Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 47

During an audit of a major contract, an internal auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?

Answer options

• A. Defective pricing.
• B. Cost mischarging.
• C. Fictitious vendor.
• D. Bid rotation.

Correct answer: B

Explanation

The correct answer is B, Cost mischarging, as consistent billing close to budgeted amounts may suggest manipulation of costs to misrepresent actual expenditures. Options A, C, and D do not directly relate to this specific pattern of billing discrepancies that raise concerns about cost allocation.