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

Detailed Explanation:

Rationale for Correct Answer: The accounting definition of assets , as cited by Marshall and in GAAP frameworks, is “probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.” This definition underlies balance sheet recognition of assets.

Analysis of Incorrect Options:

B. Liabilities – Represent probable future sacrifices, not benefits.

C. Credentials – Irrelevant to financial reporting.

D. None of the above – Incorrect since “assets” directly matches.

Key Concept: Definition of Assets under financial accounting frameworks.

Option D is correct because analytical review can reveal inventory theft when cost of goods sold changes disproportionately compared with sales. If inventory is stolen, the organization may experience higher inventory shrinkage or cost of goods sold without a corresponding increase in sales revenue. The ACFE material identifies analytical review, physical inventory counts, perpetual inventory records, and shipping-document review as methods for detecting inventory schemes. Option A is incorrect because analytical review can help identify unusual relationships or trends. Option B is weak because unchanged sales and unchanged cost of goods sold do not indicate a loss pattern. Option C is too absolute; changes in cost of goods sold must be evaluated in relation to sales, business conditions, and other explanations.

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Detailed Explanation:

Rationale for Correct Answer: Bribery is specifically defined as offering, giving, receiving, or soliciting anything of value to influence an official act or business decision. It is one of the four primary corruption categories.

Analysis of Incorrect Options:

A. Corruption – Broader category; bribery is one part of it.

B. Diverting business to vendors – A conflict of interest scheme, not bribery.

D. Lacking approval authority – Refers to control weaknesses, not corruption.

Key Concept: Bribery definition and its role in corruption.

Detailed Explanation:

Rationale for Correct Answer: This scheme is known as a Turnaround Sale or Flip . The employee secretly purchases an asset their employer needs and then resells it to the employer at a markup, thereby profiting at the employer’s expense.

Analysis of Incorrect Options:

A. Conflict of interest in sale – Too general; does not describe the flipping mechanism.

C. Unauthorized sale – Not an ACFE fraud category in this context.

D. Written sale of unique assets – Not a recognized scheme.

Key Concept: Conflict of Interest scheme — Turnaround Sales/Flips .

The correct answer is A because businesses should protect employees’ and customers’ personal information, particularly when it is transmitted over wireless networks. Encryption reduces the risk that identity thieves can intercept and misuse sensitive information. Option B is poor practice because using government identification numbers as employee identification numbers increases exposure if internal records are accessed. Option C is too broad and not risk-based; access to customer information should be limited to employees with a legitimate business need, not simply management status. Option D is incorrect because regular audits and reviews of information-handling practices help identify weaknesses and improve identity theft prevention. The ACFE material emphasizes methods of preventing identity theft for businesses, including safeguards for personal identifying information.

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Detailed Explanation:

Rationale for Correct Answer: Physical inventory counts involve actually counting items on hand and comparing them to book records. These counts can reveal theft, errors, or shrinkage when discrepancies are identified.

Analysis of Incorrect Options:

A. Perpetual inventory counts – The system tracks expected balances but cannot independently confirm theft.

C. Concealment inventory counts – Not a recognized term.

D. None of the above – Incorrect, since physical counts do aid detection.

Key Concept: Physical inventory counts as a fraud detection tool.

Detailed Explanation:

Rationale for Correct Answer: In double-entry accounting, a debit increases assets and expenses while decreasing liabilities and equity. Debits are entries on the left side of an account.

Analysis of Incorrect Options:

A. Journal Entries – General record of transactions, not the specific effect.

C. Credit – Opposite effect: increases liabilities/equity, decreases assets/expenses.

D. None of all – Incorrect because “debit” is the recognized effect.

Key Concept: Debit rules in double-entry accounting.

Detailed Explanation:

Rationale for Correct Answer: The statement is false . Cressey’s fraud triangle and Albrecht’s fraud scale both emphasize that fraud is more likely when pressures are high, opportunities are present, and integrity is low . Conversely, when pressure and opportunity are low and integrity is high, the likelihood of fraud is greatly reduced.

Analysis of Incorrect Options:

A. True – Incorrect, it directly contradicts the fraud triangle and fraud scale models.

B. False – Correct, because under the conditions stated, fraud occurrence is less likely.

Key Concept: Fraud Scale Variables — Pressure, Opportunity, Integrity.

Detailed Explanation:

Rationale for Correct Answer: The phases of the bidding process include:

Presolicitation (need recognition/specification stage),

Solicitation (inviting bids),

Submission (vendors submit bids). There is no standard phase called Postsolicitation .

Analysis of Incorrect Options:

A. Presolicitation – Valid phase.

C. Solicitation – Valid phase.

D. Submission – Valid phase.

B. Postsolicitation – Not recognized as a formal bidding stage.

Key Concept: Bidding process phases — presolicitation, solicitation, submission.

The correct answer is A. Holograms are specifically designed as anti-counterfeiting features and are among the most difficult physical card features for fraudsters to reproduce accurately. Counterfeit payment card schemes usually involve stolen account information being encoded or printed onto altered, blank, or counterfeit cards. Option B is incorrect because these schemes generally involve fraudsters, organized groups, or dishonest merchants, not collusion between card issuers and merchants. Option C is too absolute because modern technology allows counterfeit cards to be produced without traditional professional printing facilities. Option D is inaccurate because counterfeit cards usually rely on stolen or compromised active account data, not merely expired card numbers. The ACFE payment fraud materials emphasize card security features, counterfeit card production, and card-scrutiny controls.

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