Fraud/internal control

Question 1

What are the two main types of fraud?

Answer 1

1. Misappropriation
2. Fraudulent financial reporting

Question 2

Internal control practices:

Answer 2

1. segregation/separation of duties (one person should not be allowed to both handle cash and asset accounts, as this increases the risk of misappropriation)
2. budgets! Budgetting future expenses, revenues etc. and accounting for the differences when looking back at the period will help a firm uncover potential fraud happening.
3. Compliance monitoring - cross-checking a transaction by multiple people or departments