All of these initiatives are intended to achieve improvement in the level of investor confidence. Further, these initiatives directly or indirectly affect a wide range of constituencies: company directors and executives; auditors, both internal and external; third-party analysts; corporate information distributors among others. There is no silver bullet. In reality, auditors can never guarantee that they will discover a material fraud, and regulation will never require this of them. But short of unattainable perfection, there is a great deal that can be accomplished in fraud detection and deterrence.

So how does one begin to understand the complexity of fraud deterrence, detection, and investigation? The range of concerns is vast -- for example, from the tightly constructed guidelines of SAS 99 (the most recent Statement on Auditing Standards on fraud detection) to the experience-based, tough-minded skills required to conduct an admission-seeking interview with an alleged perpetrator of fraud. 

First and foremost is the urgent need for change:

• External and internal auditors must train thoroughly in fraud-detection procedures and attitudes.
• The university education of the next generation of auditors should reflect the new emphasis on fraud deterrence, detection, and investigation.
• The formal standards governing audit processes and objectives should evolve without delay to an updated and more rigorous approach to fraud detection.
• Executives and directors must become fully aware of the threat of fraud and do all they can to institute measures to deter it, ranging from robustly enforced codes of ethics to internal controls that make fraud less likely and easier to detect.

External and internal auditors who are highly effective in surfacing suspicions of fraud will, for that very reason, deter its occurrence. They will need to have an appreciation for the skills of forensic accounting investigators, and bring them into the audit when suspicions of fraud surface.

As the suspicion and reality of fraud diminish across the corporate world, investors will regain confidence in the integrity of corporate information. These changes need to reach past the audit profession and those who hire and work with auditors to the capital markets worldwide. 
 
THOMAS W. GOLDEN is the partner-in-charge of the Midwest Region Investigations & Forensic Services practice for PricewaterhouseCoopers and resides in Chicago. He is co-author of The Auditor’s Guide to Forensic Accounting Investigation, published by John Wiley & Sons in spring 2005. This book is an invaluable reference for the auditing community, written by a group of forensic accountants and auditors at PwC. Based on their unique experience, this book provides a full portfolio of best practices, tools, and techniques for the deterrence, detection, and investigation of corporate fraud.