Question

Detective controls are better than preventive controls:

a. Detective controls are better than preventive controls

b. Detective controls are as useful as preventive controls

c. There is only one kind of internal control

d. Preventive controls are better than detective controls

Answer 1

Answer ---- Preventive controls are designed to prevent errors, inaccuracy or fraud before it occurs. Detective controls are intended to uncover the existence of errors, inaccuracies or fraud that has already occurred.

Preventative vs. Detective Controls

Internal controls are typically comprised of control activities such as authorization, documentation, reconciliation, security, and the separation of duties. And they are broadly divided into preventative and detective activities.

Preventive control activities aim to deter errors or fraud from happening in the first place and include thorough documentation and authorization practices. And the separation of duties ensures that no single individual is in a position to authorize, record, and be in the custody of a financial transaction and the resulting asset. Authorization of invoices and verification of expenses are internal controls. In addition, preventative internal controls include limiting physical access to equipment, inventory, cash, and other assets.

Detective controls are backup procedures that are designed to catch items or events that have been missed by the first line of defense. Here, the most important activity is reconciliation, used to compare data sets, and corrective action is taken upon material differences. Other detective controls include external audits from accounting firms and internal audits of assets such as inventory.

B -  According to my opinion, defective controls are as useful as preventing control.