* Purpose of Fraud Risk Assessment:
* The goal is to identify vulnerabilities to fraud and implement preventive measures, not to wait for conclusive evidence of fraud before designating high-risk areas.
* Proactive Identification:
* High-risk areas are identified based on susceptibility to fraud (e.g., lack of controls, high cash transactions), even if no fraud has been detected. This approach allows organizations to act preemptively.
* Improving Fraud Awareness:
* Employee education and behavior monitoring are integral components of the assessment process to reduce fraud risks.
* Incorrect Assumption in D:
* Waiting for conclusive evidence contradicts the proactive nature of fraud risk assessment and undermines its preventative function.
References for All Questions:
* ACFE Code of Professional Ethics.
* Auditor Essentials on fraud prevention and deterrence principles.
* COSO and risk assessment frameworks in internal controls.