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?
A.
Requiring all fraud tips to be reported to employees' direct supervisors
B.
Combining the purchasing and payment functions within a single department
C.
Enforcing competitive bidding from potential vendors
D.
Using an external vendor to negotiate procurement contracts
Rationale for Correct Answer: One of the strongest internal controls against fraudulent billing schemes (such as shell companies, inflated invoices, and kickbacks) is to require competitive bidding. This ensures transparency, reduces favoritism, and makes it harder for employees and vendors to collude.
Analysis of Incorrect Options:
A – Fraud tips are valuable, but routing them only through supervisors may suppress reporting; hotlines are more effective.
B – Combining purchasing and payment increases fraud risk by reducing segregation of duties.
D – Outsourcing negotiations does not directly prevent billing fraud.
Key Concept: Internal controls and segregation of duties in preventing billing schemes.
Chosen Answer:
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