Question

Of the following internal controls, which ones are considered a detective control (as opposed to a preventative control)? Mark all that apply!! There are more than one. Question 21 options: Two people open mail and make a list of checks received. Customers are sent a statement of outstanding balances to confirm they agree (if an employee deposited a payment in their personal account, the customer would argue the outstanding balance). Inventory is kept in locked and secure location with limited access. Preparation of a bank reconciliation each month. Cameras are everywhere and monitors are in public sight so everyone knows they are on camera.

Answer 1

Customers are sent a statement of outstanding balances to confirm they agree (if an employee deposited a payment in their personal account, the customer would argue the outstanding balance). DETECTIVE

Preparation of a bank reconciliation each month. DETECTIVE

Step-by-step explanation:

The following three options are preventive control activities:

• Two people open mail and make a list of checks received. PREVENTIVE
• Inventory is kept in locked and secure location with limited access. PREVENTIVE
• Cameras are everywhere and monitors are in public sight so everyone knows they are on camera. PREVENTIVE

Detective controls are designed to detect or discover errors, mistakes or fraud, all which have already happened. They are meant to deal with problems once they take place, they are not meant to prevent them. On the other hand, preventive controls are meant to prevents errors, mistakes or fraud from happening. E.g. audits are a type of detective control since they analyze past events, while segregation of duties is a type of preventive control.

Answer 2

1. Preventive

2. Detective

3. Detective / Preventive

4. Preventive / Detective

Step-by-step explanation:

Two people open mail and make a list of checks received. Preventive

This will prevent any fraud from happening but it serves as checks and balances

Customers are sent a statement of outstanding balances to confirm they agree (if an employee deposited a payment in their personal account, the customer would argue the outstanding balance). Detective

If there has been any fraud of money collected from customers and taken by an employee,it will be revealed

Inventory is kept in locked and secure location with limited access. Preventive

Inventory being stored securely is to prevent theft

Preparation of a bank reconciliation each month. Detective / Preventive

Bank reconciliation will detect any fraud or error, in case employees have diverted deposits into personal accounts it will not reflect in the account. This also serves as a preventive measure because employees will be deterred from fraud if they know that they will be caught at the end of the month when a reconciliation is performed.

Cameras are everywhere and monitors are in public sight so everyone knows they are on camera. Preventive / Detective

Camera's serve as a preventive measure because employees will be deterred from fraud if they know that they will be caught at the end of the period when a CCTV review is performed.

It will also detect any theft in case employees have pilfered inventory or cash into personal belongings when no one was watching.