Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 185

Management has implemented a segregation-of-duties policy for handling inventory. Which of the following fraud risks would be more concerning to an internal auditor following the implementation of this new policy?

Answer options

• A. The risk of collusion between parties.
• B. The risk of falsified reconciliations.
• C. The risk of low-liquidity inventory.
• D. The risk of damages to the inventory.

Correct answer: B

Explanation

The concern for falsified reconciliations increases after implementing a segregation-of-duties policy, as individuals may manipulate records without oversight. While collusion (A) is a risk, the policy aims to reduce this by separating duties. Low-liquidity inventory (C) and damages (D) are operational risks rather than fraud risks.