[Sep 17, 2026] Verified CFE-Fraud-Prevention-and-Deterrence dumps and 331 unique questions
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NEW QUESTION # 67
According to Diane Vaughan, which of the following factors increases an organization's inherent inclination toward committing crime?
- A. Management links employee performance goals with company performance goals
- B. Rewards are given to employees who challenge the status quo
- C. Management seeks out diversity in attitudes and perspectives when hiring employees
- D. All of the above
Answer: A
NEW QUESTION # 68
Which of the following is FALSE regarding an organization's anti-fraud policy?
- A. To avoid legal problems in discharging employees, the anti-fraud policy should not include any specific examples of frau and misconduct.
- B. In developing the anti-fraud policy, management should check with legal counsel regarding any legal considerations with respect to the policy.
- C. A detailed anti-fraud policy can make it easier to investigate and punish employees who commit fraud and other dishonest acts.
- D. One of the most important considerations in developing the anti-fraud policy is to ensure every allegation is handled in a uniform manner.
Answer: A
Explanation:
* nti-Fraud Policy Components:
* A robust anti-fraud policy should provide clear definitions and examples of fraud and misconduct to ensure employees understand what constitutes unacceptable behavior.
* Specific examples make investigations and enforcement more consistent and defensible.
* Analysis of Option B:
* Avoiding specific examples creates ambiguity, which can hinder enforcement and increase legal risks when discharging employees.
* Properly vetted examples, reviewed with legal counsel, help ensure compliance with legal standards.
* Conclusion:Option B is false because including examples of fraud and misconduct strengthens the anti- fraud policy.
References:ACFE guidance on anti-fraud policies and employee misconduct.
NEW QUESTION # 69
Which of the following criminological theories states that individuals make a conscious decision to commit a crime and that crime can be deterred by reducing opportunities for criminal activity and increasing an individual's personal risk of being caught and punished?
- A. Social conflict theory
- B. Rational choice theory
- C. Routine activities theory
- D. Differential association theory
Answer: B
Explanation:
* Rational Choice Theory Overview:
* This theory posits that individuals consciously weigh the benefits and risks of committing a crime and make calculated decisions to engage in criminal behavior if the perceived benefits outweigh the risks.
* Deterrence Mechanism:
* Crime can be deterred by reducing opportunities (e.g., strong internal controls) and increasing the likelihood of detection and punishment (e.g., effective monitoring systems).
* Why Other Options are Incorrect:
* A. Routine activities theory: Focuses on the convergence of motivated offenders, suitable targets, and lack of guardianship.
* B. Differential association theory: Explains crime as learned behavior through interaction with others.
* D. Social conflict theory: Suggests crime results from societal inequalities and power struggles.
* Why C is Correct:
* Rational choice theory explicitly addresses crime prevention through increased risks and reduced opportunities.
References for All Questions:
* ACFE Fraud Examination Guide.
* Criminological theories as applied to fraud prevention and deterrence.
* Corporate governance frameworks and corruption-related risks.
NEW QUESTION # 70
(Acme, Inc. is a publicly traded, multinational corporation. Which of the following statements is TRUE regarding the corporate governance requirements that Acme is subject to?)
- A. Acme must comply with all corporate governance-related legislation in every jurisdiction in which it operates.
- B. Acme is not required to comply with any corporate governance requirements because it operates in multiple jurisdictions.
- C. Acme is required to comply only with the corporate governance standards adopted by the company's board of directors.
- D. Acme is subject to the Universal Corporate Governance Act because it is a publicly traded corporation.
Answer: A
Explanation:
The Corporate Governance chapter explains that there is no single universal corporate governance law that applies to all organizations everywhere. Instead, governance requirements arise from a combination of legislation, regulations, listing rules, and governance codes that vary by jurisdiction. The manual also notes that international principles, such as the G20/OECD Principles, are intended to work across different legal and regulatory frameworks, which reinforces that organizations operating in multiple countries may face multiple applicable governance regimes. A publicly traded multinational corporation therefore cannot rely solely on standards adopted by its own board, nor can it ignore governance rules because it operates internationally. The most accurate statement is that Acme must comply with the corporate governance-related legislation that applies in the jurisdictions where it operates.
NEW QUESTION # 71
Which of the following is a best practice to ensure a successful fraud reporting program?
- A. Employees should be informed that, to the extent possible, their names will not be disclosed.
