Fraud Detection and Prevention in Construction Flashcards
6 cards from real CCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Fraud Detection and Prevention in Construction flashcards as text
Which scheme involves a construction employee creating fictitious subcontractors and then approving invoices from those shell companies?
Answer: Shell company vendor fraud
Shell company fraud involves creating fictitious vendor entities controlled by an insider who then approves fraudulent invoices payable to themselves.
Continuous monitoring of construction project expenditures is most effectively achieved through:
Answer: Real-time data analytics tools integrated with the project cost management system
Real-time data analytics enable ongoing anomaly detection rather than waiting for periodic reviews, allowing timely fraud intervention.
A construction auditor reviewing labor records should be alert to employees consistently recording hours just below overtime thresholds, which may indicate:
Answer: Manipulation of records to avoid overtime reporting requirements or scrutiny
Systematically billing hours just under the overtime threshold across many workers can indicate timesheet manipulation to avoid detection.
Which element of an effective construction fraud prevention program includes training field staff to recognize and report suspicious activity?
Answer: Anti-fraud awareness and ethics training with a confidential hotline
Fraud awareness training combined with a confidential reporting hotline creates a culture of accountability and empowers employees to report misconduct.
When a construction auditor discovers evidence of potential fraud, the immediate next step should be to:
Answer: Expand audit procedures and notify appropriate management and legal counsel
Upon detecting fraud indicators, auditors should widen their procedures to gather evidence and promptly notify management and legal counsel without alerting suspects.
Which data analytics procedure helps detect a contractor that consistently wins bids just below the owner's internal approval threshold?
Answer: Trend analysis of bid amounts relative to thresholds
Analyzing the distribution of bid awards relative to approval thresholds can reveal a contractor exploiting knowledge of internal limits to win at just-below-threshold prices.