ACFE Financial Transactions & Fraud Schemes 5

Question 1

A CFO instructs accounting staff to capitalize routine maintenance expenses rather than expensing them immediately. The primary effect of this fraudulent accounting is:

Accepted Answer

Overstated assets and overstated current-period net income

Answer

Capitalizing expenses instead of expensing them immediately reduces current-period costs, inflating net income while also overstating the asset base.

Question 2

In a 'forced balancing' scheme, an employee manipulates bank reconciliations by:

Accepted Answer

Inserting fabricated reconciling items to make the books match the bank statement despite discrepancies

Answer

Forced balancing involves entering false reconciling items—such as unsupported adjustments or fictitious outstanding checks—to mask cash theft in reconciliation records.

Question 3

Which of the following is an example of a 'related-party transaction' that could indicate financial statement fraud?

Accepted Answer

A company purchasing supplies from a vendor owned by the CEO at above-market prices without disclosure

Answer

Undisclosed transactions with related parties at non-arm's-length prices can be used to inflate expenses, transfer profits, or manipulate financial results.

Question 4

A perpetrator uses a business checking account to pay personal credit card bills by writing checks from the company. This scheme is most accurately classified as:

Accepted Answer

Personal purchases scheme

Answer

A personal purchases scheme occurs when an employee uses company funds or accounts to pay for personal expenses, misappropriating organizational assets.

Question 5

The ACFE defines 'corruption' in its Fraud Tree as schemes in which employees:

Accepted Answer

Misuse their influence in business transactions in ways that violate their duty to their employer

Answer

Corruption involves employees abusing their authority or influence—through bribery, kickbacks, or conflicts of interest—to benefit at the employer's expense.

(ACFE) Association of Certified Fraud Examiners Practice Test

(ACFE) Association of Certified Fraud Examiners Practice Test

ACFE Financial Transactions & Fraud Schemes 5