Which of the following statements regarding a fraud risk assessment is MOST ACCURATE?
A.
One of the main objectives of a fraud risk assessment is to provide an estimate of the total amount of money that an organization has lost to fraud since it was first formed.
B.
One of the main objectives of a fraud risk assessment is to determine the organization’s vulnerabilities to both internal and external fraud.
C.
A fraud risk assessment should focus on evaluating only the entity-level fraud risk without regard to any specific individuals or positions within the organization.
D.
A fraud risk assessment should focus on designating areas as high risk only if the team discovers conclusive evidence that fraud has occurred.
A fraud risk assessment is a proactive process for identifying and addressing an organization’s vulnerabilities to fraud. The CFE material defines it as a process aimed at identifying and addressing vulnerabilities to both internal and external fraud. Option B is therefore correct. Option A is incorrect because the primary purpose is not to calculate total historical fraud losses, which are often unknown and difficult to measure. Option C is too limited because the assessment should evaluate entity-level risks, process-level risks, departments, roles, and individuals with access or authority that creates fraud exposure. Option D is also incorrect because high-risk areas can be identified based on vulnerability, likelihood, and significance, even without conclusive evidence that fraud has already occurred.
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