Which party is primarily responsible for corporate governance regarding fraud risks?

The board of directors is primarily responsible for corporate governance regarding fraud risks because they play a crucial role in overseeing the organization's overall strategy and ensuring that effective controls are put in place to mitigate fraud risk. This board-level responsibility includes establishing policies and frameworks for risk management, monitoring the organization’s compliance with regulations, and holding management accountable for the effective implementation of fraud prevention measures.

The board sets the tone at the top, influencing the organizational culture towards ethical behavior and transparency. This governance function includes reviewing and approving internal controls and procedures designed to prevent and detect fraud. By engaging in regular assessments of the organization's risk environment, the board ensures that adequate measures are in place to address potential fraud risks.

While management also plays a significant role in implementing these controls and maintaining the organization's ethical standards, the board's oversight is essential to ensuring governance aligns with the overall mission of reducing fraud risks effectively. Similarly, external auditors may provide an independent assessment of the effectiveness of internal controls and contribute to identifying areas of potential fraud; however, their role is more about assurance rather than direct governance. Fraud investigators typically focus on identifying fraud after it has occurred and do not hold governance responsibilities akin to those of the board.