Which method is commonly used to consider alternate ways of conducting business in order to manage risk, as related to the Fraud Triangle?

• A. Segregation of duties
• B. Authorization controls
• C. Risk assessment
• D. Reconciliation

Answer: (C)

Verified step by step guidance

1. Understand the Fraud Triangle: The Fraud Triangle consists of three elements that contribute to fraudulent behavior—opportunity, pressure, and rationalization. Managing risk involves addressing these elements to reduce the likelihood of fraud.
2. Recognize the role of risk assessment: Risk assessment is a systematic process used to identify, analyze, and evaluate potential risks that could impact an organization. It helps in identifying vulnerabilities related to the Fraud Triangle and implementing measures to mitigate them.
3. Compare risk assessment with other methods: Segregation of duties, authorization controls, and reconciliation are specific internal controls designed to reduce opportunities for fraud. However, risk assessment is broader and focuses on evaluating all possible risks, including those related to the Fraud Triangle.
4. Understand why risk assessment is the correct answer: Risk assessment considers alternate ways of conducting business by identifying and addressing risks holistically. It is a proactive approach to managing risk, whereas the other methods are reactive controls implemented after risks are identified.
5. Apply the concept: To manage risk effectively, organizations should conduct regular risk assessments, identify areas of vulnerability, and implement appropriate controls (such as segregation of duties, authorization controls, and reconciliation) to address the risks identified.