ACFE CFE-Fraud-Prevention-and-Deterrence Exam Questions Instant Access

Question 1

According to ACFE research, which of the following is TRUE regarding the three major categories of occupational fraud?

AIdentity theft is both the most common and costliest category of occupational fraud.

BAsset misappropriation schemes are the most common category of occupational fraud.

CCorruption schemes are the costliest category of occupational fraud.

DFinancial statement fraud schemes are the most common category of occupational fraud.

Answer : B

ACFE research indicates that asset misappropriation schemes, such as theft of cash or inventory, are the most common type of occupational fraud. While they are frequent, they typically result in lower financial losses compared to corruption or financial statement fraud, which are less common but can cause greater financial damage.

Question 2

Malcolm, a Certified Fraud Examiner (CFE), is conducting a fraud examination. He notes that he must conduct himself in accordance with the ACFE Code of Professional Ethics. Which of the following actions is explicitly prohibited by this Code?

AAccepting assignments with disclosed conflicts of interest.

BGiving opinions regarding technical matters.

CParticipating in conduct that could be considered unethical.

DProviding conclusions based on evidence.

Answer : C

The ACFE Code of Professional Ethics requires CFEs to act with integrity, competence, and professionalism. It specifically prohibits illegal or unethical conduct, as such conduct discredits the profession and undermines public confidence in fraud examination work. A CFE may provide conclusions based on evidence, provided those conclusions are supported by relevant, reliable, and sufficient facts. A CFE may also give opinions on technical matters, such as internal controls, when qualified to do so. Conflicts of interest require careful handling and disclosure, but the most clearly and explicitly prohibited action in the options is participating in conduct that could be considered unethical. This violates the ethical foundation expected of fraud examiners and threatens the credibility of the examination. Therefore, option C is correct.

Question 3

According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO), internal control is defined as:

AA process aimed at proactively identifying, assessing, and managing an organization's vulnerabilities to fraud by both internal and external sources.

BThe system enacted to ensure effective oversight of the board of directors, management, and all other parties responsible for an organization's direction, operations, and performance.

CThe system that is designed and implemented to eliminate all uncertainty and risk while also ensuring the achievement of organizational goals.

DA process, effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.

Answer : C

Question 4

Which of the following is NOT considered a conflict of interest that is prohibited under the ACFE Code of Professional Ethics?

AAccepting an assignment to secretly infiltrate the fraud examiner's employing organization and transmit inside information to another party

BUndertaking an engagement that decreases the fraud examiner's ability to perform their duties for their full-time employer

CAccepting an assignment to evaluate the anti-fraud controls at an organization in which the fraud examiner is a shareholder, provided the fraud examiner's ownership interest is disclosed

DUndertaking engagements for both sides in a case of alleged vendor overbilling

Answer : C

Understanding Conflicts of Interest:

The ACFE Code of Professional Ethics prohibits any engagements that impair the fraud examiner's objectivity, even with disclosure.

Ownership interests in a client organization create significant potential for bias, compromising the integrity of the evaluation.

Analysis of Other Options:

A . Secret infiltration:This is a clear ethical violation.

B . Engagements reducing employer duties:This constitutes a conflict of interest.

D . Representing both sides:Prohibited under the ACFE Code due to conflicting responsibilities.

Conclusion:Option C is a prohibited conflict of interest under the ACFE Code.

Question 5

Which of the following Is one of the recommendations made by the National Commission on Fraudulent Financial Reporting (the Treadway Commission) to reduce the probability of fraud in financial reports?

AGive shareholders oversight of hotline reporting programs

BHave adequate compensation committee resources and authority

CDevelop a written charter for management

DHave a mandatory independent audit committee

Answer : D

Treadway Commission Recommendations:

Establishing an independent audit committee is essential for oversight and reducing fraud risk in financial reporting.

Audit committees play a critical role in ensuring the integrity of financial statements.

Analysis of Other Options:

A . Shareholder oversight of hotlines:Not a Treadway Commission recommendation.

B . Compensation committee resources:Not directly related to fraud prevention.

C . Management charter:Unrelated to the recommendations.

Conclusion:Mandatory independent audit committees are a key recommendation to reduce fraud risk.

Question 6

According to the routine activities theory, all of the following are important elements that influence crime EXCEPT:

AThe presence of motivated offenders

BThe lack of accountability for misdeeds

CThe absence of capable guardians

DThe availability of suitable targets

Answer : B

Routine activities theory identifies three main elements necessary for crime: a motivated offender, a suitable target, and the absence of capable guardians. The lack of accountability for misdeeds is not part of this theory, as it focuses on situational factors that facilitate criminal opportunities rather than broader social or institutional factors.

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Question 7

In response to a risk identified during a fraud risk assessment, management decides to implement additional internal control measures. This response is known as:

AAssuming the risk

BMitigating the risk

CAvoiding the risk

DTransferring the risk

Answer : B

Understanding Fraud Risk Management Responses:

Risk mitigation refers to implementing controls or measures to reduce the likelihood or impact of a risk.

In this case, by implementing additional internal controls, management aims to mitigate the identified fraud risk.

Definition of Other Options:

A . Assuming the risk:This refers to accepting the risk without taking action to mitigate it. This is generally done when the risk is deemed tolerable.

C . Avoiding the risk:This involves changing business practices or ceasing activities to eliminate the risk entirely.

D . Transferring the risk:This occurs when the responsibility for the risk is shifted to another party, such as through insurance.

Conclusion:The described response clearly aligns with risk mitigation, as it focuses on reducing the risk through internal control measures.

ACFE Certified Fraud Examiner - Fraud Prevention and Deterrence CFE-Fraud-Prevention-and-Deterrence Exam Questions