ACCA Audit and Assurance (F8) Practice Exam

How should suspected fraud be communicated within an organization?

1. To the media for transparency

2. To appropriate levels of management and governance

3. To all employees for awareness

4. Only to external auditors

The correct answer is: To appropriate levels of management and governance

The appropriate communication of suspected fraud within an organization is crucial for effective management and governance. The correct choice emphasizes that suspected fraud should be reported to the appropriate levels of management and governance structures, such as the board of directors, audit committee, or internal control teams. This approach ensures that the matter is handled by individuals who have the authority and responsibility to investigate the issue further and implement any necessary remedial actions. By communicating to the right internal parties, organizations can maintain confidentiality, manage the situation discreetly, and take appropriate measures to mitigate risks and potential damage. This structured communication aligns with good governance practices, where oversight bodies can ensure proper investigation and response. Communicating the issue to the media, on the other hand, could jeopardize the investigation and lead to unnecessary public alarm or damage to the organization’s reputation before any facts are established. Notifying all employees may lead to misinformation and unnecessary panic, distracting from the investigation or corrective measures. Additionally, reporting only to external auditors neglects the internal mechanisms that are better equipped to handle such concerns in a timely and effective manner.