Pass the IOFM Accounts Payable APS Questions and answers with ValidTests

When auditing T&E expense reports, a key red flag isamounts just below the approval threshold, as employees may intentionally submit expenses slightly under the limit to avoid additional scrutiny or approval, potentially masking fraudulent or non-compliant claims. This practice, known as “threshold manipulation,” requires close attention during audits.

The web source from Tipalti states: “During T&E audits, pay particular attention to expenses just below the approval threshold, as employees may manipulate amounts to bypass additional review, indicating potential fraud.” This directly supports Option C. The other options are less critical:

Restaurant receipts with client names (A)may be useful for substantiation but are not a primary audit concern.

Highly itemized receipt details (B)are desirable for clarity, not a red flag.

Airfare with hotel costs (D)is a common combination and not inherently suspicious.

The IOFM APS Certification Program covers “Travel and Entertainment (T&E),” including auditing techniques for expense reports. The curriculum’s focus on “peer-tested best practices” aligns with scrutinizing amounts just below approval thresholds to detect potential fraud.

A recurring wire transfer is a payment set up to occur automatically on a regular schedule (e.g., weekly, monthly) to the same recipient organization, such as a vendor or service provider, often for fixed or variable amounts. The defining characteristic is that it ismade to the same organization each time, ensuring consistency in the recipient. The timing (Option A) and amount (Option C) may vary depending on the agreement, and the transfer is not required to use CHIPS (Option D), as wire transfers can be processed through other systems like Fedwire or SWIFT.

The web source from Tipalti states: “A recurring wire transfer is an automated payment to the same organization on a regular schedule, such as for rent or subscriptions, with amounts that may vary.” This directly supports Option B.

The IOFM APS Certification Program covers “Payments,” including wire transfers and recurring payment setups. The curriculum’s focus on “peer-tested best practices” aligns with the definition of recurring wire transfers as payments to a consistent recipient.

Software-as-a-Service (SaaS)is a cloud-based software delivery model where applications are hosted by a provider and accessed over the internet, typically on a subscription basis. Another term for SaaS ison-demand software, as it allows users to access software as needed without on-premises installation. A perpetual software license (Option A) refers to a one-time purchase model, onsite vendor support (Option B) is a service, and consultant-specific applications (Option C) is not a standard term.

The web source from Tipalti states: “Software-as-a-Service (SaaS), also known as on-demand software, provides cloud-based access to applications, enabling flexible and scalable AP solutions.” This directly supports Option D.

The IOFM APS Certification Program covers “Technology and Automation,” including cloud-based solutions like SaaS. The curriculum’s focus on “peer-tested best practices” aligns with recognizing SaaS as on-demand software for AP automation.

TheInternal Controlstopic in the APS Certification Program emphasizes fraud prevention, including check fraud, which is a significant risk in AP due to the handling of payments. Check fraud can occur throughcheck alteration(modifying payee or amount),invalid payments(payments to fraudulent vendors or for unauthorized transactions), andstolen issued checks(checks intercepted and cashed fraudulently). All three are recognized methods of check fraud.

Item I (Check alteration): Altering a check’s payee, amount, or date is a common fraud method, often mitigated by controls like positive pay. This is a valid way.

Item II (Invalid payments): Payments to fictitious vendors or for unauthorized purposes (e.g., duplicate invoices) constitute fraud, often enabled by weak vendor validation. This is a valid way.

Item III (Stolen issued checks): Stealing issued checks (e.g., from mail) and cashing them fraudulently is a well-documented fraud risk, mitigated by secure check handling. This is a valid way.

Option A (I, II, and III): Correct, as all three are ways organizations suffer from check fraud.

Option B (II and III only): Incorrect, as Item I is also a valid method.

Option C (I and III only): Incorrect, as Item II is also a valid method.

Option D (I and II only): Incorrect, as Item III is also a valid method.

Reference to IOFM APS Documents: The APS e-textbook underInternal Controlslists “check alteration, invalid payments to fraudulent vendors, and stolen checks” as common check fraud methods. It emphasizes controls like positive pay and secure check storage to mitigate these risks. The training video discusses check fraud scenarios, citing all three methods as prevalent in AP processes.

TheTax and Regulatory Compliancetopic in the APS Certification Program covers IRS Form 1099 reporting requirements for payments to U.S. unincorporated service providers (e.g., independent contractors, freelancers). Payments for services totaling$600 or morein a calendar year must be reported on Form 1099-NEC (Nonemployee Compensation), ensuring the IRS can track income for tax purposes.

Option A ($600): Correct. The IRS requires Form 1099-NEC for payments of $600 or more to unincorporated U.S. service providers, such as individuals or partnerships, for services rendered.

Option B ($1,000): Incorrect. The $600 threshold applies, not $1,000.

Option C ($500): Incorrect. The threshold is $600, not $500.

Option D ($300): Incorrect. The threshold is $600, not $300.

Reference to IOFM APS Documents: The APS e-textbook underTax and Regulatory Compliancestates, “Payments of $600 or more to U.S. unincorporated service providers must be reported on Form 1099-NEC, per IRS regulations.” TheMaster Guide to Form 1099 Compliancespecifies, “The $600 threshold applies to nonemployee compensation paid to individuals, sole proprietors, or partnerships, requiring a 1099-NEC filing.” The training video reinforces this, noting, “AP ensures 1099-NEC forms are issued for payments of $600 or more to track contractor income.”

TheInternal Controlstopic in the APS Certification Program emphasizes preventing employee fraud through robust controls, particularly in AP, where access to payments and vendor data creates risks.Conducting detailed background checkson new AP employees is a standard control to verify integrity and reduce the risk of fraudulent behavior. Other options, such as NDAs, accounting degrees, or temporary hiring, are less effective or irrelevant for fraud prevention.

