Question

Which of the following is a fraud symptom related to an internal control weakness?

1) lack of proper authorization
2) lack of independent checks
3) inadequate accounting system
4) lack of physical safeguards
5) all of the above are fraud symptoms related to internal controls

Answer 1

A lack of proper authorization, lack of independent checks, and an inadequate accounting system are all fraud symptoms related to internal controls.

Step-by-step explanation:

A fraud symptom related to an internal control weakness is:

1. Lack of proper authorization: This refers to situations where individuals are allowed to carry out transactions or make decisions without the necessary approval or authorization. This can lead to fraudulent activities as there is no oversight or accountability for their actions.
2. Lack of independent checks: When there are no independent checks or reviews in place, it creates an opportunity for fraud to occur. This is because there is no one scrutinizing or verifying the accuracy and legitimacy of transactions or activities.
3. Inadequate accounting system: An inadequate accounting system can make it easier for fraud to take place. This includes deficiencies in record-keeping, lack of segregation of duties, and absence of proper internal controls.

Therefore, options 1), 2), and 3) are all fraud symptoms related to internal controls.