Certified Professional Public Buyer (CPPB) Practice Test

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What is the primary purpose of a fidelity bond?

To insure against damage to physical property
To provide insurance against losses due to employee dishonesty
To cover general business liabilities
To protect company assets during audits

The correct answer is: To provide insurance against losses due to employee dishonesty

The primary purpose of a fidelity bond is to provide insurance against losses due to employee dishonesty. These bonds are specifically designed to protect employers from the financial consequences resulting from fraudulent actions committed by their employees, such as theft, embezzlement, or forgery. By securing a fidelity bond, businesses ensure that they have a financial safety net in case an employee engages in dishonest behavior that affects the company's finances. In contrast, the other options focus on different aspects of risk management. Insuring against damage to physical property pertains to property insurance, which covers tangible assets rather than employee actions. Covering general business liabilities relates to liability insurance, designed to protect against claims resulting from accidents or negligence, not specifically employee misconduct. Lastly, protecting company assets during audits is not the purpose of a fidelity bond; rather, it involves adherence to compliance and governance practices to safeguard against financial misrepresentation.