To detect nonconforming goods schemes, fraud examiners should examine which of the following?

• A. Contract specifications
• B. All of the above
• C. Unannounced inspections of questioned goods
• D. Review payroll and expense records

Answer: (D)

Nonconforming goods schemes are often revealed through the financial and payment trail that supports procurement. By examining payroll and expense records, you can uncover red flags such as kickbacks, fictitious vendors, duplicate or inflated invoices, and unusual reimbursements tied to specific suppliers. These patterns point to how substandard goods might be accepted or paid for, showing the motive and mechanism behind the fraud. While contract specifications and unannounced inspections can verify quality directly, the strongest evidence of how subpar items slip through tend to show up in the financial records that accompany procurement, making payroll and expense reviews the most informative focus here.