When is fraud, waste or abuse something or nothing?

For auditors and fraud examiners, it's often difficult to determine when seemingly "normal" conditions transition to suspicious. The fraud triangle (motive, opportunity, and rationalization) provides guidance for the elements of fraud, but no single source of evidence gives us assurance that a fraud has occurred. We must be aware of the differing red flags of fraud, waste, and abuse (FWA), and interpret these often subtle warning signs.

Fraud occurs with an intentional act committed for personal gain. However, waste and abuse involve the mismanagement or misuse of resources. Abuse also includes using a position of authority for personal gain. Conclusions drawn as a result of interviews, document reviews and data analysis determine whether controls exist to detect, prevent, and deter FWA and the extent to which identified risks and vulnerabilities affect an entity.

Sometimes it can be easy to confuse FWA. The goal is to follow the facts and let them speak for themselves. Let's consider these cases.

CASE NO. 1: THREE STRIKES