ACFE CFE-Fraud-Schemes-and-Financial-Crimes Premium Exam Engine pdf – Download Free Updated 355 Questions [Q158-Q180]

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ACFE CFE-Fraud-Schemes-and-Financial-Crimes Premium Exam Engine pdf – Download Free Updated 355 Questions

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QUESTION 158
Security audits and tests, incident response plans, and separation of duties are all examples of which of the following types of cybersecurity controls?

Technical security controls

Logical access controls

Physical access controls

Administrative security controls

Security audits and tests, incident response plans, and separation of duties are best classified as administrative security controls because they involve policies, procedures, monitoring, governance, and assignment of responsibilities. Administrative controls are designed to manage human behavior and organizational processes that support cybersecurity. The ACFE material discusses computer security controls, including separation of duties, security audits and tests, and incident response planning, as part of a broader control environment for preventing and detecting cyberfraud. Logical access controls focus on system permissions and authentication.
Physical access controls protect facilities and hardware. Technical controls are automated or technology- based safeguards. Since the listed items mainly involve procedures, oversight, and response planning, administrative security controls is the best answer.

QUESTION 159
Which of the following is a common way that dishonest contractors collude to evade the competitive bidding process?

Arranging an agreement with competitors to divide and allocate markets

Submitting bids on fake contracts to give the appearance of genuine competition

Using different publications to publish their bid solicitations

Submitting invoices for work that was not performed on joint projects

Detailed Explanation:
* Rationale for Correct Answer: Market division and allocation agreements are a classic bid-rigging scheme in which contractors collude to evade competition by assigning territories, customers, or project types among themselves. This undermines free and open competition.
* Analysis of Incorrect Options:
* B – Fake contracts are not a recognized collusion tactic in competitive bidding.
* C – Publishing solicitations in different outlets does not evade competition.
* D – Submitting false invoices is fraud, but it occurs after contract award , not during the bidding process.
* Key Concept: Bid rigging and collusion in procurement fraud.
Reference: ACFE Manual, Corruption – Procurement and Bid-Rigging Schemes .

QUESTION 160
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?

Bid tailoring

Leaking bid data

Suppressing bids

Bid splitting

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.

QUESTION 161
In what type of fraud scheme does an employee steal cash after it has appeared on the company’s books?

Cash larceny scheme

Unrecorded sales (skimming) scheme

Kickback scheme

Understated sales (skimming) scheme

Detailed Explanation:
* Rationale for Correct Answer: Cash larceny is the theft of cash after it has been recorded in the company’s books. Skimming, in contrast, is theft of cash before recording .
* Analysis of Incorrect Options:
* B & D – Both describe forms of skimming (unrecorded or understated sales).
* C – Kickback scheme is corruption, not cash theft.
* Key Concept: Distinguishing cash larceny (on-book theft) from skimming (off-book theft).
Reference: ACFE Manual, Cash Receipts – Cash Larceny .

QUESTION 162
Which of the following can constitute a bribe, even if the illicit payment is never actually made?

Offering a payment

Corruption in payment

Kickback payment

Overbilling in payment

Detailed Explanation:
* Rationale for Correct Answer: Under anti-bribery laws and fraud examination principles, the offer of a payment itself may constitute a bribe, regardless of whether money changes hands. Intent to improperly influence is enough to establish bribery.
* Analysis of Incorrect Options:
* B. Corruption in payment – Too vague, not a legal element.
* C. Kickback payment – Requires an actual payment; not just an offer.
* D. Overbilling in payment – A disbursement scheme, not a bribe.
* Key Concept: Bribery offense can occur upon the offer alone.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Corruption – Bribery Elements .

QUESTION 163
_____________ involves purposeful misreporting of financial information about the organization that is intended to mislead those who read it.

Fraudulent statement

Corruption

Asset misappropriations

None of the above

Detailed Explanation:
* Rationale for Correct Answer: Fraudulent financial statements (or “fraudulent statement”) refer to the intentional misrepresentation of financial condition, typically through overstating revenues, understating expenses, inflating assets, or concealing liabilities. The intent is to mislead stakeholders such as investors, creditors, or regulators.
* Analysis of Incorrect Options:
* B. Corruption – Refers to abuses of influence and conflicts of interest, not misreporting financial information.
* C. Asset misappropriations – Involve theft of assets, not misrepresentation of reports.
* D. None of the above – Incorrect since option A is correct.
* Key Concept: Financial Statement Fraud – misrepresentation of organizational performance and position.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Financial Statement Fraud section
– Definition and Types .