- B. The company should require employees with information about potential fraud to report it directly and only to their immediate supervisor.
- C. The company should communicate that fraud, waste, and abuse are more likely to occur in large organizations than small ones.
- D. Employees are held accountable for reporting tips that are not able to be substantiated
Answer: A
Explanation:
* Fraud Reporting Program Best Practices:
* Ensuring anonymity encourages employees to report fraud without fear of retaliation. This enhances the effectiveness of the reporting program.
* Why D is Correct:
* Communicating confidentiality builds trust and increases participation in the fraud reporting program.
* Why Other Options are Incorrect:
* A: Fraud risks are not limited to organization size.
* B: Restricting reports to immediate supervisors may create barriers.
* C: Holding employees accountable for unsubstantiated tips discourages reporting.
NEW QUESTION # 72
Who is ultimately responsible for responding appropriately to instances of fraud within an organization?
- A. General counsel
- B. Management
- C. The audit committee
- D. Internal auditors
Answer: B
Explanation:
* Fraud Response Responsibilities:
* Management is responsible for responding to fraud because they oversee the organization's operations, culture, and compliance frameworks.
* Other parties, such as internal auditors and the audit committee, provide oversight and recommendations but do not directly implement responses.
* Conclusion:Management has the ultimate responsibility for responding appropriately to fraud.
NEW QUESTION # 73
Julia, an internal auditor, is formalizing a process to evaluate the effectiveness of the company's control system over time, including both ongoing evaluations and periodic, separate evaluations. Julia's initiative BEST pertains to the component of the Committee of Sponsoring Organizations of the Treadway Commission's COSO Internal Control-Integrated Framework the Framework:
- A. Risk assessment
- B. Monitoring
- C. Control environment
- D. Control activities
Answer: B
Explanation:
The Management's Fraud-Related Responsibilities chapter defines monitoring as the process that assesses the effectiveness of a control system over time. The manual states that this component should include both ongoing evaluations and periodic separate evaluations, and that the findings should be measured against predefined criteria. This wording matches the question almost exactly. Monitoring also includes timely evaluation and communication of internal control deficiencies to the appropriate parties for corrective action.
Because Julia is establishing a process for continuous and separate reviews of control effectiveness over time, her initiative falls squarely within the monitoring component of COSO's Internal Control-Integrated Framework. None of the other components focus on the continuing evaluation of whether controls remain present and functioning over time in this way.
NEW QUESTION # 74
Which of the following options is BEST classified as a type of external fraud risk?
- A. Collusion between contractors.
- B. Reporting revenue in the wrong period.
- C. Adding ghost employees to payroll.
- D. Embezzling customer payments.
Answer: A
Explanation:
Fraud risk can arise from both internal and external sources. Internal fraud risks involve employees, management, or others inside the organization abusing their access or authority. Embezzling customer payments, adding ghost employees to payroll, and reporting revenue in the wrong period are primarily internal risks because they usually require insider access to company funds, payroll systems, or accounting records. Collusion between contractors, however, is external because the misconduct is carried out by outside parties that do business with or affect the organization. Contractor collusion can include bid rigging, price fixing, market allocation, or coordinated efforts to manipulate procurement outcomes. Although employees might sometimes participate, the risk described in the answer choice is best classified as an external fraud risk. Therefore, option D is correct.
NEW QUESTION # 75
Criminologist Charles McCaghy has stated that regulatory pressure is the single most compelling factor behind deviance by organizations.
- A. False
- B. True
Answer: B
Explanation:
* McCaghy's Perspective on Organizational Deviance:Criminologist Charles McCaghy identified regulatory pressure as a significant factor influencing organizational deviance. Excessive or poorly implemented regulations can lead companies to cut corners or engage in fraudulent behavior to remain competitive.
* Supporting Analysis:
* Regulatory pressure can create a perception that compliance is too costly or burdensome, leading to unethical practices.
* This aligns with the concept of "strain theory," where organizations under pressure may resort to deviance.
* Conclusion:McCaghy's assertion that regulatory pressure is a key driver of organizational deviance is accurate.
NEW QUESTION # 76
According to Silk and Vogel's research, which of the following is one of the ways that businesses rationalize illegal conduct?
- A. Government regulations are justified because the additional costs of regulations and bureaucratic procedures increase government profits.
