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Exam CFE - Financial Transactions and Fraud Schemes All Questions

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Exam CFE - Financial Transactions and Fraud Schemes topic 1 question 211 discussion

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

  • 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.
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Suggested Answer: B 🗳️

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_denw
1 week ago
Selected Answer: D
In a need recognition scheme, someone intentionally creates or exaggerates a need for goods or services. If materials are being ordered too early or too often, it may indicate: Inflated demand, Unnecessary purchases, or A scheme to benefit a favored vendor. This kind of ordering outside normal patterns is a red flag for potential procurement fraud.
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