CB Fraud Prevention and Internal Controls — Questions and Answers
Question 1: Which of the following is the primary objective of internal controls?
- To eliminate all financial risks
- To safeguard assets and prevent fraud (Correct answer)
- To increase company profits
- To reduce the need for audits
Correct answer: To safeguard assets and prevent fraud
Internal controls are designed to safeguard assets, ensure accurate financial reporting, and prevent fraud within an organization.
Question 2: Which of the following is an example of an internal control measure?
- Allowing one person to handle all financial transactions
- Implementing segregation of duties (Correct answer)
- Keeping financial records accessible to all employees
- Relying solely on external audits
Correct answer: Implementing segregation of duties
Segregation of duties helps prevent fraud by ensuring that no single individual has complete control over financial transactions.
Question 3: Which of the following best describes fraud?
- An unintentional accounting error
- An intentional act of deception for financial gain (Correct answer)
- A standard business practice
- An accidental omission in a financial report
Correct answer: An intentional act of deception for financial gain
Fraud is an intentional act of deception intended to gain an unfair or unlawful advantage, such as financial gain.
Question 4: What is the purpose of a bank reconciliation?
- To determine the company's net profit
- To ensure records match the bank statement (Correct answer)
- To approve financial reports
- To track investments
Correct answer: To ensure records match the bank statement
A bank reconciliation ensures that an organization's records match the bank statement, detecting errors and unauthorized transactions.
Question 5: Which of the following is a red flag for potential fraud?
- Frequent internal audits
- A lack of segregation of duties (Correct answer)
- Use of electronic payment systems
- Requiring managerial approval for large transactions
Correct answer: A lack of segregation of duties
A lack of segregation of duties can create an opportunity for fraud, as it allows one person to manipulate financial records without oversight.
Question 6: What is one way to reduce the risk of financial fraud in an organization?
- Eliminating all financial transactions
- Conducting regular audits and reviews (Correct answer)
- Allowing employees unrestricted access to financial records
- Relying solely on the CEO for financial oversight
Correct answer: Conducting regular audits and reviews
Conducting regular audits helps identify discrepancies, detect fraud, and ensure compliance with internal controls.
CB Fraud Prevention and Internal Controls
Which of the following is the primary objective of internal controls?