Pass the ACFE Certified Fraud Examiner CFE-Financial-Transactions-and-Fraud-Schemes Questions and answers with Dumpstech

Detailed Explanation:

Rationale for Correct Answer:According to the Fraud Examiners Manual (2020 International Edition), offenders can be categorized into types. Absconders are individuals who commit fraud and immediately flee with the proceeds (“take the money and run”). They differ from long-term violators who maintain their frauds for extended periods while concealing them. Thus, the correct answer is A. Absconders.

Analysis of Incorrect Options:

B. Long-term violators – These offenders commit frauds over a long period and often maintain their positions of trust while continuing the scheme.

C. Offender types – Too vague; not a specific classification.

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

Key Concept:Offender Typologies — distinguishing between absconders and long-term violators in occupational fraud.

Detailed Explanation:

Rationale for Correct Answer: Expenses appear on the income statement, not the balance sheet. The balance sheet includes assets, liabilities, and owners’ equity, representing the accounting equation.

Analysis of Incorrect Options:

A, B, D – All appear on the balance sheet.

Key Concept: Distinction between financial statements: balance sheet vs. income statement.

Detailed Explanation:

Rationale for Correct Answer: Misuse of noncash assets occurs when employees use company assets for personal purposes without authorization. Even though the vehicle was returned undamaged, unauthorized use and concealment by false statements makes it a fraud scheme under asset misappropriation.

Analysis of Incorrect Options:

A – Incorrect; unauthorized use with deception constitutes fraud.

B – Expense reimbursement involves falsified claims for travel/expenses, not vehicle misuse.

D – Financial statement fraud involves misstating accounting entries, unrelated here.

Key Concept: Misuse of company assets (noncash) as part of asset misappropriation.

Detailed Explanation:

Rationale for Correct Answer:Accrual basis accounting requires revenues and related expenses to be recorded in the same accounting period. This is known as the matching principle, ensuring accurate measurement of income.

Analysis of Incorrect Options:

A. Equity – Not relevant to matching expenses.

C. Expense – A category of cost, not a principle.

D. Financial record – Too general.

Key Concept:Accrual Accounting & Matching Principle.

Detailed 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.

Detailed Explanation:

Rationale for Correct Answer:Fraudsters may solicit bids from fictitious suppliers (phony vendors) to create the illusion of competition. This ensures that the favored vendor wins while maintaining the appearance of a legitimate competitive bidding process.

Analysis of Incorrect Options:

B. Solicit transactions from fictitious vendors – Incorrect phrasing; bids, not transactions, are solicited.

C. Solicit bid-splitting… – Bid-splitting is a different fraud scheme, not part of solicitation.

D. None of the above – Incorrect, since A is accurate.

Key Concept:Phony bid solicitation as a corruption tactic in procurement.

Detailed Explanation:

Rationale for Correct Answer:This is True. When an employee has significant authority or discretion in the procurement process (e.g., drafting specifications, approving vendors, or evaluating bids), they are more capable of steering contracts toward favored suppliers. This increases the risk of corruption schemes like kickbacks or bid-rigging.

Analysis of Incorrect Options:

B. False – Incorrect; influence grows with authority over procurement.

Key Concept:Procurement authority is a key risk factor for corruption.

Detailed Explanation:

Rationale for Correct Answer:Credits decrease assets and expenses while increasing liabilities and equity. They are recorded on the right-hand side of ledger accounts, forming the counterbalance to debits.

Analysis of Incorrect Options:

A. Journal Entries – Too general; not a directional effect.

B. Debit – Opposite effect of credits.

D. None of all – Incorrect because “credit” is the precise answer.

Key Concept:Credit rules in double-entry accounting.

Detailed Explanation:

Rationale for Correct Answer: Past posting occurs when an insured reinstates or purchases insurance coverage after a loss has already occurred and then submits a false claim, backdating the loss to appear covered. Joe’s scheme fits this exactly.

Analysis of Incorrect Options:

A. Staged accident – Fraudulent accidents deliberately caused, not applicable here.

B. Inflated damages – Exaggerating actual losses, not retroactive coverage.

D. Vehicle repair – General claim fraud, but not the scheme in question.

Key Concept: Insurance fraud – past posting schemes.

Detailed Explanation:

Rationale for Correct Answer: Properly shredded documents using a cross-cut shredder are very difficult to reconstruct, making them not a common medium for information leaks. By contrast, shareholder reports, executive speeches, and workstation displays often contain sensitive data that can be exploited by competitors or fraudsters.

Analysis of Incorrect Options:

A – Shareholder reports can reveal strategy and financial vulnerabilities.

C – Executive speeches sometimes unintentionally disclose sensitive plans.

D – Information left visible at workstations is a known security risk.

Key Concept: Protection of proprietary information against espionage and fraud.