Fraud and the Fraud Triangle quiz #3 Flashcards
Fraud and the Fraud Triangle quiz #3
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What is the significance of ethical training programs?
Ethical training programs reinforce company values and reduce rationalization for fraud. How can companies detect inventory theft?
Companies can detect inventory theft through regular inventory counts and reconciliations. What is the role of management review in fraud prevention?
Management review helps ensure that controls are followed and can identify unusual transactions. How can companies prevent collusion among employees?
Segregating duties and monitoring transactions can help prevent collusion. What is the impact of fraud on financial statements?
Fraud can lead to misstated financial statements, affecting decision-making and investor confidence. How can companies use data analytics to detect fraud?
Data analytics can identify patterns and anomalies that may indicate fraudulent activity. What is the importance of a code of conduct in fraud prevention?
A code of conduct sets ethical standards and expectations for employee behavior. How can companies respond to suspected fraud?
Companies should investigate, take disciplinary action, and review controls to prevent recurrence. What is the benefit of independent reviews of financial records?
Independent reviews provide an objective assessment and can detect errors or fraud missed by internal staff. How does employee loyalty affect fraud risk?
High employee loyalty can reduce rationalization and the likelihood of fraud. What is the role of documentation in fraud prevention?
Proper documentation provides evidence of transactions and helps detect unauthorized activities. How can companies use access controls to prevent fraud?
Access controls limit who can view or modify sensitive information, reducing the risk of unauthorized actions. What is the effect of unclear policies on fraud risk?
Unclear policies can create confusion and increase opportunities for fraud. How can companies foster a culture of accountability?
By holding employees responsible for their actions and enforcing consequences for misconduct. What is the significance of timely financial reporting?
Timely reporting helps detect discrepancies and potential fraud sooner. How can companies use physical controls to prevent fraud?
Physical controls, such as locks and security cameras, help protect assets from theft. What is the impact of fraud on stakeholders?
Fraud can harm stakeholders by reducing company value and trust. How can companies ensure that employees understand internal controls?
Through regular training and clear communication of policies and procedures. What is the benefit of having a fraud response plan?
A fraud response plan ensures a quick and effective reaction to suspected fraud. How can companies use reconciliations to detect fraud?
Reconciliations compare records to identify discrepancies that may indicate fraud. What is the role of management in setting ethical standards?
Management sets the tone for ethical behavior and enforces standards throughout the organization. How can companies reduce the risk of employee theft?
By implementing strong internal controls and monitoring employee activities. What is the importance of regular policy reviews?
Regular reviews ensure that policies remain effective and address new fraud risks. How can companies use employee feedback to improve fraud prevention?
Employee feedback can identify weaknesses in controls and suggest improvements. What is the effect of management support on fraud prevention efforts?
Strong management support reinforces the importance of controls and ethical behavior. How can companies address the risk of collusion in fraud?
By segregating duties and monitoring for unusual patterns that may indicate collusion. What is the benefit of having clear reporting lines?
Clear reporting lines help ensure accountability and proper oversight. How can companies use surprise cash counts to prevent fraud?
Surprise cash counts deter theft by increasing the risk of detection. What is the impact of fraud on company profitability?
Fraud reduces profitability by causing financial losses and increasing costs. How can companies use employee rotation to detect fraud?
Rotating employees can uncover fraudulent schemes that rely on one person controlling a process. What is the significance of ethical leadership in fraud prevention?
Ethical leadership sets a positive example and encourages employees to act with integrity. How can companies use external audits to prevent fraud?
External audits provide independent verification of financial records and controls. What is the role of transparency in reducing fraud risk?
Transparency increases accountability and makes it harder to conceal fraudulent activities. How can companies use fraud hotlines to detect fraud?
Fraud hotlines allow employees to report suspicious activities anonymously. What is the benefit of having a zero-tolerance policy for fraud?
A zero-tolerance policy deters fraud by making consequences clear and consistent. How can companies use periodic reviews to strengthen internal controls?
Periodic reviews identify weaknesses and ensure controls are functioning as intended. What is the impact of fraud on investor confidence?
Fraud undermines investor confidence and can lead to decreased investment. How can companies use job rotation to prevent long-term fraud schemes?
Job rotation disrupts schemes that require one person to control a process over time. What is the importance of documenting all financial transactions?
Documentation provides a record for review and helps detect unauthorized activities. How can companies use employee surveys to assess fraud risk?
Surveys can reveal attitudes and pressures that may increase fraud risk.
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