CFE-Fraud-Prevention-and-Deterrence Sample Questions Answers

Transparency

Fairness

Responsibility

Accountability

Green a CFE, uncovered several material internal control deficiencies unrelated to the financial statement fraud he was investigating. In his final report to management. Green included information about the deficiencies even though they were unrelated to the situation he was hired to investigate.

Stephanie, a CFE, accepted a fraud examination assignment and then instructed a lower-level employee to assess the company's cash records for signs of fraud. She took his word when he said there was no evidence of wrongdoing and ended up failing to uncover a very costly fraud scheme.

Susan, a CFE, was hired by a client to conduct a fraud examination but found nothing amiss A year later, she received a legal order from the local prosecutor's office to provide the client's file. Susan complied with the court order, even though she did not have the client's authorization to do so.

All of the above are violations

Monitoring

Control environment

Independent oversight

Information and communication

Overseeing the organization's fraud risk management activities

Designing the fraud risk management program

Punishing fraud perpetrators discovered through fraud risk management activities

Implementing the fraud risk management program

Use a checklist of initiatives to make sure all the elements of a strong tone at the lop are in place

Create an environment in which employees are dissuaded from challenging management's decisions

Visibly adhere to the same set of ethics policies that is required of all employees

All of the above

True

False

It should be used to assess whether there is a moderate-to-high risk of management overriding controls within the moderate-to-high fraud risk areas.

It should be used to replace the auditor's own identification and assessment of fraud risks.

it should be used to increase awareness in the development of audit programs for areas that have been identified as having a moderate-to-high risk of fraud.

It should be used to design audit tests to evaluate whether the controls are operating effectively.

Professional skepticism means beginning all assignments with the belief that something is amiss.

Professional skepticism involves maintaining a mindset that no fraud has occurred

Fraud examiners should form the engagement hypothesis without regard to the available preliminary information.

Fraud examiners should not relax their skeptical attitudes under any circumstances.

True

False

Fraud examiners should not relax their skeptical attitudes under any circumstances.

Professional skepticism involves maintaining a mindset that no fraud has occurred

Fraud examiners should form the engagement hypothesis without regard to the nature of the assignment

Professional skepticism can be dispelled only by evidence

All government auditors maintain the same requirements for reporting evidence of potential fraud uncovered during a public-sector financial statement audit.

Government auditors are legally prohibited from reporting evidence of potential fraud to any parties outside the organization being audited.

Government auditors' reporting requirements pertaining to fraud are substantially the same as those for external auditors in the private sector.

The requirements for government auditors to report evidence of potential fraud depend on the jurisdiction and the specific audit mandate.

Internal auditors

The audit committee

General counsel

Management

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

To ensure the independence of the team members, a fraud risk assessment must be conducted by a consultant or other external party.

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

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

True

False

To be most effective, access to the organization's ethics policy should be restricted to employees and other Internal parties only

In designing the ethics program, management should consider whether the organization currently has any ethical leadership Issues

An effective written ethics policy alone is sufficient to communicate management's ethical philosophy and serve as a comprehensive ethics program

All of the above

The most commonly reported red flag displayed by fraud perpetrators prior to the detection of their crime is complaints about management.

Mote occupational frauds are committed by men than by women

The median losses caused by executives are lower than those caused by staff-level employees

The majority of fraudsters have been previously punished by an employer for a fraud-related offense

Contract law

Guidance from her family and friends

The ACFE Code of Professional Ethics

Philosophical principles related to ethics

Event avoidance

Risk tolerance

Compliance

Review and revision

True

False

Guidance regarding appropriate board structures, responsibilities, and procedures

Support for establishing stronger protection for foreign shareholders than for domestic shareholders

A request that governments have in place an appropriate framework to support good corporate governance practices

Recognition of the importance of the role of stakeholders in corporate governance

Management seeks out diversity in attitudes and perspectives when hiring employees

Rewards are given to employees who challenge the status quo

Management links employee performance goals with company performance goals

All of the above

Trustworthiness

A well-developed sense of moral philosophy

Avoidance of conflicts of interest

Refusal to admit errors

Independent monitoring

Operating environment

Risk tolerance

Governance and culture

Cultural ties

Criminal history

Organizational opportunity

Social class

True

False

Perceived non-shareable financial need

Rationalization

Perceived opportunity

Lack of personal Integrity

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

Fraud assessment Questioning techniques are most appropriately used when attempting to determine who might be responsible for a particular fraud scheme.

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

Surprise audit procedures are an effective fraud detection mechanism, but they do not help prevent fraud

Confront Bridgette about the disagreements and discuss how they increase the department's risk of fraud.

Include her disagreements with Bridgette as a factor when assessing the risk of fraud in the accounts receivable department.

Automatically designate the accounts receivable department as a high-risk area.

Have someone else perform the fraud risk assessment work related to the accounts receivable department's activities.

Management should examine previous fraud occurrences to determine how the ideal fraud risk management program would have prevented tnem.

Management must balance the investment in anti-fraud controls with the benefit of those controls and the amount of risk it is willing to accept.

Management must assign a quantitative measure to its risk appetite so that it can accurately measure the fraud risk management program’s effectiveness.

Management should tailor the detailed objectives of the fraud risk management program to the organization's specific needs and goals.

Positive reinforcement

Negative reinforcement

Punishment

None of the above

True

False

A mandatory independent compensation committee

Shareholder oversight of internal controls

A written charter for management

Adequate audit committee resources and authority

Receipt of kickbacks

Espionage by competitors

Payment of bribes

Aiding and abetting vendor fraud

The program must include mechanisms to monitor and identify breaches in compliance.

The responsibility of handling suspected incidents of noncompliance should be delegated to someone outside of the company.

Formal sanctions for intentional noncompliance should be well-publicized throughout the company

There should be measures in place to address failures in the design or operation of anti-fraud controls, as well as fraud occurrences

High personal debt; lack of separation of duties

Revenge: too much trust in key employees

Living beyond their means, too much trust in key employees

Desire for recognition, lack of separation of duties

Control activities

Ethical culture

Risk assessment

Monitoring

Transparency

Responsibility

Fairness

Accountability

True

False

Blue should consider Green's expected purchasing pattern and method of payment in determining whether to accept the transaction.

Blue only needs to undertake due diligence procedures if Green is requesting to pay on credit.

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

Blue does not need to undertake any specific due diligence procedures for this transaction.