2 . Insurance companies are beginning to receive hospitalization claims directly from hospitals by computer media: no paper is transmitted from the hospital to the insurance company. Which of the following controls would be most effective in detecting fraud in such environment?

A.Use integrated test facilities to test the correctness of processing in a manner that is transparent to data processing.

B.Develop monitoring programs to identify unusual types of claims or an unusual number of claims by demographic classes for investigation by the claims department.

C.Use generalized audit software to match the claimant identification number with a master list of valid policyholders

D.Develop batch controls over all items received from a particular hospital and process those claims in batches.

B yes. Monitoring assesses the quality of internal control over time. Management considers whether internal control is properly designed and operating as intended and modifies it to reflect changing conditions. Monitoring may be in the form of separate, periodic evaluations or of ongoing monitoring. Ongoing monitoring occurs as part of routine operations. It includes management and supervisory review, comparisons, reconciliations, and other actions by personnel as part of their regular activities. Thus, monitoring of the number and nature of claims may seve to detect failures of internal controls

A no. an ITF is useful in determining the correctness of processing of validly entered transactions. The issue in this case is the validity of the entered transactions.

C no. An edit control should be built into the application to test for valid policy numbers.

D no. Batch controls are designed to ensure that all items submitted are processed, i.e., that they are not lost or added to. Batch controls serve a control purpose, but the major concern is the validity of the input.