Try Online CFE Fraud Prevention and Deterrence Practice Exam

Jonnie Karnath2023-08-09T08:42:48+00:00

The CFE Fraud Prevention and Deterrence exam is a globally recognized certification for anti-fraud professionals, designed to test their knowledge and expertise in the field of fraud prevention and deterrence. If you are preparing for the CFE Fraud Prevention and Deterrence exam, Certspots offers an Online CFE Fraud Prevention and Deterrence Practice Exam to help you prepare. This practice exam is designed to simulate the actual exam experience, with questions and scenarios that mirror those you will encounter on the real exam. By taking the CFE Fraud Prevention and Deterrence practice exam, you can identify areas where you need to focus your study efforts, and gain confidence in your ability to pass the actual exam.

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1. Article II of the ACFE Code of Professional Ethics prohibits illegal or unethical conduct, but It allows exceptions for unknowing violations of the law.

True

False

2. Which of the following is FALSE regarding an organization's anti-fraud policy?

A detailed anti-fraud policy can make it easier to investigate and punish employees who commit fraud and other dishonest acts.

To avoid legal problems in discharging employees, the anti-fraud policy should not include any specific examples of frau and misconduct.

In developing the anti-fraud policy, management should check with legal counsel regarding any legal considerations with respect to the policy.

One of the most important considerations in developing the anti-fraud policy is to ensure every allegation is handled in a uniform manner.

3. Employee anti-fraud education should:

Include descriptions of the procedures that management uses to detect fraud.

Include examples of prior employee misconduct and how those situations were handled.

Be restricted to formal educational mechanisms to reinforce the importance of the message.

Be presented by organizational executives or anti-fraud professionals only.

4. Which of the following is a best practice to ensure a successful fraud reporting program?

The company should communicate that fraud, waste, and abuse are more likely to occur in large organizations than small ones.

The company should require employees with information about potential fraud to report it directly and only to their immediate supervisor.

Employees are held accountable for reporting tips that are not able to be substantiated

Employees should be informed that, to the extent possible, their names will not be disclosed.

5. ABC. Inc. is a publicly traded, multi-national corporation .

Which of the following statements is TRUE regarding the corporate governance requirements that ABC is subject to?

ABC must comply with specific listing standards for the stock exchange(s) on which it is listed

ABC is required to comply with G20/OECD Principles of Corporate Governance

ABC is not required to comply with any corporate governance requirements because it operates in multiple jurisdictions

ABC is subject to the Universal Corporate Governance Act because it is a publicly traded corporation.

6. Which of the following is NOT a purpose served by a professional organization's code of conduct?

It replaces the need for individuals to consult their own conscience.

It facilitates practical enforcement and profession-wide Internal discipline.

It serves as a reference and benchmark for ethical guidance

It provides more direct solutions to professional ethical dilemmas than might exist under general ethical principles

7. 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?

Positive reinforcement

Negative reinforcement

Punishment

None of the above

8. _____________Is the criminological theory that presents crime as a conscious decision that can be deterred by reducing opportunities for criminal activity and increasing the personal risk to an Individual of being caught and punished.

Differential association theory

Routine activities theory

Justification of action theory

Rational choice theory

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

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

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

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.

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

10. 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?

A mandatory independent compensation committee

Shareholder oversight of internal controls

A written charter for management

Adequate audit committee resources and authority

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11. The internal auditor's fraud-related responsibilities include which of the following?

Evaluating whether management is actively retaining responsibility for oversight of the fraud risk management program

Reporting to regulators regarding the entity's vulnerability to fraud

Overseeing management's actions to manage fraud risks

Attesting that the organization's financial statements are free of material misstatements caused by fraud

12. Jones, an accounting manager for a software company, wants to improve her team's adherence to the company's formal accounting policies and procedures and reduce the number of process exceptions they experience.

According to behaviorist theories, which of the following options would be the most effective way for Jones to condition her staff to follow the company's formal accounting processes?

Demote employees who do not adhere to the expected processes.

Publicly call out and criticize employees who deviate from the formal processes.

Offer a bonus to anyone who experiences no process exceptions for ninety days-

Take away a day of paid time off for each process exception.

13. 1.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.

True

False

14. 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?

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

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

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

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

15. In response to an employee's failure to meet performance expectations, a manager demotes the employee to a junior-level position. This is an example of what type of behavioral response?

Positive reinforcement

Negative reinforcement

Punishment

None of the above

16. 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?

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

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

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

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

17. During a fraud risk assessment, the assessment team is seeking information on the ethical tone set by upper and middle managers. The team members determine that, for this task, they would like to get candid one-on-one feedback from employees away from their peers .

Which of the following techniques would be most helpful for them to use in gathering this information?

Interviews

Focus groups

Anonymous feedback mechanisms

Surveys

18. Which of the following is FALSE regarding the fraud risk assessment learn?

The team members should have experience in gathering and eliciting information

The team members might include both internal and external sources.

The team size should be limited to a maximum of three individuals

The team should consist of individuals with diverse knowledge, skills, and perspectives

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

Guidance regarding appropriate board structures, responsibilities, and procedures

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

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

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

20. According to International Organization for Standardization (ISO) 31000:2018, an organization's risk management program should be proportionate to the organization's specific operations and objectives.

True

False

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21. Which of the following is NOT considered a conflict of interest that is prohibited under the ACFE Code of Professional Ethics?

