Question

why do you suppose that we cannot totally eliminate the risk of fraud in our organizations? what does the word deterrence suggest in how we approach this subject?

Answer 1

Organizations can never eliminate the risk of fraud entirely. There are always people who are motivated to commit fraud, and an opportunity can arise for someone in any organization to override a control or collude with others to do so. Therefore, detection techniques should be flexible adaptable, and continously changing to meet the various changing in risk.

Fraud deterrence is the proactive identification and removal of the casual and enabling factors of fraud.

No system of internal controls can fully eliminate the risk of fraud, but well designed and effective internal controls can deter the average fraudster by reducing the opportunity to commit the fraud and increasing the perception of detection. With the right balance of preventive and detective controls, a good system of internal controls can greatly reduce an organization's vulnerability to fraud.