Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 146

Which of the following scenarios provides the most concerning red flag, or indicator of possible fraud?

Answer options

• A. An employee receives a bonus for perfect attendance.
• B. During the past 18 months, three chief financial officers have left the organization after having been promoted to the position.
• C. The organization does not perform any due diligence research on third-party service providers.
• D. Three competitors are highly profitable but a fourth, equal in size, is approaching bankruptcy limits.

Correct answer: B

Explanation

Option B indicates a high turnover of chief financial officers, which can suggest instability or potential misconduct within the financial management of the organization. The other options, while concerning, do not demonstrate a direct link to potential fraudulent activity as clearly as the repeated departure of CFOs does.