Certified Government Auditing Professional (CGAP) Practice Exam

Which action should an auditor consider if fraud risks are identified in a managerial process?

1. Address the risks with direct intervention

2. Conduct a comprehensive review of related protocols

3. Only document findings for future reference

4. Rely on existing controls to manage the risks

The correct answer is: Conduct a comprehensive review of related protocols

Conducting a comprehensive review of related protocols is vital when fraud risks are identified in a managerial process. This action allows the auditor to thoroughly assess the effectiveness of current processes, controls, and governance structures that relate to the specific area of concern. By reviewing protocols, the auditor can pinpoint weaknesses or gaps that may make fraud more likely to occur and can also identify any areas that require improvement. This proactive approach not only helps in mitigating the identified risks but also assists in enhancing the overall integrity and reliability of the managerial processes. In the context of addressing fraud risks, merely documenting findings is insufficient as it does not lead to actionable improvements. Relying on existing controls might create a false sense of security if those controls are ineffective against the detected risks. Direct intervention could also be warranted in certain scenarios, but the first step should always involve a thorough understanding of the existing protocols to inform any subsequent actions. Therefore, conducting a comprehensive review is an essential initial step in effectively managing fraud risks.