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CFE-Fraud-Prevention-and-Deterrence Certified Fraud Examiner - Fraud Prevention and Deterrence Exam Questions and Answers

Questions 4

Which of the following is TRUE regarding a background check policy for employees?

Options:

A.

When verifying past employment, management should only ask previous employers to verify the candidate's previous position and dates of employment.

B.

If a background check was conducted on an employee at the time of hire, then there is no need for management to conduct additional background checks on that employee during their employment.

C.

As part of the screening process, management should contact the personal and professional references provided by the job candidate only if they are unsure whether the candidate is being honest.

D.

Management should perform a background check on any candidate who will have access to cash, checks, credit card numbers, or other items that are easily stolen.

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Questions 5

According to Steve Albrecht's research,______is the most common personal characteristic motivating fraudsters, and ________ is the most common organization-environment factor motivating fraudsters.

Options:

A.

High personal debt; lack of separation of duties

B.

Revenge: too much trust in key employees

C.

Living beyond their means, too much trust in key employees

D.

Desire for recognition, lack of separation of duties

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Questions 6

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?

Options:

A.

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

B.

Susannah should Immediately report her findings to the secunties regulators

C.

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

D.

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

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Questions 7

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 8

The Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Enterprise Risk Management—Integrating with Strategy and Performance defines what as ‘the continual iterative process of obtaining information and sharing it throughout the entity’?

Options:

A.

Performance

B.

Strategy and objective-setting

C.

Governance and culture

D.

Information, communication, and reporting

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Questions 9

Timothy, a new Certified Fraud Examiner (CFE), has been tasked with his first fraud examination engagement. To exercise appropriate professional skepticism as he conducts the engagement, Timothy should:

Options:

A.

Begin the engagement with the belief that no fraud has occurred.

B.

Maintain a skeptical attitude throughout the entire engagement even if the evidence shows no signs of fraudulent activity.

C.

Maintain professional skepticism that can only be dispelled by evidence.

D.

Form the engagement hypothesis without consideration for the nature of the assignment.

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Questions 10

Which of the following theories suggests that, when considering the possibility of violating a law. people are likely to ask themselves. "What will my spouse think if they find out?"

Options:

A.

Social control theory

B.

Operant theory

C.

Cognitive theory

D.

Behavioral theory

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Questions 11

Employee anti-fraud education should:

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 12

Which of the following statements regarding best practices that organizations can take to protect and support whistleblowers is MOST ACCURATE?

Options:

A.

Organizations should emphasize that rules regarding whistleblower protections are only intended for lower level employees who might be more vulnerable to retaliation.

B.

Organizations should implement a clear whistleblower policy that lists out every type of misconduct that has ever been reported at the company.

C.

Organizations should publicize their whistleblower procedures internally but should avoid communicating any procedural information to parties outside of the organization.

D.

Organizations should establish formal consequences that are to be imposed upon employees at the company who retaliate against a whistleblower.

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Questions 13

Rhys, a Certified Fraud Examiner (CFE), was hired to conduct a fraud examination at Marvel Company. His examination did not reveal any conclusive evidence that fraud had occurred or was occurring. Consequently, Marvel's management asked Rhys to state in his official examination report that the company is free of fraud as a means of assuring the board of directors that the company's anti-fraud controls were effective. Which of the following is TRUE regarding the ACFE Code of Professional Ethics in this situation?

Options:

A.

The ACFE Code of Professional Ethics allows Rhys to comply with management's request without limitations.

B.

The ACFE Code of Professional Ethics allows Rhys to comply with management's request only if he can find another CFE to co-sign his report.

C.

The ACFE Code of Professional Ethics allows Rhys to comply with management's request only if the company has liability insurance to cover an incorrect assertion.

D.

The ACFE Code of Professional Ethics absolutely prohibits Rhys from complying with management's request.

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Questions 14

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 15

Which of the following mechanisms can help alleviate the pressure on employees to commit fraud?

Options:

A.

Employee monitoring software

B.

Employee support programs

C.

Discipline policies

D.

Background check policies

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Questions 16

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?

Options:

A.

Demote employees who do not adhere to the expected processes.

B.

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

C.

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

D.

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

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Questions 17

Which of the following Is FALSE regarding proactive fraud auditing procedures?

Options:

A.

Fraud audit procedures should be designed to incorporate an element of surprise

B.

