Accurate & Verified 2026 New CFE-Fraud-Prevention Answers As Experienced in the Actual Test!
CFE-Fraud-Prevention Certification Sample Questions certification Exam
NEW QUESTION # 27
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:
- A. Have someone else perform the fraud risk assessment work related to the accounts receivable department's activities.
- 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. Confront Bridgette about the disagreements and discuss how they increase the department's risk of fraud.
Answer: A
Explanation:
Impartiality in Fraud Risk Assessment:
As the lead on the fraud risk assessment, Glenda must maintain objectivity and avoid the appearance of bias.
Her history of disagreements with Bridgette creates a potential conflict of interest, which could compromise the assessment's credibility.
NEW QUESTION # 28
Which of the following is NOT one of the three general approaches used to control corporate crime?
- A. Voluntary changes in corporate attitudes and structure
- B. Strong intervention of the government
- C. Consumer action to force change
- D. Withdrawal of financial institution funding
Answer: D
Explanation:
Common approaches include government intervention, consumer action, and voluntary corporate changes.
Financial institution funding is not typically listed as a direct control mechanism for corporate crime.
NEW QUESTION # 29
Aaron, a government auditor, is conducting a financial statement audit of a public-sector entity in accordance with the International Standards of Supreme Audit Institutions. Which of the following is TRUE regarding Aaron's consideration of fraud during this engagement?
- A. Aaron does not need to comply with the requirements found in International Standard on Auditing
240 as they do not apply to the engagement. - B. Aaron's audit objectives are likely narrower than those of a private-sector financial statement audit.
- C. Aaron likely does not have the ability to withdraw from the engagement even if fraud is identified during the audit.
- D. Aaron should remain alert for fraud but does not need to consider the potential for abuse or other misconduct during the audit engagement.
Answer: C
Explanation:
Government auditors typically cannot unilaterally withdraw from an audit engagement, even in cases where fraud is identified. Public-sector audits often follow mandates from higher authorities or statutes that require the auditor to continue and report findings to oversight bodies.
Additionally, fraud and abuse (including misconduct and misuse of assets) are relevant to government audits under ISSAIs, contrary to A and B. Option D is incorrect because public-sector audit objectives are often broader, encompassing compliance, performance, and integrity aspects.
NEW QUESTION # 30
For its compliance program to be effective, an organization must promote the program through appropriate incentives for compliance.
- A. True
- B. False
Answer: A
Explanation:
Overview of Compliance Programs:An effective compliance program requires clear communication, enforcement, and promotion of ethical standards within an organization.
Promoting compliance involves setting up positive incentives, such as rewards for ethical behavior, to encourage adherence to policies and regulations.
Role of Incentives:
Incentives serve as motivators for employees to align with the compliance culture. Examples include bonuses for meeting compliance goals, recognition for ethical behavior, and career advancement opportunities tied to compliance performance.
The U.S. Federal Sentencing Guidelines for Organizations emphasize that for a compliance program to be effective, it must include incentives to encourage proper behavior and discipline to deter violations.
Supporting Reference Materials:
The Association of Certified Fraud Examiners (ACFE) highlights the importance of integrating incentives into compliance programs. These incentives are seen as essential for fostering a culture of ethics and preventing fraud.
Industry standards and frameworks, such as COSO's "Internal Control - Integrated Framework," also stress the integration of incentives to promote adherence to internal controls and compliance standards.
Importance of Positive Reinforcement:
Positive reinforcement through incentives leads to higher employee morale, enhanced commitment to ethical practices, and a reduced likelihood of non-compliance.
A compliance program that merely penalizes non-compliance without rewarding adherence can fail to motivate employees to prioritize compliance.
Application in Fraud Prevention:
By actively incentivizing compliance, organizations can proactively mitigate risks of fraud and unethical practices. This aligns employees' personal goals with the organization's ethical standards.
NEW QUESTION # 31
Which of the following choices is an example of an anti-fraud control that is primarily preventive in nature?
