Question

Which of the following best defines detection controls?

A. Controls that are applied after transactions have been processed to identify whether fraud or errors have occurred, and to rectify the fraud or errors on a timely basis
B. The collective assessment of the client's control environment, risk assessment process, information system, control activities and monitoring of controls
C. Controls that affect a particular transaction cycle or group of transactions
D. Controls that determine the flow of documents through the system

Answer 1

Detection controls are internal controls implemented to identify and correct fraud or errors in financial transactions after they have occurred, helping to maintain financial integrity.

Step-by-step explanation:

Detection controls are a type of internal control designed to identify and rectify fraud or errors that have occurred in financial transactions after they have been processed. Such controls are vital for organizations to maintain the integrity of their financial reporting and protect against losses due to error or fraud. These controls include, but are not limited to, reconciliations, reviews of financial reports for discrepancies, and audits. To illustrate, a bank statement reconciliation would be a detection control that ensures the cash balance in the company's financial records agrees with the cash balance reported by the bank after all transactions have been processed.