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Question 619 - IIA-CIA-Part1 discussion

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Which of the following frauds is most likely to occur in the accounts payable function?

A.

Factitious vendors are entered into the system, possibly resulting in improper disbursements.

Answers
A.

Factitious vendors are entered into the system, possibly resulting in improper disbursements.

B.

Bad debt expense is intentionally omitted from the financial statements.

Answers
B.

Bad debt expense is intentionally omitted from the financial statements.

C.

Certain costs are capitalized, rather than expensed.

Answers
C.

Certain costs are capitalized, rather than expensed.

D.

A related party receives benefits not appropriate in an arm's-length transaction.

Answers
D.

A related party receives benefits not appropriate in an arm's-length transaction.

Suggested answer: A

Explanation:

In the accounts payable function, the most likely fraud scenario involves the creation of fictitious vendors. This fraud can lead to improper disbursements where payments are made to non-existent entities, effectively siphoning money out of the organization. This type of fraud is easier to execute in accounts payable compared to other functions because it can involve relatively straightforward manipulations of vendor master files and payment processes. Such schemes can result in significant financial losses and are a common concern for internal auditors reviewing accounts payable controls.

Reference:

IIA Practice Guide on Accounts Payable Risks and Controls.

Association of Certified Fraud Examiners (ACFE) publications on common fraud schemes.

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asked 03/11/2024
Balanavaneethan Nitharsan
29 questions
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