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

Detailed Explanation:

Rationale for Correct Answer: Best practices in preventing EFT fraud require mailing PINs and account information separately , never together. Sending them together creates a serious security risk if intercepted.

Analysis of Incorrect Options:

A – Correct preventive measure: immediately cancel and reissue stolen access devices.

B – Correct preventive measure: validating addresses helps detect fraudulent applications.

C – Correct preventive measure: segregation of duties reduces insider fraud risks.

Key Concept: EFT fraud prevention through layered security and separation of duties.

Detailed Explanation:

Rationale for Correct Answer: Competitive intelligence refers to the legal and ethical gathering of publicly available information about competitors. It is a legitimate business practice and differs from corporate espionage , which involves illegal or covert methods.

Analysis of Incorrect Options:

B. Government-sanctioned espionage – This describes intelligence operations, not business practice.

C. Identical to espionage – False; competitive intelligence is legal, espionage is illegal.

D. Illegal covert methods – That is espionage, not competitive intelligence.

Key Concept: Competitive intelligence vs. corporate espionage .

Detailed Explanation:

Rationale for Correct Answer: Employees authorized to grant discounts may exploit this by issuing false discounts . They pocket part of the customer’s payment while recording a reduced sale amount, making the books appear balanced.

Analysis of Incorrect Options:

B. Recording a discount on sale procedure – A legitimate process, not fraud.

C. Internal discount sales audits – A control, not a scheme.

D. None of the above – Incorrect since false discounts are a recognized method.

Key Concept: False discount schemes as a skimming method.

Detailed Explanation:

Rationale for Correct Answer: The “outside the accounting system” approach occurs when perpetrators simply fabricate financial statements without regard to actual accounting records. Fraudsters may create entirely false reports using external tools (typewriters, spreadsheets, word processors).

Analysis of Incorrect Options:

A. Organized accounting – Not a fraud classification.

B. Playing the accounting – Uses the real accounting system but manipulates entries.

C. Beating accounting – Refers to overriding controls but within the system.

D. Outside accounting system – Correct, as it involves entirely fabricated statements.

Key Concept: Outside-the-books fraud — fabricated financial reports not tied to accounting records.

The correct answer is A. The facts indicate a possible nonconforming goods scheme, in which a vendor provides goods that fail to meet contract specifications while charging as though compliant goods were supplied. The most effective detection measure before customer complaints would have been an inspection of the glass upon receipt, including its packaging, appearance, description, and conformity with the contract. This control helps identify substitutions, inferior materials, counterfeit goods, or products of lower quality than promised. Option B is indirect and less reliable than inspecting the goods. Option C relates to change order abuse rather than quality substitution. Option D focuses on the vendor’s internal cost data and would not directly confirm whether the delivered glass met CTR’s contract specifications.

Detailed Explanation:

Rationale for Correct Answer: The balance sheet summarizes account balances from the ledger at a specific date, presenting assets, liabilities, and equity. It reflects the organization’s financial position and is derived from ledger balances.

Analysis of Incorrect Options:

B. Income statement – Summarizes revenues and expenses, not all ledger balances.

C. Financial statement – A general term, but the specific answer here is balance sheet.

D. General journal – Book of original entry, not a summary.

Key Concept: Balance sheet as a summary of ledger accounts.

Detailed Explanation:

Rationale for Correct Answer: A kickback scheme occurs when vendors make payments to employees of a purchasing organization in exchange for steering business their way. Here, Bob steered contracts to Oak Company and received a percentage of profits, a textbook kickback arrangement.

Analysis of Incorrect Options:

B. Illegal gratuity scheme – Involves rewards after a decision, without a prior agreement. Here, the agreement was prearranged.

C. Diversion scheme – Refers to diversion of assets, not procurement favoritism.

D. Economic extortion scheme – Involves coercion of the vendor; this was voluntary bribery.

Key Concept: Bribery and kickbacks as forms of corruption.

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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The ACFE Fraud Examiners Manual classifies this type of conduct under Insurance Fraud → Vehicle Insurance Schemes , and it specifically lists Past Posting as a recognized vehicle insurance fraud scheme.

In this question, Ron’s vehicle was damaged before he obtained the additional coverage, but he later submitted the claim as though the damage happened after the new coverage became effective. That is the essence of past posting : attempting to obtain insurance benefits for a loss that occurred before coverage applied , while misrepresenting the time of the loss. This matches the scenario exactly.

Why the other options are incorrect

A. Ditching

The Manual lists Ditching as a separate vehicle insurance scheme. It does not describe the act of misrepresenting the timing of a preexisting loss after increasing coverage.

B. Bait and wait

This is not the insurance-fraud classification that fits the facts given. The fraud here depends on claiming an earlier loss as a later covered loss , which is the Manual’s past posting category.

D. Double dipping

Double dipping generally refers to obtaining duplicate recovery for the same loss from multiple sources, which is not what Ron is doing here. The issue is the false date of loss , not duplicate reimbursement.

References

ACFE Fraud Examiners Manual, 2020 International Edition

Insurance Fraud — Vehicle Insurance Schemes — Past Posting

The correct answer is B. ACH blocks are a preventive bank control that allows an account holder to instruct the bank not to permit ACH debits from designated accounts. This reduces the risk of unauthorized electronic withdrawals. Option A is incorrect because positive pay for ACH should not be declined; it can help verify ACH transactions before they clear. Option C violates segregation of duties because the person initiating electronic payments should not also control ACH filters or payment security settings. Option D is also weak because using separate accounts for paper checks and electronic transactions can improve monitoring and limit exposure. The ACFE materials identify ACH blocks, ACH filters, positive pay, segregation of duties, and bank security services as important controls against electronic payment tampering.

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