Question

Which of the following has in the past been determined to be a significant factor in major loss events associated with the financial industry?

a. Inadequate reconciliations
b. Poor approval process
c. Inadequate segregation of duties
d. Lack of directive controls

Answer 1

Inadequate segregation of duties is a major factor that has led to significant loss events in the financial industry, as it can allow for unchecked errors and fraudulent activities by enabling a single individual to control multiple aspects of a transaction.

Step-by-step explanation:

Among the factors that have been determined to contribute to significant loss events in the financial industry, inadequate segregation of duties has been identified as a key issue. Inadequate segregation of duties can lead to unchecked errors and fraudulent activities because it allows a single individual to control multiple stages of a financial transaction or process, which should ideally be handled by multiple people to ensure accuracy and prevent misconduct.

While all the options listed have the potential to contribute to financial losses (Inadequate reconciliations, Poor approval process, Lack of directive controls), the history of financial industry failures often points to the lack of segregation of duties as a significant vulnerability that has frequently led to major financial scandals, such as embezzlement or misappropriation of funds.