Auditing in a Changing Environment

: the Symbiotic Nexus between Fraud and Money Laundering in the Context of Auditor Responsibility

Abstract

As financial markets become increasingly complex and interconnected, the risks of fraudulent activities and money laundering have intensified. Auditors are often positioned at the frontline of these risks, yet the overlap between fraud and money laundering presents significant challenges for prevention, detection, accountability, and reporting. This intersection raises a critical question: can the nexus between fraud and money laundering also serve as an avenue for strengthening auditors’ ability to prevent and detect both threats?
Despite regulatory reforms and heightened scrutiny, there is limited research into how the symbiotic relationship between fraud and money laundering reshapes auditors’ responsibilities and methodologies. Traditionally treated as distinct domains, these two phenomena frequently reinforce one another, creating blind spots in audit practice. Auditors are expected to exercise professional scepticism and respond to red flags, yet questions persist as to whether they possess the appropriate tools, training, and frameworks to address these interconnected risks effectively.
The urgency of this issue has intensified in the wake of major corporate failures. The Gupta scandal - spanning at least four countries and combining corruption, fraud, and money laundering - demonstrated how such risks operate across borders, with proceeds of crime flowing from South Africa into the UK, Dubai and Hong Kong, and implicated a Big Four audit firm in its web of misconduct. South Africa was the trigger point, but the impact reverberated globally, as the market began asking whether another Big Four firm could go the way of Enron and Arthur Andersen. The scandal underscored how deeply intertwined fraud and money laundering are, and how they can destabilize not only corporations but also the credibility and resilience of the audit profession itself.
This study adopts a qualitative grounded theory methodology, drawing on interviews with senior auditors, regulators, forensic specialists, and compliance professionals across six sectors to explore the nexus between fraud and money laundering.
Analysis of these interviews revealed several striking themes regarding the effectiveness of the current audit framework. Notably, every participant – regardless of sector – expressed the view that the existing “audit model” is fundamentally broken and ineffective in addressing today’s fraud and money laundering risks. While this consensus was unanimous, participants differed sharply in their diagnosis of the underlying causes and in their proposed remedies, often reflecting the distinct priorities and blind spots of their respective professional domains.
The findings reveal that the two threats feed off each other in a mutually reinforcing cycle facilitated by weak controls, regulatory arbitrage, and gatekeeper complicity, and that current audit approaches inadequately address this interconnection. The study develops an emerging theoretical model demonstrating how refocusing the audit lens on money flows (“following the money”) enhances the likelihood of identifying fraud, strengthens professional scepticism, and could reshape audit methodology towards earlier intervention and enhanced prevention.
The research contributes to literature and practice by offering a unified conceptualisation of fraud and money laundering risk within audit, extending debates on audit reform, and presenting a framework for integrating forensic accounting techniques into mainstream audit practice. The study proposes implications for regulatory policy, audit training, and global audit quality, positioning auditors to play a more proactive role in safeguarding financial integrity

Date of Award	18 May 2026
Original language	English
Awarding Institution	University of Portsmouth
Supervisor	Dan Shen (Supervisor), Mike Page (Supervisor) & Tarek Mohamed Hassan AbdelFattah (Supervisor)