(Management at XYZ Inc. wants to mitigate one of the risks identified during the company’s fraud risk assessment process. Which of the following actions would be MOST APPROPRIATE to support this response?)
A.
Discontinuing the underlying activity completely
B.
Deciding not to implement any responsive measures
C.
Purchasing fidelity insurance to protect against the associated risk of loss
The Fraud Risk Assessment chapter explains that once residual fraud risks are identified, management can respond by avoiding the risk, transferring the risk, mitigating the risk, assuming the risk, or using a combination of these approaches. The manual specifically treats mitigation as reducing the likelihood or impact of fraud by strengthening the control environment and implementing additional preventive or detective measures. By contrast, discontinuing the activity is avoidance, fidelity insurance is a form of risk transfer, and choosing not to implement any responsive measure is risk assumption. Since the question asks which action is most appropriate to support a mitigation response, the best answer is implementing additional internal control measures. That option directly matches the manual’s concept of mitigating fraud risk through stronger controls and oversight.
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