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CFE-Fraud-Prevention-and-Deterrence Sample Questions Answers

Questions 4

Which principle of corporate governance pertains to the disclosure of all material matters that the shareholders need to make timely and informed decisions regarding their investment in the company?

Options:

A.

Transparency

B.

Fairness

C.

Responsibility

D.

Accountability

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Questions 5

Which of the following would MOST LIKELY be a violation of the ACFE Code of Professional Ethics?

Options:

A.

Green a CFE, uncovered several material internal control deficiencies unrelated to the financial statement fraud he was investigating. In his final report to management. Green included information about the deficiencies even though they were unrelated to the situation he was hired to investigate.

B.

Stephanie, a CFE, accepted a fraud examination assignment and then instructed a lower-level employee to assess the company's cash records for signs of fraud. She took his word when he said there was no evidence of wrongdoing and ended up failing to uncover a very costly fraud scheme.

C.

Susan, a CFE, was hired by a client to conduct a fraud examination but found nothing amiss A year later, she received a legal order from the local prosecutor's office to provide the client's file. Susan complied with the court order, even though she did not have the client's authorization to do so.

D.

All of the above are violations

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Questions 6

According to the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Internal Control-integrated Framework (the Framework), there are five interrelated components of a company's internal control. Which of the following is NOT among these five components?

Options:

A.

Monitoring

B.

Control environment

C.

Independent oversight

D.

Information and communication

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Questions 7

Which of the following is among the board of directors' primary responsibilities related to fraud risk management?

Options:

A.

Overseeing the organization's fraud risk management activities

B.

Designing the fraud risk management program

C.

Punishing fraud perpetrators discovered through fraud risk management activities

D.

Implementing the fraud risk management program

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Questions 8

Management at ABC Corp. is assessing the company's ethical tone and how it affects the organization's fraud risk. To MOST EFFECTIVELY reinforce an anti-fraud culture, management should:

Options:

A.

Use a checklist of initiatives to make sure all the elements of a strong tone at the lop are in place

B.

Create an environment in which employees are dissuaded from challenging management's decisions

C.

Visibly adhere to the same set of ethics policies that is required of all employees

D.

All of the above

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Questions 9

Criminologist Charles McCaghy has stated that regulatory pressure is the single most compelling factor behind deviance by organizations.

Options:

A.

True

B.

False

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Questions 10

Which of the following Is NOT a way that an organization's fraud risk assessment should be Incorporated Into the audit process?

Options:

A.

It should be used to assess whether there is a moderate-to-high risk of management overriding controls within the moderate-to-high fraud risk areas.

B.

It should be used to replace the auditor's own identification and assessment of fraud risks.

C.

it should be used to increase awareness in the development of audit programs for areas that have been identified as having a moderate-to-high risk of fraud.

D.

It should be used to design audit tests to evaluate whether the controls are operating effectively.

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Questions 11

Which of the following statements is TRUE regarding how fraud examiners should exercise professional skepticism during a fraud examination engagement?

Options:

A.

Professional skepticism means beginning all assignments with the belief that something is amiss.

B.

Professional skepticism involves maintaining a mindset that no fraud has occurred

C.

Fraud examiners should form the engagement hypothesis without regard to the available preliminary information.

D.

Fraud examiners should not relax their skeptical attitudes under any circumstances.

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Questions 12

Having specialized departments within a company often increases the overall risk ot traud by the organization.

Options:

A.

True

B.

False

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Questions 13

Which of the following statements Is TRUE regarding how fraud examiners should exercise professional skepticism during a fraud examination engagement?

Options:

A.

Fraud examiners should not relax their skeptical attitudes under any circumstances.

B.

Professional skepticism involves maintaining a mindset that no fraud has occurred

C.

Fraud examiners should form the engagement hypothesis without regard to the nature of the assignment

D.

Professional skepticism can be dispelled only by evidence

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Questions 14

Which of the following is TRUE regarding government auditors' responsibilities to report evidence of potential fraud uncovered during an audit of a public-sector organization's financial statements?

Options:

A.

All government auditors maintain the same requirements for reporting evidence of potential fraud uncovered during a public-sector financial statement audit.

B.

Government auditors are legally prohibited from reporting evidence of potential fraud to any parties outside the organization being audited.

C.

Government auditors' reporting requirements pertaining to fraud are substantially the same as those for external auditors in the private sector.

