TIAPS Module 1 Audit and Assurance workbook

Common controls for fraud relating to cash and financial transactions, for example, include:
• Segregation of incompatible duties. Responsibility for custody of an asset,
authorization for its deployment, and recording its usage should ideally be assigned
to different individuals. Where this is not possible because of a shortage of resources
then compensating controls, including increased supervision, regular reconciliations,
stock takes, and scrutiny by inspectors and auditors, should be applied.
• Centralization of cash collection points.
• Individual cash drawers for each employee responsible for collecting money to assist
with traceability and accountability for errors and fraud.
• Endorsing checks when they are received to limit opportunities for misuse.
• Maintaining sequential receipts.
• Timely recording of transactions.
• Timely deposits of cash.
• Physical security of blank checks.
• Regular reconciliations.
Figure: Segregation of Incompatible Duties
Many of the controls described above are needed for managing risks related to human,
system, and process errors as well as the possibility of fraud. To ensure the general integrity
of the control environment, there should be clear tone at the top, a well-defined code of
conduct to confirm behavioral expectations, consistent and timely handling of breaches,
continuous awareness raising and regular training, documented policies and processes, and
opportunities for anonymous whistleblowing.
A defining characteristic of fraud is that such acts are deliberate. Frauds are not errors
caused by bad luck or incompetence. Individuals acting alone or with others usually have a
need or an incentive (motivation) to commit fraud (such as economic or social hardship,
ambition, or duress), identify an opportunity to take an unfair and unwarranted advantage of
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