Question

A control plan that is designed to detect a fraud by having one employee periodically do the job of another employee is called ____________.

1) segregation of duties
2) forced vacations
3) periodic audits
4) management control

Answer 1

A control plan designed to detect fraud by having employees periodically swap roles is called forced vacations. This strategy is effective in uncovering potential fraudulent activities that could remain hidden if employees never left their roles, also prevents over-reliance on a single employee.

Step-by-step explanation:

A control plan designed to detect fraud by periodically switching employees to perform each other's jobs is known as forced vacations.

This method serves two main purposes: it allows a company to verify that no employee is engaged in fraudulent activities that could be concealed if they never left their position, and it ensures that the company does not become too reliant on a single employee for important tasks.

Should an employee be engaged in any fraudulent activities, their absence may allow for the detection of discrepancies. In financial controls, this is seen as a strong preventive and detective measure.

In contrast, segregation of duties (option 1) refers to the practice of dividing responsibilities and tasks among different people to reduce the risk of fraud or error. Periodic audits (option 3) involve regularly scheduled checks by external or internal auditors.

Management control (option 4) pertains to the broader spectrum of practices senior management implements to ensure that the company's activities align with set goals and policies.