Procurement Fraud and Vendor Schemes Flashcards
7 cards from real ACFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Procurement Fraud and Vendor Schemes flashcards as text
Which type of procurement fraud occurs when an employee creates a fictitious vendor and submits invoices for goods or services never provided?
Answer: Shell company fraud
Shell company fraud involves setting up a fictitious vendor entity to submit fraudulent invoices, diverting payments to the fraudster.
In a kickback scheme involving procurement, which party typically initiates the fraudulent arrangement?
Answer: A company employee with purchasing authority
Kickback schemes typically involve an employee with purchasing authority who awards contracts to vendors in exchange for secret payments.
What is 'bid splitting' in the context of procurement fraud?
Answer: Dividing a large purchase into smaller ones to avoid competitive bidding thresholds
Bid splitting involves breaking a large purchase into smaller transactions to circumvent policies requiring competitive bidding above certain dollar thresholds.
Which red flag most strongly suggests a conflict of interest in a vendor relationship?
Answer: A vendor's address matching an employee's home address
A vendor address matching an employee's home address is a strong red flag indicating the employee may have an undisclosed financial interest in the vendor.
What is a 'pay-and-return' scheme in accounts payable fraud?
Answer: Paying a vendor twice and keeping the duplicate payment refund
In a pay-and-return scheme, an employee processes a duplicate payment to a vendor, and when the vendor refunds it, the employee intercepts and keeps the refund check.
Which analytical technique is most effective for detecting fictitious vendors in a vendor master file?
Answer: Duplicate name and address matching
Matching for duplicate vendor names, addresses, phone numbers, and tax IDs is the most direct method to identify fictitious or duplicate vendors in the master file.
In procurement fraud, what does 'specification manipulation' involve?
Answer: Writing bid specifications tailored to a favored vendor's capabilities
Specification manipulation involves crafting bid requirements so narrowly or specifically that only a favored vendor can qualify, rigging the selection process.