Free Practice Questions for ACFE CFE-Fraud-Schemes-and-Financial-Crimes Exam

The correct answer is D. Procurement fraud prevention requires ongoing vendor monitoring based on the organization’s highest-risk vendor schemes. Monitoring should focus on practical red flags, such as unusual pricing, duplicate vendors, related-party indicators, excessive change orders, suspicious payment patterns, or vendors lacking proper support. Option A violates segregation of duties because the person maintaining the vendor master file should not also approve invoice payments. Option B is weak because vendor background checks should occur before vendors are added to the master file, not after. Option C is incorrect because procurement monitoring should be ongoing and risk-based, not restricted to annual reviews. The ACFE material emphasizes vendor management, vendor master file controls, and monitoring based on relevant red flags.

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The correct answer is B. Corrupt payments are not limited to direct cash bribes; they may be disguised as gifts, meals, travel, entertainment, loans, discounts, consulting fees, or other benefits. Paying a recipient’s travel and entertainment expenses with a credit card provides something of value to the recipient and can be used to influence official or business decision-making. Option A is not the best answer because renting property from the recipient at below-market rent benefits the payer, not the recipient. Option C similarly benefits the payer if the recipient overpays. Option D is not corrupt as stated because the loan is legitimate and has a high interest rate, not favorable terms. The professional focus is whether value is transferred to influence conduct.

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Option A is the most accurate because government and public sector entities commonly face slower implementation of fraud prevention initiatives due to budget cycles, staffing rules, public accountability requirements, and formal approval structures. Public sector fraud prevention is often affected by legal mandates, appropriations, political priorities, and administrative constraints. Option B reverses the distinction; government entities are generally more directly constrained by legal and budgetary requirements. Option C is inaccurate because public sector organizations often have less flexibility over operations and objectives than private entities. Option D is also reversed because government and public sector fraud prevention is more likely to be influenced by public policy and prevailing government priorities. The ACFE material recognizes public-sector accountability and auditing standards as distinct from private sector governance.

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Detailed Explanation:

Rationale for Correct Answer: In a fraudulent purchase scheme , the company legitimately purchases assets, but the fraudster diverts or misappropriates them after acquisition. The purchase itself is real, but the use of the assets is fraudulent.

Analysis of Incorrect Options:

A. Inventory larceny scheme – Direct theft without purchase.

B. Asset receiving scheme – Not a recognized fraud scheme.

D. Falsify shipping – Involves falsifying shipment records, not post-purchase misappropriation.

Key Concept: Fraudulent purchases — assets are bought legitimately but stolen afterward.

Detailed Explanation:

Rationale for Correct Answer: Perpetual inventory systems maintain a continuous, running balance of inventory on hand. They are updated with each purchase and sale, providing a theoretical count at all times. Discrepancies between perpetual and physical counts may indicate theft, errors, or fraud.

Analysis of Incorrect Options:

A. Altered inventory – Fraudulent manipulation, not a system.

C. Shrinking inventory – Refers to shrinkage, not the system.

D. Fictitious inventory – Fraudulent reporting, not a legitimate system.

Key Concept: Perpetual inventory systems as internal controls.