CFE-Fraud-Prevention-and-Deterrence Exam Dumps - Certified Fraud Examiner - Fraud Prevention and Deterrence Exam

Internal audit should use the fraud risk assessment to focus audit work on the organization’s significant fraud risks and related controls. The CFE material explains that auditors should consider fraud risks when assessing internal control design and determining audit steps. They should evaluate whether controls are adequate, operating as intended, and mitigating fraud risk effectively and efficiently. Option C is therefore correct. Option A is incorrect because the audit process is not designed merely to confirm conclusive evidence of existing fraud. Option B is too broad because audit resources should be risk-based, not applied equally to every area with any level of fraud risk. Option D is too narrow because internal audit should focus particularly on moderate-to-high risks. The best use is designing tests of anti-fraud controls.

Fraud risk can arise from both internal and external sources. Internal fraud risks involve employees, management, or others inside the organization abusing their access or authority. Embezzling customer payments, adding ghost employees to payroll, and reporting revenue in the wrong period are primarily internal risks because they usually require insider access to company funds, payroll systems, or accounting records. Collusion between contractors, however, is external because the misconduct is carried out by outside parties that do business with or affect the organization. Contractor collusion can include bid rigging, price fixing, market allocation, or coordinated efforts to manipulate procurement outcomes. Although employees might sometimes participate, the risk described in the answer choice is best classified as an external fraud risk. Therefore, option D is correct.