Audit and Assurance Practice Exam

What is a typical characteristic of vendor fraud?

1. Providing goods that were never ordered.

2. Undercharging for bulk purchases.

3. Shipping inferior quality goods deliberately.

4. All of the listed options.

The correct answer is: Shipping inferior quality goods deliberately.

Vendor fraud often includes deceptive practices that undermine the integrity of transactions between a vendor and a buyer. One typical characteristic of vendor fraud is shipping inferior quality goods deliberately. This practice is aimed at taking advantage of the buyer by providing subpar products that do not meet the agreed-upon standards, all while collecting payment as if the agreed quality was delivered. This not only harms the buyer's operations but can also potentially lead to financial losses and reputational damage. In contrast, the other listed options present scenarios that may not align specifically with typical vendor fraud. Providing goods that were never ordered can indicate a lack of oversight or inventory control rather than a fraudulent intention. Undercharging for bulk purchases is generally a scenario that benefits the buyer, potentially leading to a legitimate business practice rather than fraud. Therefore, while these activities may occur in different contexts, the deliberate shipment of inferior goods directly reflects an intent to deceive and is more characteristic of vendor fraud.