Analytical review of the financial statements is best used to uncover small frauds that might be missed by other detection methods

C.

Fraud assessment questioning techniques are most appropriately used as part of the normal audit process

D.

Implementing proactive fraud audit procedures demonstrates management's intention to aggressively look for possible fraudulent conduct

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Questions 18

Management at ABC Company wants to transfer one of the risks identified during the company's fraud risk assessment process. Which of the following actions would be MOST APPROPRIATE to support this response?

Options:

A.

Implementing additional preventive and detective controls

B.

Discontinuing the underlying activity completely

C.

Deciding not to implement any responsive measures

D.

Purchasing fidelity insurance to protect against the associated risk of loss

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Questions 19

According to the 2020 Report to the Nations, which of the following is the MOST COMMON method by which frauds are detected?

Options:

A.

Internal audit

B.

Confession

C.

Tips

D.

External audit

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Questions 20

According to the 2020 Report to the Nations.___________schemes ate the MOST COMMON form of occupational fraud,

while_________schemes are the MOST COSTLY form of occupational fraud.

Options:

A.

Asset misappropriation; corruption

B.

Corruption, asset misappropriation

C.

Financial statement fraud: corruption

D.

Asset misappropriation: financial statement fraud

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Questions 21

Julia, an internal auditor, is formalizing a process to evaluate the effectiveness of the company's control system over time, including both ongoing evaluations and periodic separate evaluations. Julia’s initiative BEST pertains to which component of the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Internal Control—Integrated Framework?

Options:

A.

Control activities

B.

Risk assessment

C.

Monitoring

D.

Control environment

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Questions 22

While, a Certified Fraud Examiner (CFE). was hired to conduct a fraud examination She did not find fraud, but. In White's opinion, there were several internal control deficiencies that, if not remediated, could facilitate the occurrence of fraud Under the ACFE Code of Professional Ethics. White may include her opinion on the controls in her report to management.

Options:

A.

True

B.

False

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Questions 23

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.

Options:

A.

True

B.

False

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Questions 24

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?

Options:

A.

Positive reinforcement

B.

Negative reinforcement

C.

Punishment

D.

None of the above

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Questions 25

Mary is charged with implementing a fraud reporting program on behalf of her organization. Which of the following is a best practice that Mary should follow to ensure that the program is successful?

Options:

A.

Mary should inform employees that the names of all individuals who report misconduct will be shared with the organization's governing body and law enforcement.

B.

Mary should inform employees that they are required to report any information about potential fraud directly and only to their immediate supervisor.

C.

Mary should inform employees of the precise methods for reporting potential fraud, such as completing an online form.

D.

Mary should inform employees that they will be held accountable for reporting tips that cannot be verified.

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Questions 26

As part of its anti-fraud program, Oak Company is outlining the responsibilities of different stakeholders. Who is ultimately responsible for setting the organization’s ethical tone?

Options:

A.

General counsel

B.

Human resources

C.

Management

D.

Fraud examiners

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Questions 27

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.

Options:

A.

True

B.

False

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Questions 28

Based on research regarding the criminogenic tendencies of organizations, employees are more likely to engage in fraudulent behavior when given a direct order to do so by a superior due to an inherent desire to obey people in positions of authority.

Options:

A.

True

B.

False

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Questions 29

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

Options:

A.

True

B.

False

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Questions 30

To reinforce an anti-fraud culture, it is BEST for an organization's management to:

Options:

A.

Use a checklist of initiatives to ensure that all the elements of a strong corporate culture are in place.

B.

Require senior leaders to follow the same ethics policies that are in place for all staff-level employees.

C.

Discourage employees from questioning their immediate supervisor's actions or decisions if they have concerns.

D.

Discipline any employees who publicly express their frustration regarding organizational policies.

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Questions 31

As part of its anti-fraud program, Elm Company is outlining the responsibilities of different stakeholders. Who is ultimately responsible for ensuring the effectiveness of the organization's anti-fraud program?

Options:

A.

Forensic accountants

B.

Management

C.

The compliance function

D.

Internal auditors

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Questions 32

Which of the following is a responsibility of an organization's board of directors?

Options:

A.

Serving as the intermediary between staff-level employees and management.

B.

Assessing the strategy and underlying purpose of management's decisions and actions.

C.

