Multiple Choice
When a contract involves fraud, which element of the fraud triangle is most directly present?
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
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Which of the following is an example of a best practice strategy to prevent fraud?
A
Allowing employees to handle cash without supervision
B
Ignoring minor discrepancies in financial records
C
Relying solely on employee trust without verification
D
Implementing strong internal controls and regular audits
Verified step by step guidance1
Understand the concept of fraud prevention: Fraud prevention involves strategies and practices designed to detect, deter, and mitigate fraudulent activities within an organization.
Recognize the importance of internal controls: Internal controls are policies and procedures implemented to safeguard assets, ensure accurate financial reporting, and promote compliance with laws and regulations.
Identify the role of regular audits: Audits are systematic examinations of financial records and processes to ensure accuracy, compliance, and to detect any irregularities or fraudulent activities.
Evaluate the options provided: Analyze each option to determine whether it aligns with the principles of fraud prevention. For example, allowing employees to handle cash without supervision increases risk, while ignoring discrepancies or relying solely on trust without verification are not effective strategies.
Conclude that implementing strong internal controls and regular audits is the best practice strategy to prevent fraud, as it actively addresses risks and ensures accountability within the organization.
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