considers a theoretical review of other relevant fraud theories, literature was reviewed and the researchers recommend that the robust new fraud combination theory should greatly assist forensic auditors and external auditors to identify and assess fraud and perform effective fraud risk assessments. This study significantly contributes to the current body of knowledge by introducing the New Fraud Combined Theory, a consolidation of all the fraud models and contributory fraud risk factors for fraudulent activities enable external auditors and forensic practitioners to effectively perform fraud risks assessments (FRAs) robustly. This research will guide researchers to further research on the subject matter.