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The CFE-Financial-Transactions-and-Fraud-Schemes Exam is designed to test the knowledge and skills of professionals who are responsible for detecting, investigating, and preventing fraud. CFE-Financial-Transactions-and-Fraud-Schemes exam consists of four sections, each of which covers a specific area of fraud examination. These sections include Financial Transactions and Fraud Schemes, Law, Investigation, and Fraud Prevention and Deterrence.
NEW QUESTION # 40
In ____________ scheme, a supplier pays an employee of the purchasing company to write specifications that will require amendments at a later date.
- A. Need recognition
- B. False specification
- C. Deliberate writing of vague specifications
- D. Bid-splitting
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:Deliberate writing of vague specifications is a type of corruption scheme where an employee intentionally drafts unclear requirements. This forces later amendments, which can be manipulated to favor a particular vendor.
* Analysis of Incorrect Options:
* B. Need recognition - Involves unnecessary purchases, not vague specifications.
* C. False specification - General but not precise; "vague specifications" is the correct technical term.
* D. Bid-splitting - Breaking contracts into smaller amounts to avoid approval controls, not related to vague specs.
* Key Concept:Specification schemes in procurement corruption.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Corruption - Specification Schemes.
NEW QUESTION # 41
A fraudster poses as ABC Organization's chief executive officer (CEO) and sends an email to an employee requesting that company funds be transferred to an account that the fraudster owns. This is an example of which of the following types of fraud schemes?
- A. Executive email attack
- B. Business email compromise
- C. Electronic piggybacking
- D. Reverse social engineering
Answer: B
NEW QUESTION # 42
Which of the following is MOST ACCURATE concerning common methods that identity thieves use to steal information?
- A. Shoulder surfing is the practice of exploiting another person's access capability to gain access to restricted areas.
- B. Dumpster diving involves searching for sensitive personal information on used computers that have been purchased from a reseller.
- C. Pharming is the practice of changing a victim's email or mailing address so that the identity thief receives the victim's mail.
- D. Baiting involves leaving flash drives or similar items that have been infected with malware in places where people are likely to find them.
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:Baiting is a social engineering tactic where fraudsters leave infected flash drives or storage media in public areas, hoping victims will plug them in, unknowingly installing malware. This is an accurate description.
* Analysis of Incorrect Options:
* A. Pharming - Involves redirecting users from legitimate websites to fraudulent ones, not mail redirection.
* B. Dumpster diving - Searching physical trash for sensitive information, not computers from resellers.
* C. Shoulder surfing - Observing someone's screen or keystrokes, not access exploitation.
* Key Concept: Identity theft techniques.
Reference: ACFE Fraud Examiners Manual (2020), Corruption: Identity Theft and Social Engineering.
NEW QUESTION # 43
In Cressey's fraud triangle, its three of the legs are Opportunity, Pressure and
- A. None of the above
- B. Isolation
- C. Violation
- D. Rationalization
Answer: D
NEW QUESTION # 44
___________ should be examined to see that all are properly documented and that inappropriate payments have not been made to employees.
- A. Payable checks
- B. Payable cash
- C. Cash advances
- D. counterfeit checks
Answer: C
NEW QUESTION # 45
Which of the following is a red flag of a Ponzi scheme?
- A. There is pressure to take payouts rather than reinvest profits.
- B. A firm has a history of returns on investments that fluctuate based on market conditions.
- C. The investment strategy is very easy to understand.
- D. The financial manager manages, administers, and retains custody of investment funds.
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: A major red flag of a Ponzi scheme is when the promoter has custody and control over investor funds with little to no independent oversight. This centralization allows them to use new investor money to pay old investors while concealing losses.
* Analysis of Incorrect Options:
* A - Ponzi operators usually pressure investors to reinvest, not take payouts, to keep funds circulating.
* C - Schemes often involve overly complex or secretive strategies, not simple ones.
* D - Realistic fluctuations based on markets suggest legitimate investing, not a Ponzi scheme (which typically reports steady, unrealistic returns).
