Question

Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.

Answer 1

Collusion among employees in the commission of a fraud is difficult to both prevent and detect. This is particularly true when the collusion is between managers and their subordinate employees. Management plays a key role in the internal control structure of an organization. They are relied upon to prevent and detect fraud among their subordinates. When they participate in fraud with the employees over whom they are supposed to provide oversight, the organization’s control structure is weakened, or completely circumvented, and the company becomes more vulnerable to losses. 

Collusion in fraud, especially between managers and subordinates, is hard to prevent and detect, weakening internal controls.