ACFE Fraud Risk Assessment 3 — