[Aug-2026] ACFE CFE-Fraud-Schemes-and-Financial-Crimes Exam Practice Test Questions - TestValid
Updated Certification Exam CFE-Fraud-Schemes-and-Financial-Crimes Dumps - Practice Test Questions
NEW QUESTION # 41
Which of the following actions would balance the accounting equation to conceal the misappropriation of cash?
- A. Creating fictitious revenue
- B. Increasing owners' equity
- C. Increasing another asset
- D. Increasing a liability
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: When cash is stolen, the accounting equation (Assets = Liabilities + Equity) must still balance. Fraudsters may increase a liability (e.g., record fictitious payables) to cover the missing cash. This is a common concealment method.
* Analysis of Incorrect Options:
* A. Increasing another asset - Would require inflating assets, but this usually affects financial statement fraud, not cash theft concealment.
* B. Increasing owners' equity - Not logical without legitimate earnings or capital contributions.
* D. Creating fictitious revenue - Used in financial statement fraud, not in balancing theft concealment.
* Key Concept: Concealment methods for asset misappropriation - offsetting missing cash with fictitious liabilities .
Reference: ACFE Fraud Examiners Manual (2020) , Financial Statement Fraud: Concealment Methods .
NEW QUESTION # 42
Which of the following is a red flag that might indicate the existence of a need recognition scheme?
- A. The purchasing entity has an unusually large list of backup suppliers available.
- B. The purchasing entity does not have high requirements for stock and inventory levels.
- C. The purchasing entity's materials are not being ordered at the optimal reorder point.
- D. The purchasing entity identifies a need that can be met by various suppliers.
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: In a need recognition scheme , an employee creates or exaggerates a need for goods or services to benefit a favored supplier. One red flag is that materials are ordered prematurely or not at the optimal reorder point , suggesting that purchases are being manipulated to benefit a corrupt vendor rather than based on actual business needs.
* Analysis of Incorrect Options:
* A - A large list of suppliers suggests competition, not fraud.
* C - A need met by various suppliers does not indicate fraud.
* D - Low requirements for stock may reflect lean inventory management, not fraud.
* Key Concept: Corruption - need recognition schemes and red flags.
Reference: ACFE Manual, Corruption - Need Recognition Schemes .
NEW QUESTION # 43
A contractor visits Lindsay's home and informs her that she has a damaged roof. The contractor offers roofing services and quotes Lindsay a price. Which of the following is the BEST action Lindsay can take to prevent being victimized by a potential consumer fraud scheme?
- A. Verify that the contractor has a valid license by contacting the licensing agency for confirmation.
- B. Require the contractor to provide the phone number of a reference who can attest to the quality of their services.
- C. Agree to the contractor's services orally to avoid being bound by contract terms if the work is unsatisfactory.
- D. Ask the contractor how many roofs they have repaired in the past to ascertain how much experience they have.
Answer: A
Explanation:
The best answer is B. A consumer approached by a contractor should independently verify the contractor's license or registration with the proper licensing agency before agreeing to work. Home repair and contractor scams often involve unsolicited offers, false claims of urgent repairs, inflated prices, poor workmanship, or unlicensed contractors. Oral agreements are risky because they provide little evidence of the work, price, warranties, or rights of cancellation. References can be useful, but a phone number supplied by the contractor might be fake or controlled by an accomplice. Asking about experience is also insufficient because the contractor can misrepresent it. Independent verification with the licensing authority is stronger because it confirms whether the contractor meets professional and regulatory requirements.
NEW QUESTION # 44
A fraud examiner is attempting to determine whether an online retailer's customers have committed card-not- present (CNP) payment card fraud schemes. Which of the following measures would be MOST EFFECTIVE in detecting this type of fraud?
- A. Check for small orders placed from newly created customer accounts that do not have a purchase history.
- B. Review orders in which a customer purchased several unique items during a single transaction.
- C. Compare IP addresses for internet orders with those from previous orders placed by the same customer.
- D. Examine orders in which customers declined rush or overnight shipping for their purchases.
Answer: C
Explanation:
Card-not-present fraud occurs when payment card information is used without the physical card being presented, commonly in online transactions. Comparing IP addresses for internet orders with those used in previous orders by the same customer is the most effective detection measure listed because it helps identify unusual access patterns. If an order is placed from an unfamiliar or suspicious IP address inconsistent with the customer's historical activity, it can indicate unauthorized use of stolen card data. Small orders from new accounts might be suspicious but are less reliable alone. Declining rush shipping is not a typical fraud indicator, and purchasing several unique items is not necessarily suspicious. The ACFE materials identify payment card fraud and card-not-present transactions as key payment fraud risks.
NEW QUESTION # 45
Which of the following scenarios is an example of upcoding?
- A. Hope is diagnosed with an ear infection. Hope's doctor writes her a prescription for a name brand medication instead of prescribing a less expensive generic medication.
- B. Steven receives medical services prior to his new insurance going into effect. Before submitting the claim, he changes the service date on his bill so that it will be covered by insurance.
- C. Dr. Catz spends 15 minutes with a patient. She later submits a bill to the patient's insurance company using a code that corresponds to an office visit lasting 60 minutes.
- D. Dr. Smith performed a hysterectomy on Roberta. Dr. Smith submits an insurance claim using three procedure codes instead of the single code normally used for a hysterectomy.
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Upcoding occurs when a provider bills for a higher level of service than what was actually provided. Billing a 15-minute visit as a 60-minute visit is a classic upcoding scheme.
* Analysis of Incorrect Options:
* A. Name brand prescription - Not upcoding; this is prescribing choice, not billing fraud.
* B. Multiple codes instead of one - This is unbundling , not upcoding.
* D. Changing service date - This is falsifying service dates , not upcoding.
* Key Concept: Health care billing fraud - upcoding vs. unbundling.
Reference: ACFE Fraud Examiners Manual (2020) , Fraudulent Disbursements: Health Care Fraud .
NEW QUESTION # 46
Which of the following are not basic types of non-sharable problems?
- A. Violation of ascribed obligations
- B. Larceny by fraud
- C. Physical isolation
- D. Business reversals
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Cressey's research on fraud offenders found that most had non- sharable financial problems, which fell into categories such as: (1) violation of ascribed obligations, (2) business reversals, (3) physical isolation, (4) status gaining, and (5) employer-employee relations.
"Larceny by fraud" is not a category of non-sharable problem but rather a type of theft scheme. Hence, D is correct.
* Analysis of Incorrect Options:
* A. Violation of ascribed obligations - Correctly one type of non-sharable problem.
* B. Business reversals - Correctly one type of non-sharable problem.
* C. Physical isolation - Correctly one type of non-sharable problem.
* D. Larceny by fraud - Not a "problem" type; it is a fraud scheme.
* Key Concept: Cressey's non-sharable problems - psychological and situational pressures that contribute to occupational fraud.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraud Theory - Cressey's Hypothesis and Non-sharable Problems .
NEW QUESTION # 47
Which of the following is an example of a technical security control that organizations can use to secure computer systems and communication networks?
- A. Penetration testing
- B. Data security
- C. Human audits
- D. Application security
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Technical security controls include software- and hardware-based measures such as application security, firewalls, and encryption . Application security protects against vulnerabilities in the programs employees use.
* Analysis of Incorrect Options:
* B. Human audits - Administrative control, not technical.
* C. Penetration testing - A detective measure/test, not a control itself.
* D. Data security - A broad goal, not a specific technical control.
* Key Concept: Technical security controls for preventing cyberfraud.
Reference: ACFE Fraud Examiners Manual (2020) , Computer and Internet Fraud: Security Controls .
NEW QUESTION # 48
Which of the following must be present for a fraud to exist?
- A. A material false statement
- B. All of the above
- C. Reliance on the false statement by the victim
- D. Knowledge that the statement was false when it was uttered
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: For fraud to exist, several legal elements must be established. These include: (1) a material false statement made by the perpetrator, (2) knowledge of the falsity of that statement (scienter or intent to deceive), and (3) reliance on the false statement by the victim, resulting in harm or damages. The Fraud Examiners Manual (2020 International Edition) explains that all elements must be present for a fraud case to be sustained. Thus, the correct answer is D. All of the above .
* Analysis of Incorrect Options (Distractors):
* A. A material false statement - A false statement alone is insufficient unless there is intent to deceive and victim reliance.
* B. Knowledge that the statement was false when it was uttered - Intent is critical, but without the victim's reliance and damages, fraud is incomplete.
* C. Reliance on the false statement by the victim - Victim reliance is necessary, but without a knowingly false statement and intent, fraud cannot be proven.
* Key Concept: The essential legal elements of fraud.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Law section - The Law Related to Fraud , which explains the legal foundation and elements necessary to establish fraud.
NEW QUESTION # 49
The principle behind full disclosure is:
- A. Any material deviation from GAAP must be explained to the writer of the financial information.
- B. None of above
- C. Any material deviation from GAAP must be explained to the reader of the financial information.
- D. Any material deviation from SAS must be explained to the writer of the financial information.
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: The full disclosure principle requires that all material facts and deviations from GAAP be disclosed to readers of financial statements so that they are not misled.
Transparency is essential for informed decision-making by investors, creditors, and regulators.
* Analysis of Incorrect Options:
* B. SAS - Refers to auditing standards, not accounting standards.
* C. Writer - Incorrect; disclosures are intended for readers/users.
* D. None of above - Incorrect since option A is correct.
* Key Concept: Full disclosure principle - providing users with all material information.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts - GAAP:
Full Disclosure .
NEW QUESTION # 50
Which of the following scenarios is an example of a cash larceny scheme?
- A. Petra collects $300 from Daniel for the purchase of a lamp. Petra records a $200 sale on her cash register and puts the extra $100 in her pocket.