- B. Corporate violations that involve large sums of money are often spread among so many organizations that each gains very little individually.
- C. Government regulation is unnecessary because the matters being regulated are unimportant.
- D. Violations are caused by innocent errors in judgment rather than economic necessity.
Answer: B
Explanation:
Comprehensive and Detailed in Depth Explanation:
Silk and Vogel's research found that organizations often rationalize unethical or illegal behavior by diffusing responsibility across a group, thus minimizing perceived individual culpability. This"shared guilt" justification is reflected in option D. The other options either misunderstand the research or do not reflect actual rationalizations used in white-collar crime contexts.
Reference:Fraud Examiners Manual, 2022, Fraud Prevention and Deterrence, Understanding Criminal Behavior - Section 4.116.
NEW QUESTION # 77
Fraud risks related to regulatory and legal misconduct include all of the following EXCEPT:
- A. Fraudulent customer payments
- B. Insider trading
- C. Anti-competitive practices
- D. Conflicts of interest
Answer: A
Explanation:
* Regulatory and Legal Misconduct:
* This category includes practices that violate laws or regulations, such as anti-competitive behavior, insider trading, and conflicts of interest.
* Why A is Correct:
* Fraudulent customer payments are typically categorized under operational or financial fraud, not regulatory and legal misconduct.
* Why Other Options are Incorrect:
* B, C, and D: These practices involve violations of regulations or legal obligations, directly aligning with regulatory and legal misconduct.
References for All Questions:
* ACFE Fraud Examination Guide and related professional standards.
* International and jurisdictional auditing standards for public-sector auditors.
* COSO and governance frameworks on fraud risk management.
NEW QUESTION # 78
Criminologist Charles McCaghy has stated that regulatory pressure is the single most compelling factor behind deviance by organizations.
- A. True
- B. False
Answer: B
NEW QUESTION # 79
According to criminologist Charles McCaghy, which of the following is the most compelling factor behind deviance by organizations?
- A. Executive failures
- B. Excessive regulatory requirements
- C. Unethical corporate culture
- D. Profit pressure
Answer: D
NEW QUESTION # 80
According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO).________Is
"a process.
effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance."
- A. Financial reporting
- B. Operational risk assessment
- C. Internal control
- D. Fraud risk management
Answer: C
NEW QUESTION # 81
Which of the following components of the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Enterprise Risk Management-Integrating with Strategy and Performance refers to an organization's ability to continually assess how well its enterprise risk management (ERM) capabilities and practices have increased value over time and how they will continue to drive value for the organization?
- A. Governance and culture
- B. Strategy and objective-setting
- C. Risk tolerance
- D. Review and revision
Answer: D
Explanation:
The "Review and Revision" component is focused on evaluating how ERM practices contribute to organizational value and adapting them accordingly.
"As part of its ERM activities, the organization should review how well the ERM capabilities and practices have increased value over time and how they will continue to drive value." Reference:ACFE Fraud Examiners Manual, 2020 International Edition -Fraud Risk Management, Section
4.805.
NEW QUESTION # 82
Which of the following is FALSE regarding the fraud risk assessment learn?
- A. The team size should be limited to a maximum of three individuals
- B. The team members should have experience in gathering and eliciting information
- C. The team should consist of individuals with diverse knowledge, skills, and perspectives
- D. The team members might include both internal and external sources.
Answer: A
Explanation:
* Composition of Fraud Risk Assessment Teams:
* Effective teams require diverse perspectives, skills, and experiences to identify and address fraud risks comprehensively.
* Why C is Incorrect:
* Limiting team size to three individuals restricts diversity and may not provide sufficient expertise for a thorough assessment. Larger teams, with a range of skills, are often necessary.
* Why Other Options are Correct:
* A: Experience in gathering information is critical for the effectiveness of the team.
* B: Including external experts adds objectivity.
* D: Diverse perspectives enhance the assessment's scope.
References for All Questions:
* ACFE Fraud Examination Guide and Standards.
* ISA standards on audit procedures and unpredictability.
* Fraud risk assessment guidelines from COSO and ACFE resources.
NEW QUESTION # 83
Which of the following is BEST classified as a type of external fraud risk?