D.

The requirements for government auditors to report evidence of potential fraud depend on the jurisdiction and the specific audit mandate.

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Questions 15

Who is ultimately responsible for responding appropriately to instances of fraud within an organization?

Options:

A.

Internal auditors

B.

The audit committee

C.

General counsel

D.

Management

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Questions 16

Which of the following statements about the fraud risk assessment process Is MOST ACCURATE?

Options:

A.

The fraud risk assessment can be effectively conducted by people inside or outside of the organization.

B.

To ensure the independence of the team members, a fraud risk assessment must be conducted by a consultant or other external party.

C.

If the individuals conducting the fraud risk assessment truly believe that fraud could not happen at the organization, then the assessment process should reflect that belief.

D.

The fraud risk assessment is most effective when management's influence on the process is limited

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Questions 17

International Standard on Auditing (ISA) 240 establishes auditors as being primarily responsible for the establishment of anti-fraud internal controls within an organization.

Options:

A.

True

B.

False

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Questions 18

Which of the following Is TRUE regarding an organization's ethics program?

Options:

A.

To be most effective, access to the organization's ethics policy should be restricted to employees and other Internal parties only

B.

In designing the ethics program, management should consider whether the organization currently has any ethical leadership Issues

C.

An effective written ethics policy alone is sufficient to communicate management's ethical philosophy and serve as a comprehensive ethics program

D.

All of the above

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Questions 19

The findings in the 2020 Report to the Nations include which of the following?

Options:

A.

The most commonly reported red flag displayed by fraud perpetrators prior to the detection of their crime is complaints about management.

B.

Mote occupational frauds are committed by men than by women

C.

The median losses caused by executives are lower than those caused by staff-level employees

D.

The majority of fraudsters have been previously punished by an employer for a fraud-related offense

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Questions 20

Green, a Certified Fraud Examiner (CFE). had an ethical dilemma regarding her business contract with her professional partners. Which of the following sources of guidance would be considered the lowest level of reference to help Green in determining the most ethical course of action?

Options:

A.

Contract law

B.

Guidance from her family and friends

C.

The ACFE Code of Professional Ethics

D.

Philosophical principles related to ethics

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Questions 21

Which of the following is one of the components of the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Enterprise Risk Management—Integrating with Strategy and Performance?

Options:

A.

Event avoidance

B.

Risk tolerance

C.

Compliance

D.

Review and revision

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Questions 22

Employees should be kept unaware that management is watching for lifestyle and behavior changes In staff members that might indicate fraud.

Options:

A.

True

B.

False

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Questions 23

Which of the following is NOT included in G20/OECD Principles of Corporate Governance (the Principles)?

Options:

A.

Guidance regarding appropriate board structures, responsibilities, and procedures

B.

Support for establishing stronger protection for foreign shareholders than for domestic shareholders

C.

A request that governments have in place an appropriate framework to support good corporate governance practices

D.

Recognition of the importance of the role of stakeholders in corporate governance

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Questions 24

According to Diane Vaughan, which of the following factors increases an organization's inherent inclination toward committing crime?

Options:

A.

Management seeks out diversity in attitudes and perspectives when hiring employees

B.

Rewards are given to employees who challenge the status quo

C.

Management links employee performance goals with company performance goals

D.

All of the above

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Questions 25

In the context of a fraud examination, integrity requires all of the following EXCEPT:

Options:

A.

Trustworthiness

B.

A well-developed sense of moral philosophy

C.

Avoidance of conflicts of interest

D.

Refusal to admit errors

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Questions 26

Which of the following Is one of the components of the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Enterprise Risk Management—Integrating with Strategy and Performance?

Options:

A.

Independent monitoring

B.

Operating environment

C.

Risk tolerance

D.

Governance and culture

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Questions 27

According to modern criminological studies, which of the following is the determinant aspect of white-collar crime?

Options:

A.

Cultural ties

B.

Criminal history

C.

Organizational opportunity

D.

Social class

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Questions 28

The existence of many specialized departments within a company generally decreases the overall risk of fraud within the organization.

Options:

A.

True

B.

False

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Questions 29

Jody has been working at ABC Corp. for ten years. He steals funds from the company and tells himself that the company owes it to him for his "unrewarded hard work and loyalty" This situation BEST illustrates which leg of the Fraud Triangle?

Options:

A.

Perceived non-shareable financial need

B.

