Important ACFE CFE-Fraud-Schemes-and-Financial-Crimes Exam Questions

Answer: D

Explanation:

Rationale for Correct Answer:

In sound internal controls, the person initiating electronic payments should not also be responsible for setting filters or approving transactions. This creates a segregation of duties violation. Therefore, statement D is false.

Analysis of Incorrect Options:

A . Positive pay for ACH -- True; it helps verify transactions.

B . ACH blocks -- Correct; a control against unauthorized debits.

C . Lack of physical evidence -- True; electronic fraud lacks paper trails, making detection harder.

Key Concept: Electronic payment tampering controls.

Answer: A

Explanation:

Option A describes a card skimming or shimming scheme. Skimming involves using a hidden device to capture payment card information, often from a magnetic stripe, while shimming commonly involves a device inserted into a card reader to capture chip-card data. A small camera can also be used to record PIN entry. Automated teller machines and point-of-sale terminals are common targets because customers insert or swipe cards and enter authentication data. Option B involves theft or sale of card information but not skimming or shimming through a reader. Option C describes physical card theft or retention. Option D does not clearly show capture of card credentials. The ACFE material discusses ATM fraud, including skimming and shimming, as financial institution fraud risks.

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Answer: A

Explanation:

Rationale for Correct Answer:

The ACFE emphasizes four cornerstone internal controls to prevent inventory fraud:

Proper documentation (accurate, prenumbered records),

Segregation of duties (custody, recordkeeping, and authorization separated),

Independent checks (reconciliations and audits), and

Physical safeguards (locks, cameras, restricted access).

Analysis of Incorrect Options:

B . Inventory control -- Too general; physical safeguards are the key preventive measure.

C . Physical padding -- Not a recognized control.

D . Prenumbered affiliations -- Misworded; prenumbered documents are part of proper documentation.

Key Concept:

Internal control framework for preventing inventory fraud.

ACFE Fraud Examiners Manual (2020 International Edition), Inventory and Other Assets --- Prevention Controls.

Answer: D

Explanation:

Rationale for Correct Answer: Failing to write off obsolete inventory inflates

Analysis of Incorrect Options:

A -- An allowance for sales returns relates to revenue recognition, not inventory overstatement.

B -- Relates to accounts receivable, not inventory.

C -- Applying lower of cost or NRV reduces inventory to fair value, not overstates it.

Key Concept: Overstating assets through improper inventory valuation.

Answer: B

Explanation:

Rationale for Correct Answer:

This statement is False. According to ACFE studies, asset misappropriation is the most common but least costly category of occupational fraud. Fraudulent statements are the least common but most costly, while corruption falls in the middle in both frequency and cost.

Key Concept:

Fraud Tree Statistics --- frequency and cost comparison of asset misappropriation, corruption, and financial statement fraud.

ACFE Fraud Examiners Manual (2020 International Edition), Fraud Tree --- Comparative Analysis of Fraud Categories.