Managing Fraud Risk: A Practical Guide for Directors and Managers

Answers to the Quiz

Fraud Awareness Quiz – Question 6

When assessing controls there are two fundamental questions that you should always ask. What are they?

I include this general question in the Quiz because I want to know what my delegates think is the real function and purpose of controls in their organisations. In particular, I want to see whether the key controls concepts are familiar to those executives and managers who are from a non-financial and a non-auditing background. In my view, it is very important that all directors and managers, not only finance people and auditors, understand these concepts because controls play a crucial role in managing risk. Clearly they are central to preventing and detecting fraud. So what does the controls concept mean to the men and women who manage businesses today?

The two-part answer to the question is given in detail at the end of this section. In brief, the first part is to do with the design effectiveness of the controls, whilst the second part is to do with their operating efficiency.

When I first introduced this question into the Quiz I suspected that the quality of the answers that I was given would depend largely on the make-up of the delegates on any particular day. I thought that those delegates with some financial training or who came from an auditing background would be well equipped to answer the question, whilst those without any experience of audit or financial and accounting theory might struggle with it. In fact, my suspicion ...