PM 1208 Chapter 12

What is the primary objective of monitoring known or suspected fraud?

• To prosecute all employees

• To detect, prevent, and mitigate fraud risks

• To increase financial reporting complexity

• To ensure company policies are ignored

Which of the following is a common method for monitoring fraud?

• Random guessing

• Data analytics and continuous transaction monitoring

• Ignoring employee complaints

• Disregarding unusual financial activities

What role does whistleblower reporting play in fraud monitoring?

• It discourages employees from reporting unethical behavior

• It helps in early detection and prevention of fraud

• It increases fraud incidents in organizations

• It is not useful in fraud detection

Which operational area is most commonly at risk of fraud?

• Payroll and accounts payable

• IT department security measures

• Customer feedback surveys

• Employee training sessions

What is the first step in investigating a high-risk operational area for fraud?

• Ignoring the issue until external auditors detect it

• Conducting a risk assessment to identify vulnerabilities

• Eliminating all employees in the suspected department

• Avoiding monitoring activities

How can organizations identify operational areas at risk of fraud?

• By performing regular fraud risk assessments

• By avoiding financial audits

• By relying only on external audits

• By minimizing internal controls

What is the primary purpose of internal controls in fraud prevention?

• To increase bureaucracy in financial processes

• To ensure assets are safeguarded and fraud risks are reduced

• To allow employees unrestricted access to financial records

• To remove the need for audits

Which of the following is an example of an internal control to prevent fraud?

• Segregation of duties

• Allowing employees to access all financial records

• Granting unlimited spending authority to employees

• Ignoring suspicious financial transactions

If fraud is suspected, what is a suitable alternative to criminal prosecution?

• Internal investigation and disciplinary action

• Ignoring the incident

• Promoting the fraud suspect

• Destroying evidence

What is the role of forensic accounting in fraud investigations?

• To conduct financial analysis and detect fraudulent activities

• To increase financial complexity

• To discourage transparency in financial transactions

• To allow fraudulent activities to continue