4 Questions
Which of the following would a fraudster perceive as a pressure?
Living beyond one’s means
What is the best description of internal controls?
Internal controls and company policies are important to protect and safeguard assets and to protect all company data and are designed to protect the company from fraud.
What is the best way for owners of small businesses to maintain proper internal controls?
The owner must have enough knowledge of all aspects of the company and have controls in place to track all assets.
Which of the following is not considered to be part of the internal control structure of a company?
Write accurate financial reports.
Study Notes
Fraud and Internal Controls
- A fraudster perceives financial pressure, such as debt or living beyond means, as a pressure that may motivates them to commit fraud.
Internal Controls Definition
- Internal controls refer to the processes and procedures implemented by an organization to ensure the accuracy, completeness, and reliability of financial information.
Maintaining Proper Internal Controls in Small Businesses
- Owners of small businesses can maintain proper internal controls by separating duties among employees, such as having one person handle cash receipts and another person handle cash disbursements.
Components of Internal Control Structure
- The internal control structure of a company typically includes five components: control environment, risk assessment, control activities, information and communication, and monitoring and corrective action.
- The board of directors is not considered part of the internal control structure of a company.
Test your knowledge of fraudster perception and internal controls with this quiz. Answer questions about the pressures perceived by fraudsters and the role of internal controls in businesses.
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