QUESTION 164
Which of the following is the amount of money that would be realized upon the sale of the asset at some point in the future, less the costs associated with owning, operating, and selling it?

Net realizable value

Going concern

Cost

Fair value

Detailed Explanation:
* Rationale for Correct Answer: Net realizable value (NRV) is the estimated selling price of an asset in the ordinary course of business, minus any costs of completion, disposal, or transportation. This is often applied in valuing accounts receivable and inventory.
* Analysis of Incorrect Options:
* B. Going concern – Assumption of business continuity, not asset valuation.
* C. Cost – Historical cost, not future realizable value.
* D. Fair value – Current market-based measure, not net proceeds after costs.
* Key Concept: Net realizable value – valuation method for receivables and inventory.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts – Asset Valuation Methods .

QUESTION 165
Which of the following is the MOST APPROPRIATE technique for detecting a cost mischarging scheme?

Reviewing the inspection and testing reports of questioned goods or materials

Comparing the direct and indirect labor account totals from the prior year to the current year

Inspecting questioned goods or materials by examining packaging, appearance, and description

Examining any change orders submitted by a contractor that add new items

Detailed Explanation:
* Rationale for Correct Answer: Cost mischarging occurs when costs are charged to improper accounts or contracts. The best way to detect it is through analytical review -comparing direct vs.
indirect labor account totals across periods to identify unusual shifts or spikes.
* Analysis of Incorrect Options:
* A. Reviewing inspection/testing reports – Effective for detecting defective/substituted goods, not mischarging.
* C. Inspecting packaging – Identifies product substitution, not accounting mischarges.
* D. Examining change orders – Useful for contract fraud, but not direct mischarging.
* Key Concept: Cost mischarging detection through analytical procedures .
Reference: ACFE Fraud Examiners Manual (2020) , Fraudulent Disbursements: Contract and Procurement Fraud .

QUESTION 166
Which of the following statements about the different types of malware is MOST ACCURATE?

A computer worm is a form of malicious software that locks a user’s operating system and restricts access to data files.

Spyware is any software application that displays advertisements while it is operating.

A Trojan horse is a program that appears useful but contains hidden code that causes damage.

Ransomware is software that collects and reports information about a computer user without the user’s knowledge or consent.

The correct answer is C. A Trojan horse is malware that appears to be legitimate, useful, or harmless software but contains hidden malicious code. Once installed or executed, it can damage systems, steal information, create unauthorized access, or perform other harmful actions. Option A describes ransomware, not a worm; ransomware restricts access to systems or files and demands payment. A worm is self-replicating malware that spreads across networks. Option B describes adware more closely than spyware. Spyware secretly monitors and reports user activity or information. Option D also describes spyware rather than ransomware.
Professionally, the key distinction is the malware’s function: concealment and deception for Trojan horses, self-replication for worms, surveillance for spyware, and restriction or encryption for ransomware.

QUESTION 167
Which of the following is not a skimming scheme?

Unrecorded sales

Fraud & Cost

Theft of checks through the mail

Understated sales and receivables

Detailed Explanation:
* Rationale for Correct Answer: Common skimming schemes include unrecorded sales , theft of incoming checks , and understating sales/receivables . “Fraud & Cost” is not a recognized skimming scheme and appears to be a distractor.
* Analysis of Incorrect Options:
* A. Unrecorded sales – A classic skimming method.
* C. Theft of checks through the mail – Another recognized skimming approach (incoming receivables).
* D. Understated sales and receivables – A concealment method within skimming schemes.
* B. Fraud & Cost – Not a scheme classification.
* Key Concept: Skimming schemes vs. unrelated distractors.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Cash Receipts – Skimming Types
.

QUESTION 168
Which of the following is TRUE regarding ghost employee schemes?

The ghost employee must be a fictitious person.