Electing the company shareholders and supervising their decisions and actions.

D.

Directing employees to organize and execute business activities.

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Questions 33

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

Options:

A.

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

B.

Reporting to regulators regarding the entity's vulnerability to fraud

C.

Overseeing management's actions to manage fraud risks

D.

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

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Questions 34

Jody has been working at ABC Corp. for ten years. He steals funds from the company and tells himself that the company owes it to him for his "unrewarded hard work and loyalty" This situation BEST illustrates which leg of the Fraud Triangle?

Options:

A.

Perceived non-shareable financial need

B.

Rationalization

C.

Perceived opportunity

D.

Lack of personal Integrity

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Questions 35

Who is ultimately responsible lor ensuring the effectiveness of the organization's anti-fraud program?

Options:

A.

Internal auditors

B.

The compliance function

C.

Management

D.

External auditors

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Questions 36

Which of the following is an example of organizational crime?

Options:

A.

A sales manager using a corporate credit card for personal expenses

B.

Management of several pharmaceutical companies engaging in a price fixing scheme

C.

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

D.

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

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Questions 37

According to ACFE research, which of the following is TRUE?

Options:

A.

Men commit significantly more frauds than women do.

B.

Most fraudsters have previous criminal convictions for fraud-related offenses.

C.

An unwillingness to share duties is the most reported red flag displayed by fraud perpetrators prior to the detection of their crime.

D.

Frauds committed by staff-level employees cause higher median losses than those committed by owners and executives.

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Questions 38

Which of the following scenarios is the MOST ACCURATE representation of organizational crime?

Options:

A.

A retail clerk colluding with a friend to commit a scheme involving fraudulent returns.

B.

An inventory manager taking home the company's product to sell privately.

C.

An agreement between all the local floral companies to unnecessarily raise prices.

D.

An accountant uses company funds to pay personal credit card charges.

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Questions 39

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

Options:

A.

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.

B.

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.

C.

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.

D.

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

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Questions 40

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

Options:

A.

The team members should have experience in gathering and eliciting information

B.

The team members might include both internal and external sources.

C.

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

D.

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

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Questions 41

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

Options:

A.

True

B.

False

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Questions 42

Eliece, a Certified Fraud Examiner (CFE), and Jewel are employees at Silver Inc. Jewel informs Eliece that she has knowledge of a potential financial statement fraud but does not feel comfortable sharing this information unless Eliece can promise that she will keep it confidential. How should Eliece respond?

Options:

A.

Eliece should immediately contact management at Silver Inc. to provide information about her conversation with Jewel and her request for confidentiality.

B.

Eliece should promise Jewel that she will keep the information confidential even though she knows that she will likely be unable to keep that promise.

C.

Eliece should encourage Jewel to report the information to law enforcement because she cannot agree to Jewel’s request.

D.

Eliece should tell Jewel that she will try to keep the information as confidential as possible but she might have an ethical obligation to inform their employer.

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Questions 43

Joanna is leading the fraud risk assessment process for her organization. Which of the following considerations about the fraud risk assessment process is MOST ACCURATE and should be incorporated into Joanna's plans?

Options:

A.

To ensure the independence of the team members, a consultant or another external party must conduct the fraud risk assessment.

B.

If the individuals conducting the fraud risk assessment believe that fraud could not happen within the organization, then the assessment process should reflect that belief.

C.

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

D.

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

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Questions 44

According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO).________Is "a process.

effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance."

Options:

A.

Operational risk assessment

B.

Internal control

C.

Fraud risk management

D.

Financial reporting

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Questions 45

During a fraud risk assessment, a focus group would be MOST HELPFUL in which of the following situations?

Options:

A.

The assessment team would like to provide a means for anonymous employee suggestions or responses to questions posed.

B.

The assessment team would like to observe the interactions of several employees discussing the organization's current fraud awareness training.

C.

The assessment team would like to obtain individuals' responses through a formal electronic questionnaire.

D.

The assessment team would like to get candid one-on-one feedback from employees in a private setting.

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Questions 46

Beezie, a Certified Fraud Examiner (CFE), took an introductory class in computer forensics. When a client thought there might be evidence of a crime on their computer, Beezie decided to conduct a forensic examination of the computer even though she had no experience or advanced training in this area. Which of the following is TRUE regarding Beezie's conduct?

