Types of Fraud and Internal Control in Organizations

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What is the responsibility of the internal audit staff?

Execute administrative functions

Prepare financial statements

Ensure assets are valued appropriately

Review internal control systems (correct)

Why is it important for financial reports to be supported by legal documents and proofs?

To establish and maintain internal control

To ensure the company's assets are safeguarded

To prevent supplier kickbacks

To make the financial reports reliable and acceptable (correct)

What is the role of the independent auditor in a company?

Examine financial records and transactions (correct)

Maintain financial reporting systems

Establish internal controls

Review internal audit staff procedures

Why should assets be adequately validated and accounted for?

To safeguard against misuse or theft Signup and view all the answers

What do senior management personnel in a company typically oversee?

Participating in daily supervision and planning Signup and view all the answers

What is the primary responsibility of the financial management team?

Establishing safeguards for assets Signup and view all the answers

What is a common method through which employees commit fraud by transferring funds to their own bank account?

Abusing authorization codes to transfer funds Signup and view all the answers

Which type of assets are susceptible to theft due to their high resale value and lack of secure attachment?

Fixed assets Signup and view all the answers

In what situation might an employee use false receipts to claim additional expenses?

To charge extra expenses in expense reports Signup and view all the answers

What fraudulent activity involves employees not reimbursing the company for used supplies and inventory?

Nonpayment of employee advances Signup and view all the answers

Which indicator of high-level fraud involves creating an overly complicated organization structure?

Creating complex organization structures Signup and view all the answers

How can employees misuse their authorization codes for fraudulent activities?

Transferring funds to their bank account Signup and view all the answers

What is a common fraudulent scheme mentioned in the text?

Collusion with suppliers to inflate costs in exchange for kickbacks Signup and view all the answers

What is the primary responsibility of the Board of Directors mentioned in the text?

Providing oversight and giving directives to management Signup and view all the answers

What makes it difficult to trace or track transactions in the scenario described?

Numerous interlocked departments and organizations Signup and view all the answers

What might happen if a management team solely focuses on meeting profit goals?

Creation of biases and manipulations in financial reporting Signup and view all the answers

What is a consequence of employees taking advantage of authorization systems according to the text?

Difficulties in managing and tracking transactions Signup and view all the answers

How can fraud involving inflated costs be prevented within a company?

Implementing strong internal controls and monitoring mechanisms Signup and view all the answers

What is a potential consequence of a management team using loose interpretations of accounting rules and manipulating revenue?

Risk of large-scale fraud Signup and view all the answers

What is a characteristic of a company being run by one dominant individual with full control and authority?

Risk of misuse of power for personal gain Signup and view all the answers

What might be a reason why management prefers excessive decentralization?

Minimized control from the headquarters Signup and view all the answers

What could be a consequence of high management turnover within a company?

Disruption in operations and decision-making Signup and view all the answers

Why might customers or suppliers sue a company according to the text?

As a result of payment issues or incomplete services Signup and view all the answers

What is the potential impact on a company's image and reputation if it is entangled in lawsuits with customers or suppliers?

Negative effects on reputation and image Signup and view all the answers

What does CAPTCHA stand for?

Completely Automated Public Turing test to tell Computers and Humans Apart Signup and view all the answers

What is the main goal of a Privacy Impact Analysis/Assessment (PIA)?

To avoid privacy issues associated with collecting, maintaining, and distributing PII Signup and view all the answers

Which type of fraud involves using fabricated credentials not associated with a real person?

Synthetic identity fraud Signup and view all the answers

What is the purpose of limiting outgoing connections for business purposes?

To protect information assets from unauthorized access Signup and view all the answers

Why do most people using one password everywhere pose a security risk?

It exposes all accounts if one password is compromised Signup and view all the answers

What is the objective of a strategy in the context provided?

To achieve a specific goal through an action plan Signup and view all the answers