SOC2-CC3-FRAUD-RISK
Fraud Risk Assessment
What this control does
Assessment of fraud risks relevant to financial reporting and operations, including insider threat scenarios.
Implementation guidance
Include fraud scenarios in the annual risk assessment: unauthorized access to financial systems, manipulation of customer data, abuse of privileged access. Document controls that mitigate each scenario. Review after any personnel changes in high-risk roles.
Requirements satisfied
Why it matters
Undetected fraud directly undermines the accuracy and integrity of financial records—the foundation of SOC 2 trust. Without explicit fraud risk scenarios mapped to controls, organizations miss critical attack vectors like unauthorized fund transfers, data manipulation by privileged users, or collusion between roles that violate segregation of duties. A fraud risk assessment ensures financial systems have detective controls positioned to catch these threats before material impact occurs.
Evidence to collect
- Annual fraud risk assessment document identifying at least 5 fraud scenarios (e.g., unauthorized GL journal entries, customer data theft, override of payment approval workflows) with likelihood/impact ratings
- Risk matrix or heat map showing how fraud scenarios map to mitigating controls (access logs, transaction limits, MFA, approval workflows)
- Personnel change log for past 12 months with documented fraud risk re-assessment notes for Finance, Accounting, or Systems Admin role transitions
- Evidence of management sign-off on fraud risk assessment (email approval, risk register entry, board presentation slides)
Testing procedure
Interview the Financial Controller or Compliance Lead and request the current-year fraud risk assessment document. Verify it includes at least three insider threat scenarios (e.g., unauthorized transaction processing, system configuration changes, data export). Cross-reference each scenario to documented controls and confirm those controls are actually in place (verify one control per scenario through logs or system configuration). Check that the assessment was updated within the last 12 months and documents review triggers (hiring, separation, role change) for high-risk functions.
Common gotchas
Organizations often create a generic fraud risk assessment once and file it away without linking it to specific operating controls or updating it when personnel change—this creates a false sense of completeness while actual fraud pathways remain unmitigated. Another common mistake is assessing fraud risk in isolation from segregation of duties testing; the assessment becomes irrelevant if it doesn't validate that the controls it relies on (approval workflows, access restrictions) are actually enforced in production systems.