Options:

A.

Beezie's conduct would be a violation of the ACFE Code of Professional Ethics.

B.

Beezie's conduct would not be a violation of the ACFE Code of Professional Ethics.

C.

Beezie's conduct would be a violation of the ACFE Code of Professional Ethics only if she also violated the law.

D.

Beezie's conduct would be a violation of the ACFE Code of Professional Ethics only if she did not find the fraudster.

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Questions 47

Which of the following choices is an example of an anti-fraud control that is primarily detective in nature?

Options:

A.

Continuous audit techniques

B.

Separation of employee duties

C.

Employee background checks

D.

Hiring policies and procedures

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Questions 48

Which principle of corporate governance pertains to the disclosure of all material matters that the shareholders need to make timely and informed decisions regarding their investment in the company?

Options:

A.

Transparency

B.

Fairness

C.

Responsibility

D.

Accountability

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Questions 49

Devon, an employee at Tilly Corp., repeatedly demonstrates a negative attitude when working with other departments. To address this behavior, Devon’s manager tells him that he is no longer allowed to lead cross-departmental projects. This is an example of what type of behavioral response?

Options:

A.

Positive reinforcement

B.

Negative reinforcement

C.

Punishment

D.

None of the above

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Questions 50

Warren wants to decrease the amount of cash register discrepancies among the cashiers at his small business. According to behaviorist theories, which of the following options would be the MOST EFFECTIVE way for Warren to encourage the cashiers to reduce their discrepancies and keep their cash drawers balanced?

Options:

A.

Demote employees who continue to have reconciliation discrepancies.

B.

Publicly praise employees every time their cash drawers are balanced.

C.

Deduct an hour's worth of pay for anyone whose cash drawer is not perfectly reconciled each day.

D.

Take away an hour of paid time off from an employee each time their cash drawer is not balanced.

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Questions 51

XYZ, Inc. Is a specialty retailer of high-end ergonomic office furniture. The company receives a very large order from ABC Company, a new customer in a different country that wants to pay on credit. Which of the following is MOST ACCURATE regarding the due diligence procedures XYZ should perform on ABC before proceeding with this transaction?

Options:

A.

XYZ only needs to undertake due diligence procedures if ABC conducts business in countries with known corruption risks.

B.

XYZ does not need to take any specific procedures to verify ABC's identity before accepting the transaction

C.

XYZ should examine ABC's net worth as part of deciding whether to allow the purchase on credit.

D.

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

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Questions 52

During a fraud risk assessment, the assessment team determines that it would like to observe the interactions among several employees as they collectively discuss the organization's current fraud awareness training. Which of the following techniques would be MOST HELPFUL for the team to use in gathering this information?

Options:

A.

Focus groups

B.

Surveys

C.

Anonymous feedback mechanisms

D.

Interviews

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Questions 53

Fraud risks related to regulatory and legal misconduct include all of the following EXCEPT:

Options:

A.

Fraudulent customer payments

B.

Anti-competitive practices

C.

Insider trading

D.

Conflicts of interest

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Questions 54

Which of the following factors increases an organization's inherent inclination toward committing crime according to Diane Vaughan's research?

Options:

A.

Management seeks diversity in attitudes and perspectives when hiring employees.

B.

Management separates employee performance goals from company performance goals.

C.

Management encourages employee loyalty through social functions.

D.

Management rewards employees who challenge how the company functions.

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Questions 55

The availability of suitable targets, absence of capable guardians, and presence of motivated offenders are the three most important elements that influence crime according to which of the following criminological theories?

Options:

A.

Conditioning theory

B.

Routine activities theory

C.

Rational choice theory

D.

Social control theory

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Questions 56

The existence of many specialized departments within a company generally decreases the overall risk of fraud within the organization.

Options:

A.

True

B.

False

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Questions 57

Which of the following is a best practice when assembling a fraud risk assessment team?

Options:

A.

Team members should all have similar skills and perspectives.

B.

The size of the team should be limited to four individuals.

C.

The team should include only external sources.

D.

Team members should have experience in eliciting information.

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Questions 58

According to Diane Vaughan, which of the following factors increases an organization's inherent inclination toward committing crime?

Options:

A.

Management seeks out diversity in attitudes and perspectives when hiring employees

B.

Rewards are given to employees who challenge the status quo

C.