The ghost employee must be classified as an exempt employee.

The ghost employee must be someone who has never worked for the victim company.

The ghost employee must be added to the payroll.

Detailed Explanation:
* Rationale for Correct Answer: A ghost employee scheme occurs when someone (real or fictitious) is added to payroll, and paychecks are diverted to the fraudster. The key requirement is that the “ghost” is listed on payroll records.
* Analysis of Incorrect Options:
* A – The ghost may be fictitious or a real former employee.
* B – Employment classification is irrelevant.
* C – A ghost could be a current, terminated, or entirely fictitious employee.
* Key Concept: Payroll fraud – ghost employee schemes.
Reference: ACFE Manual, Asset Misappropriation – Payroll Schemes .

QUESTION 169
Margarette sends a text message to Arlo that appears to come from Arlo’s doctor’s office asking him to make a payment on an overdue bill. When Arlo clicks on the payment link, it takes him to a payment portal that Margarette controls, and she is able to steal his credit card information. Margarette has perpetrated which of the following schemes?

Quishing

Pharming

Vishing

Smishing

The correct answer is D. Smishing is phishing conducted through SMS or text messages. Margarette sends a fraudulent text that appears to come from Arlo’s doctor’s office and includes a payment link to a fake portal she controls. The purpose is to trick Arlo into entering payment card information, which she then steals.
Quishing uses QR codes to direct victims to fraudulent sites. Pharming redirects users from legitimate websites to fraudulent ones, often through technical manipulation of domain name resolution or device settings. Vishing uses voice calls or voicemail to obtain sensitive information. Because the fraudulent communication is a text message and the goal is to steal payment information, the scheme is smishing.

QUESTION 170
Malcolm is a manager at a financial institution. To safeguard the bank and its customers from electronic funds transfer (EFT) fraud, Malcolm is implementing preventive measures. What is one measure Malcolm can take to prevent EFT fraud?

Send online banking portal PINs, usernames, and passwords in a single communication to ensure the information is not lost or intercepted.

Send electronic communications containing usernames in an unencrypted format to ensure that the intended recipient can access them.

Employ multifactor authentication to verify transfers via electronic bill presentment and payment (EBPP) or person-to-person (P2P) systems.

Ensure that the same employee handles both PIN issuance and access device information to limit the number of people accessing this information.

The correct answer is C. Multifactor authentication is an effective preventive control for electronic funds transfer fraud because it requires users to verify their identity through more than one authentication factor before initiating or approving payments. This reduces the risk that stolen usernames, passwords, or account credentials alone will allow unauthorized transfers through EBPP or P2P systems. Option A is unsafe because sending PINs, usernames, and passwords together increases exposure if the communication is intercepted.
Option B is also poor practice because sensitive credentials should be encrypted. Option D weakens segregation of duties by allowing one employee to control both PIN issuance and access device information.
The ACFE materials emphasize authentication, access controls, and segregation of duties in preventing EFT fraud.

QUESTION 171
To detect fraud committed by a health care provider, a fraud examiner should look for which of the following red flags?

The number of claims made by the provider for reimbursement are lower than average.

There is a high percentage of coding outliers in the provider’s documentation.

The details in the provider’s supporting documentation match the health care claim.

The provider has unusually low profits compared to similar businesses in the same region.

Detailed Explanation:
* Rationale for Correct Answer: A high percentage of coding outliers (e.g., using higher-paying diagnosis or procedure codes more often than peers) is a red flag of upcoding or fraudulent billing. This signals possible abuse of reimbursement systems.
* Analysis of Incorrect Options:
* A – Fewer claims would not suggest fraud.
* C – Matching documentation is expected, not suspicious.
* D – Low profits may indicate inefficiency, not fraud.
* Key Concept: Health care fraud detection through data analytics and coding anomalies.
Reference: ACFE Manual, Financial Transactions – Health Care Fraud .

