Internal Controls and Fraud Detection in Government Flashcards

What is 'procurement fraud' in the government context?

Answer: Illegal conduct in the acquisition process such as bid rigging, kickbacks, or conflicts of interest

Procurement fraud includes bid rigging, kickbacks, conflicts of interest, false certifications, and collusion that corrupts the integrity of competitive contracting.

What is the role of a 'whistleblower protection' program in government fraud prevention?

Answer: To encourage employees to report suspected fraud by protecting them from retaliation

Whistleblower protection programs encourage reporting of fraud, waste, and abuse by shielding employees from demotion, termination, harassment, or other retaliation.

What is a 'management override of controls,' and why is it a significant fraud risk?

Answer: When senior management uses their authority to circumvent existing controls, enabling fraud that lower-level employees could not commit

Management override allows senior officials to bypass controls that exist to prevent fraud, making it difficult to detect because those with override authority also supervise the very controls they bypass.

What is 'data analytics' used for in government fraud detection?

Answer: Analyzing large datasets to identify anomalies, patterns, or outliers indicative of fraud or control weaknesses

Data analytics allows auditors to examine entire populations of transactions rather than samples, flagging duplicate payments, unusual vendors, outlier transactions, and other red flags.

Which internal control activity involves reviewing transaction reports after the fact to catch errors or unauthorized activity?

Answer: Detective control

Detective controls identify errors, irregularities, or unauthorized transactions after they occur, such as account reconciliations, exception reports, and supervisory reviews.

What is 'tone at the top' in the context of government internal control?

Answer: The ethical climate and commitment to integrity established by leadership that influences behavior throughout the organization

Tone at the top reflects leadership's values and commitment to ethical behavior, which directly influences whether employees at all levels act with integrity.