ACFE CFE-Fraud-Schemes-and-Financial-Crimes Exam Questions Instant Access

Question 1

Which of the following statements is MOST ACCURATE?

AGovernment and public sector organizations can usually accept more fraud risk than private sector organizations because there are no shareholders.

BGovernment and public sector organizations are required to reprioritize areas of focus for fraud detection less frequently than private sector organizations.

CGovernment and public sector organizations might need to conduct and respond to fraud risk assessments more frequently than private sector organizations.

DGovernment and public sector organizations have more autonomy in how they practice fraud detection than private sector organizations.

Answer : C

The correct answer is C. Government and public sector organizations might need to conduct and respond to fraud risk assessments more frequently because their risks can change with political priorities, public programs, emergency funding, legislative mandates, and changing public expectations. Public entities are accountable to citizens, regulators, oversight bodies, and funding authorities. Option A is incorrect because the absence of shareholders does not permit higher fraud tolerance; public stewardship often requires strong accountability. Option B is inaccurate because public sector priorities can shift quickly based on laws, budgets, and government initiatives. Option D is also incorrect because public organizations usually have less autonomy than private entities due to statutory requirements, public scrutiny, procurement rules, and oversight obligations. Fraud risk assessment should therefore be dynamic and responsive.

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Question 2

Hannah is a manager at a financial institution. To safeguard the bank and its customers from electronic funds transfer (EFT) fraud, Hannah is implementing several preventive measures. Which of the following is NOT a measure Hannah should take to prevent EFT fraud?

AIf a customer reports the loss or theft of an access device, then cancel the existing card, PIN, or other form of access and issue a new one.

BSend a welcome letter to new customers to determine if the address submitted on the account application is valid.

CSeparate the duties of bank employees so that the responsibilities for the issuance of access devices are separate from the issuance of PINs.

DMail PINs and other associated account information together to reduce the chance of those items being lost during transit.

Answer : D

Rationale for Correct Answer: Best practices in preventing EFT fraud require mailing

Analysis of Incorrect Options:

A -- Correct preventive measure: immediately cancel and reissue stolen access devices.

B -- Correct preventive measure: validating addresses helps detect fraudulent applications.

C -- Correct preventive measure: segregation of duties reduces insider fraud risks.

Key Concept: EFT fraud prevention through layered security and separation of duties.

Question 3

_____________ involves purposeful misreporting of financial information about the organization that is intended to mislead those who read it.

AFraudulent statement

BCorruption

CAsset misappropriations

DNone of the above

Answer : A

Rationale for Correct Answer:

Fraudulent financial statements (or ''fraudulent statement'') refer to the intentional misrepresentation of financial condition, typically through overstating revenues, understating expenses, inflating assets, or concealing liabilities. The intent is to mislead stakeholders such as investors, creditors, or regulators.

Analysis of Incorrect Options:

B . Corruption -- Refers to abuses of influence and conflicts of interest, not misreporting financial information.

C . Asset misappropriations -- Involve theft of assets, not misrepresentation of reports.

D . None of the above -- Incorrect since option A is correct.

Key Concept:

Financial Statement Fraud --- misrepresentation of organizational performance and position.

ACFE Fraud Examiners Manual (2020 International Edition), Financial Statement Fraud section --- Definition and Types.

Question 4

In accordance with the accounting equation, which of the following actions would conceal the fraudulent removal of a liability from the books?

AIncreasing another liability

BDecreasing owners' equity

CIncreasing an asset

DCreating a fictitious expense

Answer : A

The correct answer is A because the accounting equation is Assets = Liabilities + Owners' Equity. If a fraudster removes a liability from the books, total liabilities decrease. To keep the equation balanced without drawing attention to the improper removal, the fraudster could increase another liability account. This offsets the decrease and keeps total liabilities from appearing reduced. Decreasing owners' equity or creating a fictitious expense would further reduce the right side of the equation and would not conceal the removal in the same way. Increasing an asset would increase the left side, worsening the imbalance unless another entry were also made. The ACFE accounting concepts materials explain that understanding debit-credit relationships and the accounting equation is essential in detecting concealment entries.

Question 5

''Anticipate possible losses and omit potential profits'', this results in:

AAsymmetrical accounting

BSymmetrical accounting

CPlaying accounting

DBearing accounting

Answer : A

Rationale for Correct Answer:

This description reflects asymmetrical accounting, which is based on the conservatism principle. Possible losses are recorded, but potential gains are omitted until realized. This creates an asymmetry in recognizing losses versus gains.

Analysis of Incorrect Options:

B . Symmetrical accounting -- Would recognize gains and losses equally, contrary to conservatism.

C . Playing accounting -- Fraud scheme, not a principle.

D . Bearing accounting -- Not a recognized concept.

Key Concept:

Asymmetry in accounting --- conservative recognition of losses versus gains.

ACFE Fraud Examiners Manual (2020 International Edition), Accounting Concepts --- Conservatism and Asymmetric Accounting.

Question 6

The taxing authority in a country allows companies to subtract the cost of production from their gross sales to determine taxable income. A business owner operating in that country purchases materials from a local supplier and pays the supplier to alter the receipt to show a higher price than was paid. When the business owner submits the company's tax information to the taxing authority, they submit the altered receipt to reduce their tax burden. The business owner is MOST LIKELY committing which of the following schemes?

AAn excise tax evasion scheme

BA failure to declare income scheme

CA falsified tax deduction scheme

DA tax credit deferral scheme

Answer : C

The correct answer is C. The business owner is committing a falsified tax deduction scheme by fraudulently inflating production costs to reduce taxable income. Deductions are legitimate only when they accurately reflect allowable expenses. Here, the owner paid the supplier to alter the receipt so that the company appears to have incurred a higher deductible cost than it actually did. This false documentation reduces reported taxable income and therefore lowers the tax liability improperly. Option A is incorrect because the facts do not involve excise taxes on a specific class of goods. Option B is incorrect because the owner is not omitting income; they are overstating expenses. Option D is not applicable because the scheme involves deductions, not tax credits.

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Question 7

George, a 71-year-old man, receives a fraudulent message on his computer stating that his computer has been infected by a virus. When George calls the phone number listed on the message, he speaks with a fraudster who charges him for computer repair services that are unnecessary. George has MOST LIKELY been victimized by which of the following schemes?

APharming

BBait and switch scheme

CTech-support scheme

DSmishing

Answer : C

Rationale for Correct Answer:

This is a tech-support scam, in which fraudsters trick victims into believing their computers are infected and then charge fees for unnecessary or fake repairs. The scam often targets elderly victims.

Analysis of Incorrect Options:

A . Pharming -- Redirects users to fake websites, not fake support calls.

B . Bait and switch -- Advertising deception, not fraudulent computer support.

D . Smishing -- Fraud via SMS text messages, not on-screen computer popups.

Key Concept: Consumer fraud schemes --- tech-support scams.

ACFE Certified Fraud Examiner - Fraud Schemes and Financial Crimes CFE-Fraud-Schemes-and-Financial-Crimes Exam Questions