An organization is conducting a fraud risk assessment as part ol its risk management program. Which of the following steps is the organization most likely to perform first?

Question

Options

• AIdentify relevant fraud risk factors.
• BIdentify potential fraud schemes.
• CIdentify existing controls for preventing and detecting fraud.
• DIdentify red flags by conducting data analysis.

• A
  2% (1)
• B
  82% (42)
• C
  10% (5)
• D
  6% (3)

Explanation

Identifying potential fraud schemes (B) is the logical starting point because you must first understand what frauds could occur before you can meaningfully assess risk factors, evaluate controls, or look for red flags - it defines the scope of everything that follows. Option A (fraud risk factors) comes after scheme identification, since risk factors are assessed in the context of specific schemes. Option C (existing controls) is evaluated only after you know which schemes to protect against. Option D (data analysis for red flags) is a later-stage activity used to test for fraud that has already been risk-assessed.

Memory tip: Think of it as a crime investigation framework - you first ask "what crimes could happen here?" (schemes), then "what conditions enable them?" (risk factors), then "what's stopping them?" (controls), and finally "is there evidence they're happening?" (data analysis).

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