Accepting an assignment to secretly infiltrate the fraud examiner's employing organization and transmit inside information to another party

Undertaking an engagement that decreases the fraud examiner's ability to perform their duties for their full-time employer

Accepting an assignment to evaluate the anti-fraud controls at an organization in which the fraud examiner is a shareholder, provided the fraud examiner's ownership interest is disclosed

Undertaking engagements for both sides in a case of alleged vendor overbilling

22. Which of the following is TRUE regarding G20/OECD Principles of Corporate Governance (the Principles)?

The Principles are required to be implemented by all corporations in the jurisdictions that have officially adopted them

The Principles state that an entity's corporate governance framework should discourage active cooperation between corporations and stakeholders in creating wealth.

The Principles are intended to be applicable in developed economies but not in emerging markets.

The Principles state that an entity's corporate governance framework should ensure the equitable treatment of all shareholders.

23. Which of the following is an example of organizational crime?

A salesman offering bribes to secure a contract

An accounting clerk forging company checks to herself

A doctor conspiring with patients to Tile false health care insurance claims

Management of several construction companies engaging In bid rigging

24. According to the results of behavioral studies, such as those conducted by B. F. Skinner, application of punishment to undesired behavior typically results in which of the following?

increase in the occurrence of the undesired behavior

No effect on the occurrence of the undesired behavior

Temporary suppression of the undesired behavior

Permanent suppression of the undesired behavior

25. Which of the following Is NOT considered a conflict of Interest that Is prohibited under the ACFE Code of Professional Ethics?

Undertaking an engagement that decreases the fraud examiner's ability to perform their duties for their full-time employer

Accepting an assignment to assess red flags of fraud at an organization in which the fraud examiner is a partner, provided the fraud examiner's ownership interest is disclosed

Undertaking engagements for both sides in a case of an alleged product substitution scheme

Accepting an assignment to secretly infiltrate the fraud examiner's employing organization and transmit inside information to another party

26. Which of the following is an example of organizational crime?

A sales manager using a corporate credit card for personal expenses

Management of several pharmaceutical companies engaging in a price fixing scheme

An insurance claims agent conspiring with customers to file false insurance claims and share the proceeds

An HR employee adding a ghost employee to the payroll and misappropriating the paychecks

27. Which of the following is TRUE regarding the internal audit function's reporting responsibilities pertaining to fraud?

The internal audit function should discuss how and when to report fraud-related issues with senior management and the board of directors before such issues arise.

The internal audit function is permitted, but not required, to periodically report about the organization's fraud risks to senior management and the board of directors.

The internal audit function should not disclose the results of its fraud audits to senior management or the board of directors in order to maintain independence.

The internal audit function is not permitted to communicate with the board of directors about fraud, as that is the responsibility of external auditors.

28. In the area of criminological theory, compliance is the theory that tries to prevent crime by providing economic incentives for voluntary conformity to the laws and using administrative efforts to control violations before they occur.

True

False

29. Susannah Is conducting an external audit of a company In a jurisdiction that is subject to International Standards on Auditing (ISAs). While undertaking her audit procedures, she discovers evidence that senior management has been fraudulently manipulating the financial statements .

Which of the following is Susannah's BEST response to these findings?

Susannah should confront management with her audit findings and try to get a confession.

Susannah should Immediately report her findings to the secunties regulators

Susannah should report her findings to the audit committee of the board of directors.

Susannah should not disclose her findings to any other parties due to client confidentiality.

30. Black, a Certified Fraud Examiner (CFE). was hired to conduct a fraud examination. He did not find fraud, but. in Black's opinion, the controls he examined were deficient. Under the ACFE Code of Professional Ethics. Black is not permitted to express his opinion on the deficient controls.

True

False

Page 4 of 5

31. In identifying the inherent fraud risks that could apply to the organization, the fraud risk assessment team should discuss:

The organization's incentive programs

The possibility of management's override of controls

Risks to the organization's reputation

All of the above

32. Professional auditing standards require that auditors incorporate an "element of unpredictability" in the selection of auditing procedures to be performed.

True

False

33. The internal auditor's fraud-related responsibilities include which of the following?

Obtaining reasonable assurance that the organization's financial statements are free of material misstatements caused by fraud

Overseeing management's actions to manage fraud risks

Evaluating indicators of fraud and deciding whether any further action is necessary or whether an investigation should be recommended

Establishing and maintaining effective anti-fraud controls at a reasonable cost

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

Receipt of kickbacks

Espionage by competitors

Payment of bribes

Aiding and abetting vendor fraud

35. During an external audit, the audit team identifies evidence that management has Intentionally manipulated the organization's reported revenue amount However, the amount of the resulting misstatement does not meet the quantitative materiality threshold for the audit .

Which of the following is TRUE regarding this situation?

The auditors should reconsider the reliability of the audit evidence they have previously obtained.

The auditors should assume that all audit evidence collected previously is unreliable and withdraw from the audit engagement.

The auditors should only consider the evidence if they can determine that the actions meet the legal definition of fraud.

The auditors should regard the misstatement as immatenal to the audit because the omitted amount is less than the quantitative materiality threshold

36. Professional auditing standards suggest that auditors incorporate an "element of predictability" in the selection of auditing procedures to be performed so that they ensure the same areas are tested in the same manner during each audit.

True

False

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

True

False

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

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.

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

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.

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

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

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

Mote occupational frauds are committed by men than by women

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

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

40. In the area of criminological theory, deterrence is the theory that tries to prevenl crime by using the threat of criminal sanctions.

True

False

Page 5 of 5

41. Reputational damage is an indirect cost of fraud that can be difficult for organizations to calculate.

True

False

42. Which of the following is NOT explicitly prohibited by the ACFE Code of Professional Ethics?

Acting in a way that could be deemed unethical by the industry

Drawing conclusions based upon evidence

Participating in an activity where there is an undisclosed conflict of interest

Engaging in behavior that is against the law

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

True

False

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