- A. Employee background checks
- B. Continuous audit techniques
- C. Whistleblower hotline
- D. Proactive data analysis techniques
Answer: A
Explanation:
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."
NEW QUESTION # 32
According to Silk and Vogel's research, business leaders rationalize legal violations by asserting that compliance with government regulations is too costly and cuts too heavily into company profits.
- A. True
- B. False
Answer: A
Explanation:
Research Findings by Silk and Vogel:
Their research highlights that business leaders often justify non-compliance with regulations by arguing that adhering to such rules significantly increases operational costs and reduces profitability.
Rationalization in Legal Violations:
This rationalization is consistent with the fraud triangle concept, where rationalization serves as a justification for unethical or illegal actions.
Why A is Correct:
This accurately represents a common justification for regulatory non-compliance as documented in fraud and compliance research.
NEW QUESTION # 33
Which of the following theories suggests that, when considering the possibility of violating a law.
people are likely to ask themselves. "What will my spouse think if they find out?"
- A. Operant theory
- B. Cognitive theory
- C. Social control theory
- D. Behavioral theory
Answer: C
Explanation:
Social Control Theory Overview:
This theory posits that individuals consider social and personal relationships when deciding whether to commit a crime. They reflect on the potential consequences of their actions on their relationships and social standing.
Application to the Scenario:
The question of "What will my spouse think?" aligns directly with social control theory, as it involves weighing personal consequences within a social context.
NEW QUESTION # 34
Jane, a Certified Fraud Examiner (CFE), was hired lo conduct a fraud examination at XYZ Company Her examination did not reveal any conclusive evidence that fraud had occurred or was occurring Consequently. XYZ's management asked Jane to state in her official examination report that the company is free of fraud as a means of assuring the board of directors that the company's anti-fraud controls were effective. The ACFE Code of Professional Ethics prohibits Jane from complying with management's request.
- A. True
- B. False
Answer: A
Explanation:
ACFE Code of Professional Ethics:
CFEs must not make definitive statements about the absence of fraud, as such statements can mislead stakeholders and compromise professional integrity.
Why A is Correct:
Jane cannot state the company is "free of fraud" because no examination can guarantee the complete absence of fraud, only that no evidence was found based on the scope of work.
NEW QUESTION # 35
Which of the following is FALSE regarding a fraud risk assessment?
- A. The objective of the assessment is to help the organization identify what makes it most vulnerable to fraud.
- B. The designation of an area as high risk should only occur if the assessment has conclusively revealed that fraud is occurring there.
- C. The assessment team should consider how employees behave as part of its assessment
- D. The assessment should be used to improve employee fraud awareness
Answer: B
Explanation:
Purpose of Fraud Risk Assessment:
The goal is to identify vulnerabilities to fraud and implement preventive measures, not to wait for conclusive evidence of fraud before designating high-risk areas.
Proactive Identification:
High-risk areas are identified based on susceptibility to fraud (e.g., lack of controls, high cash transactions), even if no fraud has been detected. This approach allows organizations to act preemptively.
Improving Fraud Awareness:
Employee education and behavior monitoring are integral components of the assessment process to reduce fraud risks.
Incorrect Assumption in D:
Waiting for conclusive evidence contradicts the proactive nature of fraud risk assessment and undermines its preventative function.
NEW QUESTION # 36
According to Diane Vaughan. which of the following factors increases an organization's inherent inclination toward committing crime?
- A. Management separates employee performance goals from company performance goals
- B. Rewards are given to employees who challenge the status quo
- C. All of the above
- D. Management encourages employee loyalty through social functions
Answer: A
Explanation:
Diane Vaughan's Theory on Organizational Crime:
Vaughan argued that organizational environments prone to crime exhibit a "normalization of deviance," often influenced by management decisions that misalign employee incentives with organizational objectives.
Why C is Correct:
Misaligned goals create conflicting priorities, increasing the likelihood of unethical behavior to meet individual or team objectives.
