ACFE Procurement Fraud and Vendor Schemes 3

Question 1

When investigating a suspected procurement fraud, which document should a fraud examiner prioritize obtaining first?

Accepted Answer

Contracts, purchase orders, and invoices related to suspect vendors

Answer

Personnel records of suspected employees

Answer

Competitor bid records

Answer

Bank statements of the suspect vendor

Question 2

What is the primary purpose of a 'vendor audit right' clause in a procurement contract?

Accepted Answer

To give the buying organization the right to inspect the vendor's records for billing accuracy

Answer

To allow the vendor to audit the buyer's internal processes

Answer

To require vendors to maintain ISO certification

Answer

To restrict vendor subcontracting arrangements

Question 3

Which behavioral red flag is commonly associated with employees committing procurement fraud?

Accepted Answer

Living beyond apparent means or refusing to take vacation

Answer

Consistently arriving early and leaving on time

Answer

Frequently requesting expense reimbursements

Answer

Requesting transfers to other departments

Question 4

In the context of ACFE's fraud tree, where do procurement and vendor fraud schemes primarily fall?

Accepted Answer

Both corruption and asset misappropriation depending on the scheme

Answer

Financial statement fraud

Answer

Corruption

Answer

Asset misappropriation

Question 5

Which internal control weakness most commonly enables procurement fraud to occur?

Accepted Answer

Lack of segregation of duties in the purchasing and payment cycle

Answer

Inadequate cybersecurity controls

Answer

Insufficient physical security over inventory

Answer

Absence of an employee assistance program

Question 6

What does 'bid suppression' mean in a bid rigging conspiracy?

Accepted Answer

Agreeing not to submit a bid so that a designated conspirator wins

Answer

Artificially lowering a bid to win a contract

Answer

Withdrawing a previously submitted bid

Answer

Suppressing bid results from public disclosure

Question 7

Which financial ratio or metric is most useful in detecting overbilling by vendors during a procurement fraud investigation?

Accepted Answer

Gross margin percentage by vendor compared to industry benchmarks

Answer

Current ratio

Answer

Accounts receivable turnover

Answer

Debt-to-equity ratio