Rationalization

C.

Perceived opportunity

D.

Lack of personal Integrity

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Questions 30

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 31

Glenda. an internal auditor, and Brldgette. an accounts receivable clerk, have had several heated disagreements over accounting procedures and policies. Glenda has just been told that she will be the lead on the company's fraud risk assessment. During the fraud risk assessment. Glenda should:

Options:

A.

Confront Bridgette about the disagreements and discuss how they increase the department's risk of fraud.

B.

Include her disagreements with Bridgette as a factor when assessing the risk of fraud in the accounts receivable department.

C.

Automatically designate the accounts receivable department as a high-risk area.

D.

Have someone else perform the fraud risk assessment work related to the accounts receivable department's activities.

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Questions 32

Which of the following is FALSE regarding the process of defining the objective of the fraud risk management program?

Options:

A.

Management should examine previous fraud occurrences to determine how the ideal fraud risk management program would have prevented tnem.

B.

Management must balance the investment in anti-fraud controls with the benefit of those controls and the amount of risk it is willing to accept.

C.

Management must assign a quantitative measure to its risk appetite so that it can accurately measure the fraud risk management program’s effectiveness.

D.

Management should tailor the detailed objectives of the fraud risk management program to the organization's specific needs and goals.

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Questions 33

To address an employee's consistent failure to meet deadlines, a manager removes the employee's ability to work from home This is an example of what type of behavioral response?

Options:

A.

Positive reinforcement

B.

Negative reinforcement

C.

Punishment

D.

None of the above

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Questions 34

For its compliance program to be effective, an organization must promote the program through appropriate incentives for compliance.

Options:

A.

True

B.

False

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Questions 35

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?

Options:

A.

A mandatory independent compensation committee

B.

Shareholder oversight of internal controls

C.

A written charter for management

D.

Adequate audit committee resources and authority

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Questions 36

Fraud risks related to corruption include all of the following EXCEPT;

Options:

A.

Receipt of kickbacks

B.

Espionage by competitors

C.

Payment of bribes

D.

Aiding and abetting vendor fraud

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Questions 37

Which of the following statements is FALSE regarding an organization's fraud risk management program?

Options:

A.

The program must include mechanisms to monitor and identify breaches in compliance.

B.

The responsibility of handling suspected incidents of noncompliance should be delegated to someone outside of the company.

C.

Formal sanctions for intentional noncompliance should be well-publicized throughout the company

D.

There should be measures in place to address failures in the design or operation of anti-fraud controls, as well as fraud occurrences

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Questions 38

According to Steve Albrecht's research,______is the most common personal characteristic motivating fraudsters, and ________ is the most common organization-environment factor motivating fraudsters.

Options:

A.

High personal debt; lack of separation of duties

B.

Revenge: too much trust in key employees

C.

Living beyond their means, too much trust in key employees

D.

Desire for recognition, lack of separation of duties

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Questions 39

According to the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Internal Control— Integrated Framework (the Framework), there are five interrelated components of a company's internal control. Which of the following is NOT among these five components?

Options:

A.

Control activities

B.

Ethical culture

C.

Risk assessment

D.

Monitoring

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Questions 40

Which of the following principles of corporate governance pertains to the duty of the organization to act in the best interest of society?

Options:

A.

Transparency

B.

Responsibility

C.

Fairness

D.

Accountability

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Questions 41

Effectively documenting and communicating organizational hierarchies, including the proper flow of information, can be a helpful tool in preventing fraud.

Options:

A.

True

B.

False

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Questions 42

Blue. Inc. is a specialty retailer of customized shipping containers. The company receives a very large order from Green Company, a new customer from a country that is known to have high corruption risks. Which of the following is MOST ACCURATE regarding the due diligence procedures Blue should perform on Green before proceeding with this transaction?

Options:

A.

Blue should consider Green's expected purchasing pattern and method of payment in determining whether to accept the transaction.

B.

Blue only needs to undertake due diligence procedures if Green is requesting to pay on credit.

C.

Blue should perform the same level of due diligence as it would for any other customer to avoid claims of discrimination.

D.

Blue does not need to undertake any specific due diligence procedures for this transaction.

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Exam Code: CFE-Fraud-Prevention-and-Deterrence
Exam Name: Certified Fraud Examiner - Fraud Prevention and Deterrence Exam
Last Update: Jul 13, 2024
Questions: 141
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