Certified Government Auditing Professional (CGAP) Practice Exam

An adequate internal control system is most likely to detect fraud perpetrated by which type of employee?

1. A group of employees in collusion.

2. A single employee.

3. A group of managers in collusion.

4. A single manager.

The correct answer is: A single employee.

An adequate internal control system is most likely to detect fraud perpetrated by a single employee. This is because internal controls are designed to establish checks and balances within an organization, ensuring that no individual has complete control over any financial transaction or process. When an internal control system is functioning properly, it can monitor actions, approvals, and access levels of individual employees, making it more difficult for a single employee to bypass controls unnoticed. In contrast, collusion among employees or managers presents a greater challenge for detection. When individuals work together to commit fraud, they can circumvent the internal controls that might otherwise identify irregularities. This group dynamic means that the controls designed to catch a single perpetrator may not be effective if multiple people are involved in concealing the fraud. Thus, the risk and complexity associated with detecting fraud increase significantly when it involves collusion, limiting the effectiveness of the internal controls in these scenarios.