FRAUDE Flashcards
What is internal control?
Internal control refers to the processes and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.
True or False: Internal control systems are only necessary for large organizations.
False.
Fill in the blank: A lack of __________ can lead to increased opportunities for fraud.
internal controls
What are the main objectives of internal controls?
The main objectives are to ensure accurate financial reporting, compliance with laws and regulations, and effective and efficient operations.
Which of the following is NOT a component of internal control? (A) Risk Assessment (B) Control Environment (C) Management Style (D) Monitoring
C) Management Style
What is fraud?
Fraud is an intentional act of deception that results in financial or personal gain.
True or False: Internal controls can completely eliminate the risk of fraud.
False.
What role does segregation of duties play in internal controls?
Segregation of duties helps to prevent fraud by ensuring that no single individual has control over all aspects of a financial transaction.
Fill in the blank: __________ is a common internal control measure that involves regularly reviewing financial statements.
Monitoring
What is the purpose of a fraud risk assessment?
The purpose is to identify potential areas of fraud risk and develop strategies to mitigate those risks.
Which of the following is an example of a preventive control? (A) Internal audits (B) Employee training (C) Fraud hotlines (D) Surprise audits
B) Employee training
What is the relationship between internal controls and organizational culture?
A strong organizational culture promotes ethical behavior and compliance, which enhances the effectiveness of internal controls.
True or False: Documentation is a key element of internal controls.
True.
What is the impact of technology on internal controls?
Technology can enhance internal controls by automating processes, improving accuracy, and providing better monitoring capabilities.
Fill in the blank: __________ controls are designed to detect errors or fraud after they have occurred.
Detective
What is an example of a detective control?
An example of a detective control is conducting regular internal audits.
Which principle of internal control involves ensuring that employees are aware of their responsibilities?
Establishing a clear control environment.
True or False: Management override of controls is a common occurrence in organizations.
True.
What are compensating controls?
Compensating controls are alternative measures put in place to mitigate risks when primary controls are not feasible or effective.
Fill in the blank: The __________ framework provides guidelines for designing effective internal controls.
COSO
What is the significance of a whistleblower policy in internal controls?
A whistleblower policy encourages employees to report unethical behavior or fraud without fear of retaliation.
True or False: Internal controls should be static and not subject to change.
False.
What is the role of external auditors in relation to internal controls?
External auditors assess the effectiveness of an organization’s internal controls during their audits to provide assurance on financial statements.
Fill in the blank: An effective internal control system requires __________ from all levels of the organization.
commitment
What is the consequence of failing to implement adequate internal controls?
The consequence can include increased risk of fraud, financial loss, legal penalties, and damage to reputation.
