CFE – Fraud Prevention and Deterrence — Question 65

Which of the following is FALSE regarding corporate governance?

Answer options

• A. Effective corporate governance practices are considered to be the foundation of fraud risk management.
• B. Corporate governance's primary purpose is to ensure the accuracy of the organization's financial reports.
• C. An entity's corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organization.
• D. Effective corporate governance practices are most necessary in an organization in which the owners are not also the individuals responsible for setting and executing the business strategy.

Correct answer: D

Explanation

Option D is correct because effective corporate governance is essential in organizations where ownership and management are separate, as it helps align interests and mitigate conflicts. Options A, B, and C accurately describe the roles and purposes of corporate governance, highlighting its importance in managing fraud risk, ensuring financial accuracy, and clarifying roles within the organization.