- B. Helena sells a life insurance policy to Kevin. Instead of reporting the sale of the policy to the insurance company, she steals Kevin's payment.
- C. Omar opens the store where he works early and makes several sales before any other workers arrive. He then deletes the register log and removes the cash from those transactions from his register.
- D. Julia obtains the access code for Kathy's cash register. While Kathy is on vacation, Julia logs in using Kathy's access code and processes transactions as usual. At the end of the day, she removes $100 from the register.
Answer: D
Explanation:
The correct answer is D because cash larceny involves stealing cash after it has already been recorded in the organization's accounting records. Julia processes transactions as usual, meaning the sales and cash should already be reflected in the register records, and then she removes $100. Option A is closer to skimming because the payment is stolen before being reported. Option B is also skimming because Petra records only part of the sale and steals the unrecorded portion. Option C involves deleting the register log, which suggests an attempt to prevent the transactions from remaining recorded. The ACFE materials distinguish cash larceny from skimming based on whether the stolen funds were recorded before theft.
NEW QUESTION # 51
Which of the following is NOT a medium that commonly causes an organization's proprietary information to be compromised?
- A. Reports to company shareholders
- B. Information displayed at an employee's workstation
- C. Documents that were shredded using a cross-cut shredder
- D. Speeches made by executives
Answer: C
Explanation:
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.
Reference: ACFE Manual, Fraud Prevention and Deterrence - Information Security .
NEW QUESTION # 52
Maria manages the procurement function for ABC Co., which uses a competitive sealed bidding process for its larger projects. Maria receives payment from a company that frequently bids on ABC's projects in exchange for providing solicitation specifications before the solicitation is published to the public. Maria is engaging in which of the following procurement fraud schemes?
- A. Bid splitting
- B. Suppressing bids
- C. Bid tailoring
- D. Leaking bid data
Answer: D
Explanation:
Maria is engaging in leaking bid data because she provides confidential or pre-bid information to a favored bidder before the solicitation is publicly available. The ACFE material explains that leaking bid data occurs when procurement employees disclose pre-bid information or confidential information to a favored vendor, giving that vendor an unfair advantage. This differs from bid tailoring, where specifications are drafted to favor a contractor. It also differs from suppressing bids, which involves preventing competitors from submitting bids, and bid splitting, which involves breaking a larger purchase into smaller amounts to avoid competitive bidding thresholds. Maria's conduct gives the bidder advance notice and extra preparation time, making option B the correct answer.
NEW QUESTION # 53
Joe's automobile insurance policy expired in June. In August, Joe was involved in an automobile accident, and his vehicle was severely damaged. After the accident, Joe contacted his insurance company and reinstated the policy. In September, Joe then submitted a claim with a September accident date for the damages that occurred to his vehicle in August. Joe has engaged in which of the following insurance schemes?
- A. Staged accident
- B. Vehicle repair
- C. Inflated damages
- D. Past posting
Answer: D
Explanation:
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.
Reference: ACFE Manual, Financial Transactions - Insurance Fraud Schemes .
NEW QUESTION # 54
Which of the following statements concerning methods that corporate spies use to steal information from other organizations is MOST ACCURATE?
- A. Spies use pretexting to observe conversations at restaurants frequented by a target company's employees with the goal of obtaining sensitive information.
- B. Spies use social engineering tactics primarily for accessing confidential files found on employee desks or workstations at target companies.
- C. Spies use technical surveillance to obtain nondocumentary information about target companies that they cannot find through open sources.
- D. Spies use physical infiltration to exploit technical security weaknesses so they can bypass firewalls and obtain access to company computers.
Answer: C
Explanation:
The correct answer is D. Technical surveillance involves using electronic or technical means to collect information that is not available through open sources, including nondocumentary information such as conversations, signals, or communications. This is a recognized method of corporate espionage when used to obtain proprietary or confidential business information. Option A is too narrow and inaccurate because social engineering manipulates people into revealing information or providing access, not primarily desk-file searches. Option B misstates physical infiltration; physical entry can give access to premises, documents, or devices, but exploiting firewalls is a technical attack. Option C incorrectly defines pretexting; pretexting involves using a false identity or fabricated reason to obtain information. Corporate espionage must be distinguished from lawful competitive intelligence.
NEW QUESTION # 55
Entering a sales total lower than the amount actually paid by the customer is called:
- A. Internal sales audits
- B. Underrings a sale
- C. All of the above
- D. Recording a sale procedure
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: An underring occurs when an employee intentionally enters a lower sales amount into the register than what was collected from the customer. The difference is pocketed by the employee. This is a common register manipulation skimming scheme.
* Analysis of Incorrect Options:
* B. Recording a sale procedure - General process, not fraud.
* C. Internal sales audits - Control activity, not the fraud scheme.
* D. All of the above - Incorrect, since only "underring" is accurate.
* Key Concept: Underring schemes in cash register fraud.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Cash Receipts - Skimming via Underrings .
NEW QUESTION # 56
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