ACCA Audit and Assurance (F8) Practice Exam

Who is typically responsible for the prevention and detection of fraud?

1. The internal auditor

2. The external auditor

3. Management

4. The board of directors

The correct answer is: Management

Management is typically responsible for the prevention and detection of fraud within an organization. This responsibility stems from the fact that management possesses the authority and ability to implement effective internal controls and policies that can mitigate the risk of fraud. They are the ones who establish the tone at the top, creating a culture of integrity and ethical behavior that can discourage fraudulent activities. In addition, management is tasked with designing and maintaining an internal control system that includes procedures tailored to detect and prevent fraudulent acts. This responsibility includes ensuring adequate training for employees, setting up reporting mechanisms for suspected fraud, and regularly assessing the effectiveness of the internal controls in place. By proactively managing these aspects, management plays a crucial role in safeguarding the organization's assets and ensuring compliance with laws and regulations. While internal and external auditors also contribute to the overall fraud risk management process, their roles differ significantly from those of management. Internal auditors evaluate the adequacy of the internal controls established by management and assess the risk of fraud as part of their audit tasks. External auditors, on the other hand, primarily focus on expressing an opinion on the financial statements and may identify potential fraud risks during their audits, but they are not responsible for preventing or detecting fraud. The board of directors has an important oversight capacity, but the day-to