ACFE Fraud Prevention & Deterrence 4 — Questions and Answers
Question 1: According to the ACFE, how does organizational size typically affect fraud losses?
- Larger organizations always suffer greater total losses
- Smaller organizations tend to suffer larger median losses relative to revenue (Correct answer)
- Size has no meaningful impact on fraud losses
- Mid-sized firms have the highest fraud rates
Correct answer: Smaller organizations tend to suffer larger median losses relative to revenue
Smaller organizations tend to have weaker internal controls and thus suffer proportionally larger losses relative to their size, even though total dollar losses may be smaller.
Question 2: Which fraud prevention measure specifically targets the 'pressure' element of the fraud triangle?
- Segregation of duties
- Employee assistance programs (EAPs) (Correct answer)
- Surprise audits
- Access controls
Correct answer: Employee assistance programs (EAPs)
Employee assistance programs address financial, personal, or addiction pressures that may drive employees to commit fraud, directly targeting the pressure element.
Question 3: A vendor master file review is BEST described as which type of anti-fraud control?
- Preventive
- Corrective
- Detective (Correct answer)
- Compensating
Correct answer: Detective
Reviewing the vendor master file helps detect fictitious vendors, duplicate entries, or unauthorized changes that may indicate accounts payable fraud after the fact.
Question 4: The 'diamond model' of fraud extends the fraud triangle by adding which fourth element?
- Greed
- Collusion
- Capability (Correct answer)
- Concealment
Correct answer: Capability
David Wolfe and Dana Hermanson added 'capability'—the fraudster's skills, position, and ability to execute and conceal fraud—as a fourth element to the diamond model.
Question 5: Which governance structure is MOST effective at overseeing fraud risk management?
- An audit committee composed of independent directors (Correct answer)
- A committee of senior operational managers
- The CFO acting alone as chief risk officer
- External auditors serving as primary overseers
Correct answer: An audit committee composed of independent directors
An independent audit committee provides objective oversight of fraud risk because its members are not part of management and have no operational conflicts of interest.
Question 6: When fraud is discovered, what should an organization do FIRST before taking any further action?
- Terminate the suspected employee immediately
- Contact law enforcement
- Consult legal counsel and secure evidence (Correct answer)
- Notify all employees of the incident
Correct answer: Consult legal counsel and secure evidence
Consulting legal counsel and securing evidence ensures proper handling that preserves the organization's legal options and prevents inadvertent destruction of evidence.
Question 7: Which of the following BEST describes a 'zero-tolerance' fraud policy?
- All fraud suspects are immediately arrested
- No fraud, regardless of amount, is overlooked or handled informally (Correct answer)
- Only large frauds are prosecuted
- Employees receive a warning for first-time minor fraud
Correct answer: No fraud, regardless of amount, is overlooked or handled informally
A zero-tolerance policy means every instance of fraud is formally investigated and sanctioned consistently, regardless of the dollar amount or the perpetrator's position.
ACFE Fraud Prevention & Deterrence 4
According to the ACFE, how does organizational size typically affect fraud losses?