CFE – Financial Transactions and Fraud Schemes — Question 95

Which of the following is a red flag that might indicate the existence of a need recognition scheme?

Answer options

• A. The purchasing entity identifies a need that can be met by various suppliers.
• B. The purchasing entity has an unusually large list of backup suppliers available.
• C. The purchasing entity does not have high requirements for stock and inventory levels.
• D. The purchasing entity's materials are not being ordered at the optimal reorder point.

Correct answer: B

Explanation

Option B is correct because having an unusually large list of backup suppliers may indicate the purchasing entity is preparing for potential supply issues, a sign of a need recognition scheme. Options A, C, and D do not directly imply a scheme, as they relate more to general procurement practices rather than indicating a specific awareness of needs.