What type of internal control focuses on "keeping fraud from occurring in the first place"?

The concept of internal controls is vital in safeguarding an organization’s assets and ensuring the integrity of its financial reporting. Preventative controls are specifically designed to prevent fraud and errors from happening in the first place. This type of control proactively addresses potential issues before they can manifest into actual problems. Examples include segregation of duties, proper authorization processes, and employee training on compliance and ethical standards.

Preventative controls establish the framework necessary to maintain a secure operational environment. By implementing these controls, organizations significantly reduce the opportunity for fraud and enhance overall compliance with laws and regulations.

Detective controls, in contrast, are focused on identifying and detecting fraud or errors that have already occurred. Corrective controls are employed after an issue has been identified, providing remediation processes to address any damage done. Directive controls help guide organizational behavior and decision-making but do not directly prevent fraud. Therefore, preventative controls are essential in the prevention of fraud, making them the correct choice in this context.