QUESTION 172
__________ are the amounts which are owed to other entities:

Supplies

Expenses

Assets

Liabilities

Detailed Explanation:
* Rationale for Correct Answer: Liabilities are defined as obligations to transfer assets or provide services to other entities in the future as a result of past transactions. They represent what the organization owes, distinguishing them from assets.
* Analysis of Incorrect Options:
* A. Supplies – Assets consumed within a year, not obligations.
* B. Expenses – Costs incurred, but not necessarily amounts owed.
* C. Assets – Resources owned, not obligations.
* Key Concept: Definition of Liabilities in accounting.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts – Assets and Liabilities .

QUESTION 173
Which of the following scenarios is an example of a trade-based money laundering scheme?

A fraudster purchases rare items on an online gaming platform using illicit funds and then sells the items to an accomplice who pays the fraudster with legitimate money.

An importer funnels money through a cash-intensive business to conceal income from illicit activities with legitimate revenue from the front company.

An exporter and importer engage in a fraudulent transaction in which the exporter invoices goods to the importer at a price above their market value.

A public official embezzles government funds from Country A and transfers them to a foreign account in Country B in small increments to avoid the reporting threshold.

The correct answer is C. Trade-based money laundering uses international trade transactions to disguise or move illicit value. A common method is misinvoicing, where colluding importers and exporters overstate or understate the price, quantity, or quality of goods. When goods are invoiced above market value, value can be transferred from the importer to the exporter under the appearance of a legitimate commercial payment.
Option A involves laundering through virtual or digital assets, not trade-based laundering. Option B describes use of a front business, particularly a cash-intensive business, to mix illegal proceeds with legitimate revenue.
Option D describes structuring or smurfing through small transfers. The international invoice manipulation in option C is the strongest example of trade-based money laundering.

QUESTION 174
__________ can be defined as conduct detrimental to the organization and to the employee.

Employee deviance

Employee theft

Employee fraud

All of the above

Detailed Explanation:
* Rationale for Correct Answer: The term Employee deviance refers to conduct that is harmful both to the organization and to the employee engaging in it. This encompasses a broad set of behaviors, including fraud, theft, abuse, and violations of organizational norms. While employee theft and fraud are subsets, deviance is the umbrella concept.
* Analysis of Incorrect Options:
* B. Employee theft – Specific to stealing from the employer, not the broader definition of detrimental conduct.
* C. Employee fraud – Specific to deceptive practices, not all deviant acts.
* D. All of the above – Incorrect, since the definition most accurately matches “Employee deviance.”
* Key Concept: Employee Deviance – broader behavioral category that includes fraud, theft, and other misconduct.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraud Theory – Employee Deviance and Occupational Fraud .

QUESTION 175
Which of the following statements is MOST ACCURATE concerning common methods that identity thieves use to steal information?

Baiting is the practice of manipulating an individual into releasing confidential information by impersonating their bank or a financial institution with which they do business.

Pharming involves searching for sensitive personal or business information on used computers that have been purchased from a third-party reseller.

Shoulder surfing involves gathering personal information by listening to a conversation or observing an individual entering a PIN into a device.

Phishing is the practice of searching through discarded credit card receipts, bank statements, and other identifying documentation for personal and business information.

Shoulder surfing is the practice of obtaining personal or confidential information by watching or listening while a victim uses or discloses it. Common examples include observing someone enter a PIN, password, access code, or account number, or overhearing a person provide sensitive details during a conversation.
Option A is inaccurate because impersonating a bank or financial institution to obtain confidential information is closer to phishing or vishing, not baiting. Option B is inaccurate because pharming redirects users to fraudulent websites, while searching used devices is a discarded-device or data-recovery risk. Option D describes dumpster diving, not phishing. The ACFE identity theft materials distinguish these methods because recognizing the specific technique is important for prevention, investigation, and victim response.

QUESTION 176
Organizations that had external audits actually had higher median losses and longer-lasting fraud schemes than those organizations that were not audited.

True

False

Detailed Explanation:
* Rationale for Correct Answer: This statement is True . ACFE research shows that external audits, while valuable, are generally not effective at detecting fraud quickly . Organizations with only external audits often experience higher median losses and longer-lasting schemes compared to those with stronger internal controls and fraud-specific detection mechanisms. External audits are not designed to catch fraud; their focus is on financial statement accuracy.
* Key Concept: Effectiveness of External Audits in fraud detection versus prevention and internal controls.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraud Prevention and Detection
– Effectiveness of External Audits .

