CFE – Fraud Prevention and Deterrence — Question 51

Which of the following statements regarding recommended vendor due diligence procedures is MOST ACCURATE?

Answer options

• A. An organization should avoid revealing that it is seeking information about potential vendors prior to starting its relationship with them
• B. An organization should ensure that vendors have their own ethics and compliance program before engaging in any transactions with them
• C. An organization should subject vendors to an internal audit conducted by the organization's own auditors before agreeing to do business with them
• D. An organization should request that new vendors fill out a questionnaire about their background immediately after signing a contract with them

Correct answer: D

Explanation

The correct answer is D because requesting a background questionnaire after signing a contract allows the organization to gather critical information while maintaining a formal agreement. Option A is incorrect as transparency is crucial in the vendor selection process. Option B is not the best choice because while ethics and compliance are important, the timing and manner of due diligence can vary. Option C is excessive, as internal audits may not be necessary for all vendors before a business relationship is established.