NEW QUESTION # 37
A fraud risk assessment identifies a scheme that has a low likelihood of occurrence but would cause catastrophic financial and reputational damage. How should the organization treat this risk?
- A. Ignore it because likelihood is low
- B. Focus only on frequent fraud risks
- C. Remove it from the assessment
- D. Evaluate both likelihood and impact when determining mitigation priorities
Answer: D
Explanation:
Fraud risk assessments should consider both probability and potential impact. Some events occur rarely but can threaten the organization's financial stability, reputation, or regulatory standing. These risks often justify significant preventive and detective controls despite their low likelihood.
NEW QUESTION # 38
Which of the following is a responsibility of an organization's board of directors?
- A. Electing the company shareholders and supervising their decisions and actions.
- B. Directing employees to organize and execute business activities.
- C. Serving as the intermediary between staff-level employees and management.
- D. Assessing the strategy and underlying purpose of management's decisions and actions.
Answer: D
NEW QUESTION # 39
Gray, an independent Certified Fraud Examiner (CFE), was hired by Green, president of the ABC Corporation, to investigate allegations that one of ABC's employees is taking kickbacks. During the investigation. Gray teams that Green is involved in an unrelated fraud. Under the ACFE Code of Professional Ethics. Gray should:
- A. Resign from the engagement
- B. Not disclose the information about Green.
- C. Tell the company's board of directors about Green.
- D. Report Green to law enforcement
Answer: C
Explanation:
Professional Responsibility Under ACFE Code of Ethics:
The ACFE Code of Professional Ethics requires Certified Fraud Examiners (CFEs) to disclose material information to the proper authorities. When fraud is discovered, the CFE must act in the best interest of the organization while adhering to ethical standards.
In this scenario, Gray must report Green's involvement in unrelated fraud to ABC Corporation's board of directors. This ensures transparency and accountability without breaching client confidentiality unnecessarily.
Relevant Principles from ACFE Code of Ethics:
Integrity:CFEs must act honestly and report findings to the appropriate parties.
Objectivity:The CFE must avoid conflicts of interest and ensure impartiality in all findings and disclosures.
Board Reporting Responsibility:
Reporting to the board is appropriate because they are responsible for corporate governance and oversight. Law enforcement involvement should follow organizational protocols unless laws explicitly mandate direct reporting.
NEW QUESTION # 40
According to ACFE research, which of the following is TRUE regarding the three major categories of occupational fraud?
- A. Corruption schemes are the costliest category of occupational fraud.
- B. Asset misappropriation schemes are the most common category of occupational fraud.
- C. Financial statement fraud schemes are the most common category of occupational fraud.
- D. Identity theft is both the most common and costliest category of occupational fraud.
Answer: B
Explanation:
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.
NEW QUESTION # 41
An employee submits reimbursement requests for personal expenses disguised as business expenses. This scheme is BEST classified as:
- A. Corruption
- B. Billing fraud
- C. Financial statement fraud
- D. Expense reimbursement fraud
Answer: D
Explanation:
Expense reimbursement fraud occurs when employees seek payment for fictitious, inflated, or personal expenses. Such schemes exploit trust in the expense approval process and often involve falsified documentation.
NEW QUESTION # 42
Helene has been working at WPX Corp. for nine years. She takes some of the company's products from the warehouse and sells them online. Helene tells herself that the company owes it to her for her "years of underpaid service." This situation BEST illustrates which component of the Fraud Triangle?
- A. Rationalization
- B. Perceived non-shareable financial need
- C. Integrity lapse
- D. Perceived opportunity
Answer: A
NEW QUESTION # 43
Which of the following statements is MOST ACCURATE regarding an effective system of anti- fraud controls?
- A. It focuses more on preventive controls than detective controls.
- B. It prioritizes implementing detective controls over preventive controls.
- C. It deters fraudsters by increasing the perception that fraud will be detected.
- D. It fully eliminates the risk of fraud by removing opportunities for misbehavior.
Answer: C
NEW QUESTION # 44
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