ACFE - Association of Certified Fraud Examiners Corporate Governance and Ethics Questions and Answers

Question 1

A company's senior management team consistently emphasizes the importance of meeting aggressive quarterly revenue targets.
They offer substantial bonuses for hitting these targets and publicly criticize managers who fall short.
However, the company's official code of conduct explicitly prohibits channel stuffing and recording sales before they are earned.
When an internal audit discovers that a sales manager has been pressuring staff to ship unordered products to distributors at the end of a quarter, this situation MOST directly indicates a failure in:

Accepted Answer

The establishment of a proper 'tone at the top'.

Answer

The external audit function's oversight.

Answer

The company's whistleblower protection program.

Answer

The segregation of duties within the sales department.

Question 2

Which of the following is a primary responsibility of a company's audit committee in the context of corporate governance and fraud prevention?

Accepted Answer

Overseeing the financial reporting process and the work of external auditors.

Answer

Executing the day-to-day internal control procedures.

Answer

Personally conducting all internal fraud investigations.

Answer

Managing the company's quarterly and annual budgeting process.

Question 3

To enhance corporate accountability and restore investor confidence after major accounting scandals, the Sarbanes-Oxley Act of 2002 (SOX) instituted several key reforms. Which provision of SOX directly holds CEOs and CFOs personally accountable for the accuracy of their company's financial statements?

Accepted Answer

Section 302, which requires officer certification of financial reports.

Answer

Section 404, which requires an internal control report.

Answer

Section 806, which provides whistleblower protection.

Answer

Section 201, which restricts services offered by auditors.

Question 4

An effective corporate code of conduct is a cornerstone of a strong ethical culture. Which of the following elements is MOST critical for ensuring a code of conduct is an effective anti-fraud tool rather than just a document?

Accepted Answer

Consistent enforcement of the code and visible disciplinary action for violations.

Answer

Making the document publicly available on the company website.

Answer

Ensuring the document is written by the external legal counsel.

Answer

Requiring all employees to pass a multiple-choice test on the code's contents annually.

Question 5

A Certified Fraud Examiner (CFE) working as an internal auditor for a large corporation discovers credible evidence that the Chief Financial Officer (CFO) has been deliberately misclassifying capital expenditures to inflate net income. The CFO is the CFE's direct supervisor and warns the CFE that pursuing the matter will end their career. According to the ACFE Code of Professional Ethics, what is the CFE's primary obligation?

Accepted Answer

To report the findings to a higher level of authority, such as the audit committee or the board of directors.

Answer

To resign immediately to avoid a conflict of interest.

Answer

To keep the information confidential as it was obtained during a professional engagement.

Answer

To comply with the supervisor's directive to protect their employment.

Question 6

Which of the following is NOT considered a fundamental component of an effective corporate ethics and compliance program?

Accepted Answer

A guarantee of bonuses for employees who report misconduct.

Answer

Clear, written standards and procedures, including a code of conduct.

Answer

A confidential reporting mechanism and whistleblower protection policies.

Answer

Regular, effective training and communication for all employees.