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

Question 1

Management at Alpha Company is developing a corporate compliance program. To ensure that the program will be effective, management should both incentivize employees for their compliance and discipline them for any violations.

ATrue

BFalse

Answer : A

Question 2

Which of the following choices is an example of an anti-fraud control that is primarily preventive in nature?

AContinuous audit techniques

BProactive data analysis techniques

CEmployee background checks

DWhistleblower hotline

Answer : C

Employee background checks are considered a preventive control because they are designed to identify potentially risky hires before employment. The manual states that ''background checks are a front-line preventive measure in combating fraud by screening out individuals who pose higher risk.''

Question 3

Christopher is conducting an external audit of a company in a jurisdiction that is subject to International Standards on Auditing (ISAs). While conducting his audit procedures, he discovers evidence of a fraud involving Jeffrey, the company's chief executive officer. Which of the following is Christopher's BEST response to these findings?

AChristopher should immediately report his findings to the relevant government authority.

BChristopher should report his findings to those charged with governance of the organization.

CChristopher should confront Jeffrey with his audit findings and try to get a confession.

DChristopher should not disclose his findings to any other parties due to legal liability.

Answer : B

According to ISA 240, the auditor is required to communicate identified fraud involving management to those charged with governance.

''When fraud involving senior management is identified or suspected, the auditor shall communicate these findings directly to those charged with governance.''

Question 4

Which of the following is TRUE regarding proactive fraud auditing procedures?

AAnalytical review of the financial statements is best used to uncover small frauds that might be missed by other detection methods.

BFraud assessment Questioning techniques are most appropriately used when attempting to determine who might be responsible for a particular fraud scheme.

CImplementing proactive fraud audit procedures demonstrates the organization's intention to aggressively look for possible fraudulent conduct.

DSurprise audit procedures are an effective fraud detection mechanism, but they do not help prevent fraud

Answer : C

Step by Step Comprehensive Detailed Explanation with All Reference:

Proactive Fraud Auditing:

Proactive fraud audit procedures aim to prevent and detect fraud before it escalates. Implementing these procedures signals to employees and stakeholders that fraud will not be tolerated.

Such actions align with creating a strong anti-fraud culture within the organization.

Examples of Proactive Fraud Audits:

Surprise audits, continuous monitoring, and analytical procedures identify discrepancies and potential fraud risks.

Fraud prevention and deterrence are enhanced through consistent implementation.

Effectiveness and Prevention:

Unlike reactive measures, proactive approaches demonstrate an organization's commitment to maintaining integrity and ethical standards.

Question 5

Which of the following is NOT a responsibility of the organization's board of directors?

AServing as the intermediaries between shareholders and management

BActing as guardians of the organization's resources and assets

CDirecting employees to execute business activities

DAssessing the strategy and underlying purpose of management's decisions and actions

Answer : C

Responsibilities of the Board of Directors:

The board is primarily responsible for oversight, governance, and ensuring the organization operates in the best interest of stakeholders. Key responsibilities include:

Acting as intermediaries between shareholders and management.

Safeguarding resources and assets.

Assessing management's strategies and decisions.

Why C is Correct:

Directing employees is a management responsibility, not a board function. The board focuses on oversight rather than operational execution.

Reference:

ACFE governance principles emphasize the separation of oversight and operational roles.

Question 6

Which of the following is NOT one of the three elements that have the most influence on crime according to the routine activities theory?

AThe absence of capable guardians

BThe availability of suitable targets

CThe presence of motivated offenders

DThe lack of societal ethics

Answer : D

In the manual's discussion of routine activities theory, three important elements are identified as influencing crime: the availability of suitable targets, the absence of capable guardians, and the presence of motivated offenders. This framework assumes that opportunities for crime arise when these three conditions come together. The theory does not list a lack of societal ethics as one of its three core elements. While ethics can matter broadly in criminology and organizational behavior, the routine activities approach is focused more narrowly on the interaction between offenders, targets, and guardianship. Because the manual expressly names only those three elements, the option referring to a lack of societal ethics is the one that does not belong. Therefore, option D is the correct answer under the Fraud Prevention and Deterrence material.

Question 7

Which of the following is TRUE regarding International Standard on Auditing (ISA) 240?

AISA 240 requires auditors to effectively educate the staff about the risk of fraud within the audited organization.

BISA 240 establishes auditors as being primarily responsible for implementing anti-fraud internal controls within an organization.

CISA 240 provides guidance regarding the auditor's responsibility to consider fraud in an audit of financial statements.

DISA 240 creates requirements for the board of directors regarding the establishment of a holistic fraud risk management program.

Answer : C

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