CFE – Fraud Prevention and Deterrence — Question 10

Which of the following statements is TRUE?

Answer options

• A. Educating employees about hotlines and reporting programs has a very limited effect on preventing fraud
• B. Most experts agree that it is harder to prevent frauds than to detect them
• C. Controls are not effective in preventing theft and fraud if those at risk do not know of the presence of possible detection
• D. Conducting covert audits is among the most effective fraud prevention methods

Correct answer: D

Explanation

The correct answer is D because covert audits can uncover fraudulent activities without alerting potential wrongdoers, making them a strong deterrent. Option A is incorrect as education can significantly impact fraud prevention. Option B is misleading since many experts argue that prevention strategies can be effective. Option C is also wrong because awareness of controls is essential for their effectiveness in preventing fraud.