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The following article was authored by Adam Weisman, Partner, Deloitte Financial Advisory Services LLP and Tania Lynn, Senior Manager, Deloitte & Touche LLP.

Fraud has always represented a dangerous and perhaps dangerously underestimated risk for many companies. For hedge funds and other investment management firms, the threat of fraud is a risk for both the company and for the investors who entrust them to manage their assets. The recent discovery of the alleged fraud committed by Bernard Madoff has been well-publicized, but this is not the only incidence or allegation of fraud involving asset management firms - nor is it likely to be the last. Fraud is not something new or isolated to hedge funds or the asset management industry; however the Madoff fraud has appropriately renewed the focus of investors on the importance of risk management and due diligence in protecting their investments.

Many companies, including those in the asset management industry, are experiencing economic challenges given current market conditions. As conditions deteriorate and economic pressures persist, the incidence of fraud for companies and organizations may increase. Therefore, investors should be proactive in evaluating and assessing the risk management and fraud detection programs that are in place relating to their investments.

The risk of fraud can be mitigated by a system of risk manageme......................

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