Which of the following would be the most effective fraud prevention control?

Question breakdown

Tests

Distinguish preventive fraud controls from detective controls

Difficulty

Medium

Key idea: Preventive controls stop fraud before it happens by shaping behavior and awareness, while alerts, reports and surveillance mainly detect or deter fraud after it starts.

How to reach the answer

1. The question asks for the most effective prevention control, so judge each option by when it acts.
2. Alerts on large checks and reports of failed log-ins flag events that have already happened, which makes them detective.
3. Video surveillance mostly records losses and only partly deters them.
4. New-hire fraud training reaches employees before any misconduct and builds an anti-fraud culture, which makes it preventive.

Each option

• AIncorrect. The alert goes out after the check is issued, so it is a detective control.
• BIncorrect. Surveillance in a warehouse that already has losses mainly records and investigates theft, so it is detective with only limited deterrence.
• CCorrect. Training sets expectations, explains consequences and builds integrity before fraud can happen, so it prevents fraud across the organization.
• DIncorrect. A daily report of failed log-ins identifies attempts after they occur, so it is detective.

Common trap: Cameras feel like a strong physical safeguard, so candidates confuse deterrence or detection with prevention.

In practice: When auditors assess fraud risk management, they check whether the program goes beyond monitoring and includes preventive elements such as onboarding training, code-of-conduct acknowledgment and tone at the top.

Remember: Ask whether a control acts before the act or after it; awareness training acts before, while reports and alerts act after.

Drafted with AI assistance and checked against the answer key.