ACFE Procurement Fraud and Vendor Schemes

Question 1

Which type of procurement fraud occurs when an employee creates a fictitious vendor and submits invoices for goods or services never provided?

Accepted Answer

Shell company fraud

Answer

Bid rigging

Answer

Kickback scheme

Answer

Duplicate payment fraud

Question 2

In a kickback scheme involving procurement, which party typically initiates the fraudulent arrangement?

Accepted Answer

A company employee with purchasing authority

Answer

An external auditor

Answer

The CFO

Answer

A government regulator

Question 3

What is 'bid splitting' in the context of procurement fraud?

Accepted Answer

Dividing a large purchase into smaller ones to avoid competitive bidding thresholds

Answer

Sharing a winning bid among multiple vendors

Answer

Submitting the same bid to multiple buyers

Answer

Splitting the kickback between two employees

Question 4

Which red flag most strongly suggests a conflict of interest in a vendor relationship?

Accepted Answer

A vendor's address matching an employee's home address

Answer

A vendor with multiple product lines

Answer

A vendor with a long payment history

Answer

A vendor operating in multiple states

Question 5

What is a 'pay-and-return' scheme in accounts payable fraud?

Accepted Answer

Paying a vendor twice and keeping the duplicate payment refund

Answer

Returning merchandise for a cash refund

Answer

Paying early to obtain a discount and returning the savings

Answer

A vendor returning defective goods for payment

Question 6

Which analytical technique is most effective for detecting fictitious vendors in a vendor master file?

Accepted Answer

Duplicate name and address matching

Answer

Ratio analysis

Answer

Benford's Law analysis of invoice amounts

Answer

Variance analysis

Question 7

In procurement fraud, what does 'specification manipulation' involve?

Accepted Answer

Writing bid specifications tailored to a favored vendor's capabilities

Answer

Altering invoice specifications after delivery

Answer

Changing product specifications to reduce quality

Answer

Manipulating contract terms after award