What are the three types of fraud risk?

What are the three types of fraud risk?

• A. Incentives to commit fraud; opportunities to carry out fraud; attitudes and rationalizations to justify the fraud
• B. Internal Audit; Management Review; Reconciliations
• C. SWP; Guaranteed lifetime annuities through insurance; Temp payout from plan assets
• D. Assess needs and responsibilities; Learn about RIGs; Learn what can be supported by current plan sponsor; Develop criteria for retirement income program, and assess how each RIG meets criteria; Develop a timetable

Answer: (A)

Fraud risk comes from three interacting elements: incentives or pressures to commit fraud, opportunities to carry it out (such as weak internal controls or access to assets), and attitudes or rationalizations that justify the wrongdoing. If someone has a financial or personal motive, there’s a way to commit the fraud, and they’ve convinced themselves it’s acceptable, fraud becomes possible. That combination is exactly what the option describes when it lists incentives, opportunities, and attitudes/rationalizations. The other options don’t fit this concept. One describes internal control activities (like audits and reconciliations), which are about detecting or preventing fraud, not the three core risk factors that enable fraud to occur. Another lists retirement products, which are unrelated to fraud risk. The last option outlines planning steps for a retirement program, again not about the inherent risk factors that drive fraudulent behavior. So the best answer aligns with the well-known Fraud Triangle: incentives, opportunities, and attitudes/rationalizations.

Fraud risk comes from three interacting elements: incentives or pressures to commit fraud, opportunities to carry it out (such as weak internal controls or access to assets), and attitudes or rationalizations that justify the wrongdoing. If someone has a financial or personal motive, there’s a way to commit the fraud, and they’ve convinced themselves it’s acceptable, fraud becomes possible. That combination is exactly what the option describes when it lists incentives, opportunities, and attitudes/rationalizations.

The other options don’t fit this concept. One describes internal control activities (like audits and reconciliations), which are about detecting or preventing fraud, not the three core risk factors that enable fraud to occur. Another lists retirement products, which are unrelated to fraud risk. The last option outlines planning steps for a retirement program, again not about the inherent risk factors that drive fraudulent behavior.

So the best answer aligns with the well-known Fraud Triangle: incentives, opportunities, and attitudes/rationalizations.