Internal Controls and Fraud Detection in Government Flashcards

What is the primary framework used by U.S. federal agencies to evaluate and report on internal controls?

Answer: GAO's Standards for Internal Control in the Federal Government (Green Book)

The GAO Green Book establishes standards for internal control in the federal government and is used to evaluate and report on internal control effectiveness under FMFIA.

Which of the five components of internal control in the Green Book focuses on management's attitudes and commitment to integrity?

Answer: Control Environment

The Control Environment sets the tone of an organization through management's integrity, ethical values, and commitment to competence and accountability.

What is 'segregation of duties' as an internal control principle?

Answer: Dividing key tasks among different individuals so no single person can perpetrate and conceal an error or fraud

Segregation of duties splits authorization, custody, and record-keeping functions among different employees to prevent one person from having complete control over a transaction.

In the fraud triangle, which element refers to the justification a fraudster uses to rationalize their behavior?

Answer: Rationalization

Rationalization is the self-justification fraudsters use to make dishonest behavior seem acceptable to themselves, such as 'I'll pay it back' or 'the government wastes money anyway.'

Which type of fraud involves government employees submitting claims for goods or services not received?

Answer: Fictitious vendor scheme

A fictitious vendor scheme involves creating fake vendor records and submitting fraudulent invoices for goods or services never provided.

What is a 'compensating control'?

Answer: A secondary control that mitigates risk when a primary control cannot be implemented

A compensating control is an alternative control that reduces the risk of error or fraud when the ideal primary control (such as segregation of duties) is impractical.