- A. Adding ghost employees to payroll
- B. Embezzling incoming customer payments
- C. Collusion between contractors
- D. Reporting revenue in the wrong period
Answer: C
Explanation:
Collusion between contractors is an example of external fraud risk because it involves external parties conspiring to defraud the organization. The other options describe internal fraud risks, such as actions committed by employees within the organization.
NEW QUESTION # 84
The objective of anti-fraud controls is to:
- A. Reduce the inherent fraud risk to a level that is significantly smaller than the residual fraud risk.
- B. Completely eliminate residual fraud risk
- C. Completely eliminate inherent fraud risk.
- D. Reduce the residual fraud risk to a level that is significantly smaller than the inherent fraud risk
Answer: D
NEW QUESTION # 85
Which of the following statements Is TRUE regarding how fraud examiners should exercise professional skepticism during a fraud examination engagement?
- A. Fraud examiners should not relax their skeptical attitudes under any circumstances.
- B. Fraud examiners should form the engagement hypothesis without regard to the nature of the assignment
- C. Professional skepticism can be dispelled only by evidence
- D. Professional skepticism involves maintaining a mindset that no fraud has occurred
Answer: C
Explanation:
Definition of Professional Skepticism:
* Professional skepticism requires maintaining a questioning mindset and critically assessing evidence throughout the fraud examination process.
Why D is Correct:
* Professional skepticism ensures that fraud examiners remain vigilant and rely on evidence to conclude whether fraud has occurred or not. It is dispelled only when sufficient evidence supports a clear conclusion.
Why Other Options are Incorrect:
* A: While skepticism is critical, it does not mean refusing to acknowledge credible evidence.
* B: Assuming no fraud occurred contradicts the principle of skepticism.
* C: Hypotheses should consider the nature of the assignment and available information.
NEW QUESTION # 86
Gregory, an internal auditor, and Brandon, the company's purchasing manager, have had several heated disagreements over purchasing procedures and policies. Gregory has just been told that he will be the lead on the company's fraud risk assessment. During the fraud risk assessment. Gregory should:
- A. Include his disagreements with Brandon as a factor when assessing the risk of fraud in the purchasing function.
- B. Confront Brandon about the disagreements and discuss how they increase the organization's risk of fraud-
- C. Have someone else perform the fraud risk assessment work related to the purchasing function
- D. Automatically designate the purchasing function as a high-risk area.
Answer: A
Explanation:
* Fraud Risk Assessment Objectivity:
* The assessment must remain unbiased, but any prior disagreements or conflicts may highlight areas where policies or procedures are unclear, increasing fraud risks.
* Why C is Correct:
* Incorporating disagreements provides context to evaluate risks objectively, ensuring that all relevant factors are considered without bias.
* Why Other Options are Incorrect:
* A: Confronting Brandon could create further conflict without adding value.
* B: Delegating the task unnecessarily avoids responsibility.
* D: Automatically designating the area as high-risk lacks justification and could undermine credibility.
References for All Questions:
* ACFE Code of Professional Ethics and Fraud Examination Guide.
* ISO 31000:2018 guidelines for risk management.
* Criminological theories related to crime causation and fraud risk assessments.
NEW QUESTION # 87
XYZ, Inc. Is a specialty retailer of high-end ergonomic office furniture. The company receives a very large order from ABC Company, a new customer in a different country that wants to pay on credit. Which of the following is MOST ACCURATE regarding the due diligence procedures XYZ should perform on ABC before proceeding with this transaction?
- A. XYZ does not need to take any specific procedures to verify ABC's identity before accepting the transaction
- B. XYZ should examine ABC's net worth as part of deciding whether to allow the purchase on credit.
- C. XYZ only needs to undertake due diligence procedures if ABC conducts business in countries with known corruption risks.
- D. XYZ should perform the same level of due diligence as it would for any other customer to avoid claims of discrimination
Answer: B
Explanation:
* Due Diligence for Large Orders on Credit:
* Before extending credit, it is critical to assess the financial stability of the new customer to mitigate credit risk.
* Examining net worth provides a direct measure of ABC's ability to fulfill financial obligations.
* Analysis of Other Options:
* A. Corruption risk countries: Due diligence should be applied universally, not selectively.
* B. No verification needed: Verification is essential, especially for new customers.
* D. Same due diligence for all customers: While consistency is important, the level of due diligence may vary based on transaction specifics.
* Conclusion:Examining ABC's net worth is a necessary step in the due diligence process.
NEW QUESTION # 88
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