Question

Which of the following personnel and operating policies contribute to high fraud environments?

A) Clear policies on reporting misconduct
B) Robust internal controls
C) Ethical leadership
D) Weak segregation of duties

Answer 1

Weak segregation of duties contributes to high fraud environments by increasing the potential for undetected misconduct, whereas clear policies, robust internal controls, and ethical leadership deter fraud.

Step-by-step explanation:

In the context of organizational policies and environments conducive to fraud, one aspect that can notably contribute to a high fraud environment is D) Weak segregation of duties. Segregation of duties is a foundational element of internal controls in which various tasks and responsibilities are distributed among different individuals to reduce the risk of error or inappropriate actions. If one person controls multiple facets of a process, such as the authorization, recording, and custody of assets, it increases the opportunity for misconduct without detection.

Conversely, options A) Clear policies on reporting misconduct, B) Robust internal controls, and C) Ethical leadership are actually characteristics that help to deter fraud by promoting a culture of transparency, accountability, and ethical behavior within an organization.