CFE Question of the Day: Mandatory vacation and job rotation

Quiz Yazan Ibrahim
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CFE exam practice question — CFE Question of the Day: Mandatory vacation and job rotation

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

Question

A mid-sized company discovers that its long-tenured accounts payable manager both authorizes vendor payments and performs monthly bank reconciliations. The manager rarely takes time off and no one else is familiar with their duties. Which control is most likely to detect a concealed fraud perpetrated by this individual?

  • A. Require an external annual audit of accounts payable and bank activity
  • B. Implement dual approval for vendor payments and segregate reconciliation duties
  • C. Enforce mandatory vacations and periodic job rotation for finance personnel
  • D. Introduce periodic background re-screening and continuous credit checks for finance staff
Show the answer and explanation

Correct answer: C. Enforce mandatory vacations and periodic job rotation for finance personnel

Enforcing mandatory vacations and periodic job rotation is the best control to detect concealed fraud by a single, long-tenured employee. When someone else performs the duties during an enforced absence or rotation, hidden irregularities (missing payments, altered documentation, ghost vendors) are more likely to surface. An external annual audit (option 1) is useful but intermittent and may miss ongoing schemes. Dual approval and segregation (option 2) are strong preventive controls but may not reveal previously concealed fraud that the incumbent has hidden over time. Background re-screening and credit checks (option 4) are preventive and reputational measures, not effective at detecting existing concealed operational fraud.

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