CFE – Financial Transactions and Fraud Schemes — Question 98

Warner is part of management at ABC Corporation. He has been asked to implement measures to help prevent fraudulent billing schemes. Which of the following measures would likely be MOST EFFECTIVE?

Answer options

• A. Using an external vendor to negotiate procurement contracts
• B. Combining the purchasing and payment functions within a single department
• C. Requiring all fraud tips to be reported to employees' direct supervisors
• D. Enforcing competitive bidding from potential vendors

Correct answer: D

Explanation

Enforcing competitive bidding from potential vendors (D) is the most effective measure as it creates a transparent process that reduces opportunities for fraud. Using an external vendor for contracts (A) might introduce new risks, while combining functions (B) can lead to a lack of checks and balances. Requiring fraud tips to go to supervisors (C) does not actively prevent fraud, but rather responds to it after the fact.