Fraud Prevention & Detection Flashcards

Which control best prevents a single employee from both approving and processing a payment?

Answer: Dual authorization

Dual authorization requires a second person to approve transactions, enforcing segregation of duties.

A company notices that expense reports submitted on Fridays are rarely reviewed. This represents which type of fraud opportunity?

Answer: Control gap exploitation

Exploiting predictable review gaps (like end-of-week reduced oversight) is a classic control gap exploitation tactic.

Which analytical technique flags transactions that fall just below an approval threshold repeatedly?

Answer: Threshold circumvention detection

Threshold circumvention detection identifies patterns where amounts cluster just below approval limits, a common fraud indicator.

A vendor master file that is rarely reviewed creates the greatest risk of which scheme?

Answer: Ghost vendor fraud

Unreviewed vendor master files allow fictitious vendors to remain active and receive fraudulent payments.

Which fraud detection method involves comparing employee addresses against vendor addresses in the system?

Answer: Data matching

Data matching cross-references records to identify conflicts of interest, such as employees operating undisclosed vendor companies.

What is the primary purpose of a hotline as an anti-fraud control?

Answer: Provide anonymous tips about suspected misconduct

Ethics hotlines give employees and third parties a confidential channel to report suspected fraud without fear of retaliation.

Which of the following is considered a proactive fraud detection technique?

Answer: Conducting surprise cash counts

Surprise cash counts are proactive because they occur without advance notice, catching potential misappropriation before it can be concealed.