What is an example of a detective control?

What is an example of a detective control?

• A. Segregation of duties to prevent fraud
• B. Regular audits to identify discrepancies in financial reporting
• C. Training staff on risk management
• D. Establishing a risk management committee

Answer: (B)

A detective control is designed to identify and expose errors or irregularities after they have occurred. Regular audits serve this purpose effectively by systematically reviewing operations, transactions, and financial statements to uncover discrepancies or compliance issues that may not have been detected during routine processes. This practice helps an organization maintain accurate records and identify potential weaknesses or fraud after they occur, allowing for timely corrective action. The other choices pertain to preventive or managerial strategies. For example, segregation of duties is a preventive control as it aims to minimize the risk of fraud by ensuring that no single individual has control over all aspects of a financial transaction. Training staff on risk management is also preventive, as it prepares employees to identify and mitigate risks before they can lead to issues. Establishing a risk management committee focuses on governance and oversight rather than directly identifying issues after they arise.

A detective control is designed to identify and expose errors or irregularities after they have occurred. Regular audits serve this purpose effectively by systematically reviewing operations, transactions, and financial statements to uncover discrepancies or compliance issues that may not have been detected during routine processes. This practice helps an organization maintain accurate records and identify potential weaknesses or fraud after they occur, allowing for timely corrective action.

The other choices pertain to preventive or managerial strategies. For example, segregation of duties is a preventive control as it aims to minimize the risk of fraud by ensuring that no single individual has control over all aspects of a financial transaction. Training staff on risk management is also preventive, as it prepares employees to identify and mitigate risks before they can lead to issues. Establishing a risk management committee focuses on governance and oversight rather than directly identifying issues after they arise.