CFE Question of the Day: Approval Threshold Controls

Quiz Yazan Ibrahim
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CFE exam practice question — CFE Question of the Day: Approval Threshold Controls

CFE exam practice question: daily practice for the Certified Fraud Examiner (CFE) exam — domain: Fraud Prevention and Deterrence.

Question

A mid-sized company’s procurement manager regularly asks staff to bypass the ERP’s approval limits to expedite vendor orders, leaving only a brief email justification. Which control is most effective to reduce fraud risk associated with these approval overrides?

  • A. Configure the ERP to enforce approval limits automatically, require electronic documented justification for any override, and log the approver identity and timestamp
  • B. Require verbal approval from the department head for purchases above limits and record the approval in a shared spreadsheet
  • C. Perform quarterly audits of purchase orders to identify and report any approval limit exceptions to senior management
  • D. Deliver annual training to managers on approval policies and ask supervisors to monitor their teams’ adherence
Show the answer and explanation

Correct answer: A. Configure the ERP to enforce approval limits automatically, require electronic documented justification for any override, and log the approver identity and timestamp

Configuring the ERP to enforce approval limits with mandatory electronic justification and audit logging is the strongest control because it prevents or constrains unauthorized transactions, creates an immutable audit trail, and assigns clear accountability. Quarterly audits (option C) are useful as a detective control but are retrospective and allow ongoing exposure between audits. Verbal approvals recorded in a spreadsheet (option B) are weak because they lack secure provenance and are easy to falsify. Training (option D) helps awareness but is insufficient alone; it does not prevent or reliably detect deliberate circumvention of controls.

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