Answer (D) is correct . Deterrence of fraud consists of those actions taken to discourage the perpetration of fraud and limit the exposure if fraud does occur. The principal mechanism for deterring fraud is control. Primary responsibility for establishing and maintaining control rests with management. Furthermore, internal auditors are responsible for assisting in the deterrence of fraud by examining and evaluating the adequacy and the effectiveness of the system of internal control, commensurate with the extent of the potential exposure/risk in the various segments of the organization’s operations. Internal auditors should determine whether the organization fosters control consciousness, realistic goals and objectives are set, written policies describe prohibited acts and their consequences, transaction-authorization policies are maintained, mechanisms exist to monitor activities and safeguard assets, communication channels provide management with adequate and reliable information, and cost-effective controls need to be established to deter fraud (PA 1210.A2-1).
Answer (A) is incorrect because Effective control, an internal auditing function, and adequate and reliable communication with management help to deter fraud.
Answer (B) is incorrect because Effective control, an internal auditing function, and adequate and reliable communication with management help to deter fraud.
Answer (C) is incorrect because Effective control, an internal auditing function, and adequate and reliable communication with management help to deter fraud.
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