The first step to detecting fraud is to:
A) build an internal control system.
B) establish an audit committee and identify its authority.
C) seek out red flag transactions and possible anomalies.
D) build an understanding of the organization and the environment in which it operates.

Question

Quizplus · Accepted Answer

Building an understanding of the organization and its environment is the first step in detecting fraud as it will help identify normal and abnormal behavior or transactions. This understanding can be used to develop procedures and controls to detect and prevent fraudulent activity. Building an internal control system (A) and establishing an audit committee (B) are important steps in preventing and detecting fraud but come after gaining an understanding of the organization. Seeking out red flag transactions (C) is also an important step, but it should come after developing an understanding of the organization and its environment.

The First Step to Detecting Fraud Is To