ACFE Procurement Fraud and Vendor Schemes 2 — Questions and Answers
Question 1: Which form of bid rigging involves competitors agreeing in advance on who will win a particular contract?
- Bid suppression
- Bid rotation (Correct answer)
- Complementary bidding
- Subcontracting schemes
Correct answer: Bid rotation
Bid rotation is a collusion scheme where competitors take turns winning contracts, ensuring each participant gets a share of the business over time.
Question 2: What is 'complementary bidding' in a bid rigging conspiracy?
- Bidding on complementary product categories
- Submitting intentionally losing bids to make a predetermined winner appear competitive (Correct answer)
- Offering price matching as a competitive strategy
- Submitting bids that complement each other's scope
Correct answer: Submitting intentionally losing bids to make a predetermined winner appear competitive
Complementary bidding involves conspirators submitting deliberately high or otherwise unacceptable bids so that the designated winner appears to win a legitimate competition.
Question 3: Under the Sherman Antitrust Act, bid rigging is classified as which type of violation?
- A civil infraction requiring restitution only
- A per se illegal violation (Correct answer)
- A rule-of-reason violation
- An administrative violation
Correct answer: A per se illegal violation
Bid rigging is treated as a per se illegal violation under the Sherman Antitrust Act, meaning it is automatically illegal regardless of any claimed justification.
Question 4: Which purchasing scheme involves an employee authorizing payment for goods received at inflated prices due to a secret arrangement with the vendor?
- Lapping scheme
- Overbilling scheme (Correct answer)
- Skimming scheme
- Larceny scheme
Correct answer: Overbilling scheme
An overbilling scheme involves a vendor charging more than the agreed or market price, with an employee facilitating this in exchange for a kickback from the excess amount.
Question 5: Which control is most effective at preventing employees from creating fictitious vendors?
- Requiring dual authorization for vendor master file changes (Correct answer)
- Monthly vendor reconciliations
- Annual vendor audits
- Segregating invoice processing from payment
Correct answer: Requiring dual authorization for vendor master file changes
Requiring dual authorization (two separate employees) to add or modify vendor master file records prevents any single employee from creating a fictitious vendor unilaterally.
Question 6: What is a 'subcontractor kickback' scheme in construction procurement fraud?
- A subcontractor overcharging the prime contractor
- A general contractor receiving secret payments from subcontractors in exchange for favorable subcontract awards (Correct answer)
- A subcontractor paying workers off the books
- A contractor billing for unauthorized subcontract work
Correct answer: A general contractor receiving secret payments from subcontractors in exchange for favorable subcontract awards
In a subcontractor kickback scheme, a general contractor's employee steers subcontracts to certain firms in exchange for secret payments, inflating overall project costs.
Question 7: Which data analysis method is best suited to identifying employees who are also listed as vendors in the accounts payable system?
- Trend analysis
- Cross-matching employee and vendor master files (Correct answer)
- Benford's Law
- Regression analysis
Correct answer: Cross-matching employee and vendor master files
Cross-matching employee data (names, addresses, SSNs, bank accounts) against the vendor master file directly identifies conflicts of interest or fictitious vendor relationships.
ACFE Procurement Fraud and Vendor Schemes 2
Which form of bid rigging involves competitors agreeing in advance on who will win a particular contract?