Exam IIA-CIA-Part1 topic 6 question 98 discussion

Actual exam question from IIA's IIA-CIA-Part1

Question #: 98
Topic #: 6

[All IIA-CIA-Part1 Questions]

Which of the following scenarios provides the most concerning red flag, or indicator of possible fraud?

A. An employee receives a bonus for perfect attendance.
B. During the past 18 months, three chief financial officers have left the organization after having been promoted to the position.
C. The organization does not perform any due diligence research on third-party service providers.
D. Three competitors are highly profitable but a fourth, equal in size, is approaching bankruptcy limits.

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Suggested Answer: B 🗳️

by abdullah01 at July 8, 2024, 12:53 p.m.

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Kozy

1 month ago

Selected Answer: C

Lack of due diligence on third-party service providers is a significant fraud red flag because it increases the risk of: ✔ Contracting with shell companies or fictitious vendors ✔ Overpaying for services ✔ Collusion or kickbacks ✔ Inadequate control over outsourced activities This scenario represents a clear control weakness and a heightened risk for procurement, bribery, or vendor fraud.

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abdullah01

1 year ago

ack of Due Diligence: Failure to conduct due diligence on third-party service providers can increase the risk of engaging with fraudulent or untrustworthy entities. This lack of scrutiny can lead to various forms of fraud, such as billing schemes, kickbacks, or collusion between the service provider and internal employees.

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