* Key Concept: Ponzi schemes rely on lack of oversight, unrealistic returns, and control of funds by promoters.
Reference: ACFE Manual, Fraud Prevention and Deterrence - Ponzi Schemes.
NEW QUESTION # 46
Which of the following scenarios is an example of an electronic extortion scheme?
- A. A politician threatens to shut down a business if it does not pay a bribe.
- B. A vendor rewards a purchasing employee with tickets for a professional sports team's game after the employee directs business to the vendor.
- C. An employee receives a payment for directing excess business to a vendor.
- D. A purchasing employee and vendor agree to bill the company for services never rendered.
Answer: A
NEW QUESTION # 47
Undisclosed payments made by vendors to employees of purchasing companies are referred to as:
- A. None of the above
- B. Kickbacks
- C. Presolicitation
- D. Bid-rigging
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:Kickbacks are undisclosed payments made by vendors to employees of purchasing companies to secure favorable treatment. They are a classic form of bribery under the corruption classification of the Fraud Tree.
* Analysis of Incorrect Options:
* A. Bid-rigging - Involves collusion among bidders, not secret payments.
* C. Presolicitation - A phase in procurement fraud, not the scheme itself.
* D. None of the above - Incorrect, as kickbacks are the precise answer.
* Key Concept:Kickbacks - secret vendor payments for favorable purchasing treatment.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Corruption - Kickback Schemes.
NEW QUESTION # 48
Which of the following statements is TRUE regarding the prevention of inventory theft?
- A. Shipping documents should be prenumbered and controlled.
- B. The purchasing supervisor should conduct the physical inventory count.
- C. The person who is responsible for shipping inventory should also be responsible for converting inventory to scrap.
- D. The inventory requisition form should be completed by the same person who is responsible for incoming shipments.
Answer: A
NEW QUESTION # 49
Which of the following is the MOST ACCURATE statement about the different types of malware?
- A. Ransomware is malicious software that locks the operating system and restricts access to data files.
- B. A Trojan horse is a hidden program that displays advertisements while the computer is operating.
- C. Spyware is a software program with instructions executed every time a computer is turned on.
- D. A computer worm is a program that appears useful but monitors and logs keystrokes.
Answer: B
NEW QUESTION # 50
In the fraud scale, pressure, opportunity, and integrity variables all result in a list of ___ possible red flags or indicators of occupational fraud and abuse.
- A. 0
- B. 1
- C. 2
- D. 3
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:W. Steve Albrecht's Fraud Scale introduced the relationship between pressure, opportunity, and integrity. He and his colleagues identified 81 red flags or behavioral indicators of occupational fraud and abuse based on these three dimensions. Therefore, the correct answer is A. 81.
* Analysis of Incorrect Options:
* B. 82 / C. 83 / D. 84 - Distractors; none match the number identified in the fraud scale research.
* Key Concept:Fraud Scale - Red Flags of occupational fraud.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Fraud Theory - Albrecht's Fraud Scale.
NEW QUESTION # 51
The principal way to detect omitted credits from books of account is through:
- A. Forced Balance
- B. Expense account
- C. None of all
- D. Trend analysis
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:Trend analysis is one of the most effective ways to detect omitted credits. By analyzing patterns in revenue, expenses, or balances over time, discrepancies such as missing credits become apparent. Forensic examiners rely on comparative financial analysis to identify anomalies that suggest manipulation.
* Analysis of Incorrect Options:
* A. Forced Balance - Describes concealment, not detection.
* C. Expense account - Accounts can be manipulated but are not detection methods.
* D. None of all - Incorrect, since trend analysis is correct.
* Key Concept:Analytical procedures (trend analysis) in fraud detection.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Fraud Examination Techniques - Analytical Procedures.
NEW QUESTION # 52
The _______________ cost method of pricing would carry an asset's value on the financial statements as what it would currently cost, considering inflation.
Answer:
Explanation:
Price-level adjusted historical cost
* Rationale for Correct Answer:The price-level adjusted historical cost method adjusts the original purchase price of an asset for inflation, providing a more current value while still tied to historical cost principles. It addresses one of the limitations of strict historical cost accounting.
