![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
Definitions: Fraud and Audit
Feb. 10th, 2025 08:22 amIt has become apparent to me that many people do not know what financial fraud is nor how an audit is conducted. Having worked at a financial institution for many years and being intimately involved in audits and fraud prevention, herewith are definitions.
1) Fraud: Financial fraud is an unauthorized or improper payment. For example, Individual X was supposed to get paid, but Individual Y manipulated the payment system to reroute the money to them. Or, Individual Y created a payment to themselves without authorization (i.e., forged a check). Or, a vendor bills for services not rendered, either in whole or in part (overbill). Finally, internal employees create a non-existent vendor controlled by them to which they funnel money.
2) Audit: Audit is a systematic review of financial transactions, reporting and control. If you are auditing Accounts Payable (money going out of the entity) then you sit down and review all transactions looking for fraud as defined above. You do not take control of the payment system if only to not destroy potential evidence of criminal activity. You also don't pull reports from the system and give to your buddy so they can shitpost on the Internet that "Lutheran Family Services is a money-laundering operation." Lastly, any payments to the entity doing the audit should be disclosed and limited to just what it costs to perform said audit.
None of what Elon Musk perports to have found is fraud. It may be wasteful and it's clearly not to his tastes, but it's not fraud. What he's doing is related to audit in the same way that professional wrestling is related to real athletic contests. Musk is putting on a show to advance his agenda, not looking for fraud.
1) Fraud: Financial fraud is an unauthorized or improper payment. For example, Individual X was supposed to get paid, but Individual Y manipulated the payment system to reroute the money to them. Or, Individual Y created a payment to themselves without authorization (i.e., forged a check). Or, a vendor bills for services not rendered, either in whole or in part (overbill). Finally, internal employees create a non-existent vendor controlled by them to which they funnel money.
2) Audit: Audit is a systematic review of financial transactions, reporting and control. If you are auditing Accounts Payable (money going out of the entity) then you sit down and review all transactions looking for fraud as defined above. You do not take control of the payment system if only to not destroy potential evidence of criminal activity. You also don't pull reports from the system and give to your buddy so they can shitpost on the Internet that "Lutheran Family Services is a money-laundering operation." Lastly, any payments to the entity doing the audit should be disclosed and limited to just what it costs to perform said audit.
None of what Elon Musk perports to have found is fraud. It may be wasteful and it's clearly not to his tastes, but it's not fraud. What he's doing is related to audit in the same way that professional wrestling is related to real athletic contests. Musk is putting on a show to advance his agenda, not looking for fraud.