Management links employee performance goals with company performance goals

D.

All of the above

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Questions 59

Which of the following Is NOT Included In Ihe five fraud risk management principles described In Fraud Risk Management Guide, a joint publication by COSO and the ACFE?

Options:

A.

Communicating the expectations of those governing the fraud risk management program

B.

Performing comprehensive fraud risk assessments to identify specific fraud schemes

C.

Deploying preventive and detective fraud control activities to mitigate fraud risk

D.

Developing one-time evaluations for each fraud risk management principle

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Questions 60

Which of the following scenarios is LEAST LIKELY to be considered a conflict of interest that is prohibited under the ACFE Code of Professional Ethics?

Options:

A.

Lori accepts an assignment to infiltrate her employer and transmit inside information to a competitor.

B.

Ren undertakes an external engagement that requires him to work outside the normal work hours of his primary employer.

C.

DeVon undertakes engagements for both sides in a case of an alleged fraudulent warranty scheme.

D.

Karen accepts an assignment to search for fraud indicators at an organization in which she is an undisclosed partner.

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Questions 61

Rosie, a Certified Fraud Examiner (CFE), conducted a fraud examination for her company that led to a confession of guilt from Dean. Which of the following statements in Rosie's verbal report to management would violate the ACFE Code of Professional Ethics?

Options:

A.

"The evidence does not support Dean's confession."

B.

"Dean is guilty of embezzlement."

C.

"Dean's confession is supported by the evidence."

D.

"Dean confessed to embezzlement."

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Questions 62

Formally documenting and communicating organizational hierarchies, including the proper flow of information, can hinder an organization's fraud prevention initiatives.

Options:

A.

True

B.

False

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Questions 63

Which of the following is NOT one of the three general approaches used to control corporate crime?

Options:

A.

Strong intervention of the government

B.

Voluntary changes in corporate attitudes and structure

C.

Consumer action to force change

D.

Media blacklisting of the organization

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Questions 64

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

Options:

A.

True

B.

False

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Questions 65

Which of the following is FALSE regarding a fraud risk assessment?

Options:

A.

The objective of the assessment is to help the organization identify what makes it most vulnerable to fraud.

B.

The assessment should be used to improve employee fraud awareness

C.

The assessment team should consider how employees behave as part of its assessment

D.

The designation of an area as high risk should only occur if the assessment has conclusively revealed that fraud is occurring there.

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Questions 66

Which of the following is a detective anti-fraud control?

Options:

A.

Hiring policies and procedures

B.

Independent reconciliations

C.

Separation of duties

D.

Fraud awareness training

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Questions 67

The theory of differential association is used frequently lo explain white-collar criminality. Which of the following is NOT one of the assertions or principles of differential association?

Options:

A.

Criminal behavior is explained by an individual's general needs and values.

B.

Criminal behavior is acquired through participation with intimate personal groups.

C.

Criminal behavior is learned from other people in a process of communication.

D.

Criminal behavior is learned using the same mechanisms as other learning

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Questions 68

Management at Alpha Company is developing a corporate compliance program. To ensure that the program will be effective, management should both incentivize employees for their compliance and discipline them for any violations.

Options:

A.

True

B.

False

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Questions 69

Which of the following statements regarding monitoring employees for warning signs of fraud is MOST ACCURATE?

Options:

A.

Employees who steal do not commonly display lifestyle or behavioral warning signs of their misdeeds.

B.

An increase in employee wealth is always a sign of fraud that should be investigated.

C.

Managers should only observe employees for signs of suspicious behavioral or lifestyle changes if they can do so without the employees' knowledge.

D.

Managers should be instructed to observe employees for any unusual lifestyle improvements, such as an unexplained increase in luxury purchases.

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Questions 70

Jane, a Certified Fraud Examiner (CFE), was hired lo conduct a fraud examination at XYZ Company Her examination did not reveal any conclusive evidence that fraud had occurred or was occurring Consequently. XYZ's management asked Jane to state in her official examination report that the company is free of fraud as a means of assuring the board of directors that the company's anti-fraud controls were effective. The ACFE Code of Professional Ethics prohibits Jane from complying with management's request.

Options:

A.

True

B.

False

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Exam Name: Certified Fraud Examiner - Fraud Prevention and Deterrence Exam
Last Update: Apr 19, 2025
Questions: 234

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