* Key Concept:Inflation adjustments in asset valuation.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Accounting Concepts - Alternative Valuation Methods.
NEW QUESTION # 53
In which phase of the competitive bidding process do fraudsters attempt to influence the selection of a contractor by restricting the pool of competitors from whom bids are sought?
- A. Need recognition
- B. False specification
- C. Submission
- D. Solicitation
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:During the solicitation phase, corrupt employees may attempt to eliminate legitimate competitors by restricting the list of vendors invited to bid. This unfairly favors a particular supplier, often in exchange for bribes or kickbacks.
* Analysis of Incorrect Options:
* A. Need recognition - Involves creating false or unnecessary demand, not restricting bidders.
* C. False specification - Relates to vague or tailored specifications, not bid solicitation.
* D. Submission - Occurs after solicitation when vendors submit bids.
* Key Concept:Solicitation phase schemes - restricting competition.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Corruption - Procurement and Bid-Rigging Schemes.
NEW QUESTION # 54
Which of the following is NOT one of the information security goals that should be achieved to secure an e- commerce system for users and account holders?
- A. Non-repudiation
- B. Availability of data
- C. Authentication
- D. Accuracy of data
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: The key goals of information security (the CIA triad plus authentication and non-repudiation) are confidentiality, integrity, availability, authentication, and non-repudiation. While accuracy of data is important, it is not formally one of the core security goals.
* Analysis of Incorrect Options:
* A. Availability - Ensures users can access data when needed.
* C. Authentication - Confirms identities before granting access.
* D. Non-repudiation - Prevents denial of legitimate transactions.
* Key Concept: Information security objectives for fraud prevention.
Reference: ACFE Manual, Fraud Prevention and Deterrence - Cybersecurity Principles.
NEW QUESTION # 55
Which of the following is a red flag that might indicate that someone is attempting to commit insurance fraud?
- A. A theft claim includes items that were purchased recently and the receipts.
- B. A claim is made soon after an insurance policy commences.
- C. A burglary loss claim includes small electronic items and jewelry.
- D. The insured made one other insurance claim within the past five years.
Answer: B
NEW QUESTION # 56
Jonathan, a Certified Fraud Examiner (CFE), is tasked with identifying potential indicators of intrusion into his employer's computer network. Which of the following might indicate that the organization's network has been compromised or accessed without authorization?
- A. Network users are prompted to install unfamiliar software onto their computers.
- B. The network is receiving data from a country where one of the organization's suppliers is located.
- C. Users are denied access to network files they do not typically use in their organizational role.
- D. When logging into the computer network, employees receive a reminder to change their log-in passwords before they expire.
Answer: A
NEW QUESTION # 57
Ada uses her mother's government identification card to impersonate her mother and obtain health care for herself under her mother's insurance benefits. Which type of patient health care fraud scheme is Ada MOST LIKELY committing?
- A. Misrepresentations fraud
- B. Fictitious claims fraud
- C. Multiple claims fraud
- D. Third-party fraud
Answer: D
NEW QUESTION # 58
The person or persons who have access to __________ are often the targets of unethical vendors seeking an advantage in the process.
- A. Tailor specifications
- B. General purchasing
- C. Sealed bids
- D. Bid-splitting
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer:Fraudsters often attempt to influence or bribe employees who have access to sealed bids. Access to sealed bids provides unfair knowledge of competitors' pricing and terms, enabling collusion or bid manipulation.
* Analysis of Incorrect Options:
* A. Bid-splitting - A fraud scheme, not what vendors seek access to.
* C. General purchasing - Too broad; not specifically tied to vendor fraud.
* D. Tailor specifications - A corruption scheme, but not the specific target of vendor bribery.
* Key Concept:Sealed bid access as a key target in procurement fraud.
Reference:ACFE Fraud Examiners Manual (2020 International Edition), Corruption - Bid Manipulation.
NEW QUESTION # 59
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