Which control reduces the risk of fraud in financial operations?

• A. Dual or segregated duties and regular reconciliations
• B. Handling all payments by a single person
• C. Never documenting expenditures
• D. Ignoring bank statements

Answer: (A)

Separating duties and performing regular reconciliations are fundamental controls to reduce fraud in financial operations. When responsibilities are divided so that no single person both authorizes transactions, records them, and handles cash or payments, there are built-in checks and balances that deter misappropriation. This separation makes it harder for someone to carry out and conceal fraudulent activities, because another person reviews and verifies each step.

Regular reconciliations between internal records and external evidence like bank statements help detect discrepancies promptly. They provide an audit trail and make it clear when something doesn’t balance, prompting investigation rather than letting errors or fraud go unnoticed. Together, these practices establish accountability and reduce opportunities for fraud.

Other approaches undermine protection: having one person handle all payments concentrates control and eliminates independent verification; never documenting expenditures eliminates the trail auditors rely on to verify transactions; ignoring bank statements removes ongoing verification against external records, allowing fraudulent activity to slip by unnoticed.