QUESTION 177
Which of the following options BEST describes horizontal analysis?

A means of measuring the performance of a parent company to one of its subsidiaries

A means of examining the percentage change in individual line items on a financial statement from one accounting period to the next

A means of measuring the relationship between two different financial statement amounts

A means of examining the relationship of items on a financial statement by expressing components as percentages of a specified base value

The correct answer is B. Horizontal analysis compares financial statement amounts across accounting periods and focuses on changes over time. Fraud examiners use it to identify unusual increases, decreases, or trends in individual line items, such as revenue, expenses, inventory, accounts receivable, or liabilities. Option C describes ratio analysis, which measures relationships between different financial statement amounts. Option D describes vertical analysis, which expresses financial statement items as percentages of a base amount, such as total assets or net sales. Option A is unrelated. In financial statement fraud detection, horizontal analysis helps reveal abnormal trends that might indicate improper revenue recognition, concealed liabilities, manipulated expenses, or other misstatements requiring further investigation.

QUESTION 178
Which of the following statements about skimming is CORRECT?

Skimming schemes involve the theft of cash sales but not accounts receivable payments.

Skimming schemes involve stolen customer payments that were not recorded.

Skimming schemes are considered on-book frauds because they leave an audit trail.

Skimming schemes are generally less difficult to detect than cash larceny schemes.

Detailed Explanation:
* Rationale for Correct Answer: Skimming is the theft of incoming cash before it is recorded in the books . Since the payment is never recorded, no audit trail exists, making it an “off-book” scheme.
* Analysis of Incorrect Options:
* A – Incorrect; skimming can involve both sales and receivable payments.
* C – Incorrect; skimming is off-book , not on-book.
* D – Incorrect; skimming is typically harder to detect than larceny, since there is no record.
* Key Concept: Skimming vs. larceny – off-book theft of cash receipts.
Reference: ACFE Manual, Cash Receipts – Skimming Schemes .

QUESTION 179
Brad owns a failing business that sells various types of raw stone for homes. Brad decides to file for bankruptcy on behalf of the company, but one month before doing so, he transfers several expensive slabs of marble to his son’s construction business at no charge. Which type of fraud scheme has Brad MOST LIKELY committed?

A concealed transfer

A fraudulent bankruptcy

A planned bustout

A fraudulent conveyance

The correct answer is D. A fraudulent conveyance occurs when a debtor transfers property to another party, often an insider or related party, for little or no consideration before or during insolvency to place assets beyond the reach of creditors. Brad’s transfer of valuable marble slabs to his son’s construction business at no charge shortly before bankruptcy is a strong indicator of such a scheme. Option A, concealed transfer, is less precise because the key issue is not merely hiding a transfer but transferring assets for inadequate value to impair creditors. Option B is overly broad and does not identify the scheme type. Option C, planned bustout, usually involves obtaining goods or credit with the intent to dispose of assets and then file bankruptcy.

QUESTION 180
________, one of the synonyms for fraud, implies deceiving so thoroughly as to obscure the truth.

Deceive

Delude

Mislead

Beguile

Detailed Explanation:
* Rationale for Correct Answer: The word delude means to mislead the mind or judgment so completely that the truth is obscured. In fraud examination, this aligns with the ACFE definition of fraud as a “deliberate misrepresentation that causes another to act to their detriment.” Fraud is not merely a false statement; it involves concealment or suppression of the truth with the intent to induce reliance. Thus, delude most accurately represents the deeper essence of fraud.
* Analysis of Incorrect Options (Distractors):
* A. Deceive: While fraud does involve deception, this word does not fully convey the thoroughness of obscuring the truth that fraud entails.
* C. Mislead: This implies causing error or leading astray but lacks the complete concealment aspect central to fraud.
* D. Beguile: Often connotes charm or trickery rather than the intentional concealment that characterizes fraud.
* Key Concept: This question tests the definition and essence of fraud – specifically that fraud is not only about deceiving but about deluding , or thoroughly misleading, in a way that obscures the truth.
Reference: ACFE Fraud Examiners Manual (2020 International Edition), Law – The Law Related to Fraud:
Definition of Fraud .

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