Certified Management Accountant Practice Exam

Preventive controls are specifically designed to stop problems from occurring in the first place. These controls are proactive measures implemented to minimize the risk of errors or unwanted events by addressing potential issues before they can manifest. For instance, in a financial management context, preventive controls could include policies and procedures that mandate regular training for employees, segregation of duties, and proper authorization processes for transactions. By putting these measures in place, organizations can effectively mitigate risks related to financial misstatements, fraud, or operational inefficiencies before they materialize. Detective controls, on the other hand, are focused on identifying problems that have already occurred, while corrective controls are intended to address issues that have been detected to restore operations to normal. Directive controls are primarily aimed at guiding actions within an organization, rather than directly preventing issues. Each of these other control types serves a distinct purpose in an overall internal control system, but it is the preventive controls that are fundamentally about preemptively addressing risks.