Option A (Require that all potential employees sign an NDA prior to hire): Non-disclosure agreements (NDAs) protect confidential information but do not directly prevent fraud, which involves financial misconduct (e.g., embezzlement). This is not a primary fraud control.

Option B (Ensure all staff members have accounting degrees): An accounting degree does not guarantee honesty or prevent fraud. Many AP roles require practical skills, not formal degrees. This is not a fraud control.

Option C (Hire only temporary employees and rotate them out): Temporary staffing and frequent rotation disrupt continuity and may increase fraud risk due to lack of accountability. This is not a fraud control.

Option D (Conduct detailed background checks on all new AP employees): Background checks verify criminal history, credit issues, and past employment, identifying potential fraud risks. This is a standard and effective control. Correct answer.

Reference to IOFM APS Documents: The APS e-textbook underInternal Controlsstates, “To prevent employee fraud, organizations should implement controls like detailed background checks for AP staff to ensure trustworthiness.” It lists background checks as a key measure, alongside segregation of duties and surprise audits, but does not mention NDAs, degrees, or temporary staffing as fraud prevention controls. The training video reinforces this, citing background checks as essential for roles with financial access.

Fraudulent expense reimbursement schemes in T&E processes typically involve misrepresenting or manipulating expense reports to obtain unauthorized reimbursements. Common schemes include reporting personal expenses as business-related (Option A), forging or altering receipts (Option B), and submitting the same expense multiple times for reimbursement (Option C). Lapping schemes (Option D), which involve misappropriating funds and covering them with subsequent payments, are more associated with accounts receivable or cash management, not T&E expense reimbursements.

The web source from SAP Concur explains: “Common T&E fraud schemes include submitting personal expenses as business-related, altering or forging receipts, and requesting multiple reimbursements for the same expense.” Lapping schemes are not mentioned in the context of T&E fraud, as they pertain to different financial processes, such as diverting payments and covering them with later receipts, per the Corcentric source: “Lapping is a fraud scheme typically seen in accounts receivable, not expense reimbursements.”

The IOFM APS Certification Program covers “Travel and Entertainment (T&E),” including fraud prevention in expense reporting. The curriculum’s emphasis on “peer-tested best practices” includes identifying common T&E fraud schemes, supporting Options A, B, and C as prevalent, while excluding lapping schemes (Option D).

TheInternal Controlstopic in the APS Certification Program details the COSO framework’s Control Environment component, which establishes the foundation for effective internal controls. Key elements include clear roles and responsibilities, timely information distribution, and ongoing monitoring of controls. However,staff working in self-directed teamsis not a COSO requirement, as the framework focuses on structure and accountability rather than specific team management styles.

Option A (Internal controls are monitored and evaluated): This aligns with COSO’s Monitoring Activities component but also supports the Control Environment by ensuring controls are enforced. It is a necessary element.

Option B (Staff work in self-directed teams): COSO does not mandate self-directed teams. While teamwork may be beneficial, the Control Environment emphasizes defined roles and oversight, not specific team structures. This is the correct answer.

Option C (Information is distributed in a timely way): This supports the Control Environment by ensuring employees have the information needed to perform their duties, aligning with COSO’s Information and Communication component. It is a necessary element.

Option D (People know their responsibilities and limits of authority): This is a core element of the Control Environment, ensuring clear accountability and authority structures. It is a necessary element.

Reference to IOFM APS Documents: The APS e-textbook underInternal Controlsexplains, “The COSO Control Environment requires clear responsibilities, timely information flow, and ongoing monitoring to establish effective controls.” It lists elements like “defined roles and authority limits” and “effective communication” but does not mention self-directed teams as a requirement. The training video emphasizes COSO’s focus on accountability and structure, noting that team configurations are organizational choices, not COSO mandates.

In the context of accounts payable and financial operations, the acronymFIFOstands forFirst In, First Out, a method commonly used in inventory management and accounting to assume that the earliest goods purchased (first in) are sold or used first (first out). This affects cost of goods sold and inventory valuation. The other options are not relevant: “Fifty Invested, Five Optioned” (Option B), “Fraud In Financial Operations” (Option C), and “Final Invoice For Offset” (Option D) are not standard terms in AP or accounting.

The web source from SAP Concur states: “FIFO, or First In, First Out, is an inventory accounting method where the earliest goods received are recorded as sold first, impacting financial reporting.” This directly supports Option A.

The IOFM APS Certification Program covers “Internal Controls,” including accounting principles like FIFO that affect financial processes. The curriculum’s focus on “peer-tested best practices” aligns with understanding FIFO as a standard method in inventory and cost accounting.

A blanket purchase order (PO) is a long-term agreement with a supplier to purchase goods or services over a specified period, often used for recurring or high-volume purchases. A key limitation is that itshould not extend past a specified timeframe, as blanket POs are typically set for a defined duration (e.g., one year) to manage pricing, terms, and supplier commitments. Extending beyond this timeframe without renegotiation can lead to pricing discrepancies or supply chain issues.

The web source from NetSuite explains: “A blanket purchase order covers multiple deliveries over a set period, but it is limited by a specified timeframe to ensure pricing and terms remain valid.” This directly supports Option B. The other options are incorrect:

Option A: Blanket POs can be used for both goods and services, not just services.

Option C: Payment terms for blanket POs vary and are not restricted to same-day wire transfers.

Option D: Blanket POs are designed for multiple deliveries over time, not a specific delivery date.

The IOFM APS Certification Program covers “Invoices,” including the use of purchase orders in invoice processing. The curriculum’s focus on “peer-tested best practices” supports the understanding of blanket POs and their time-bound nature.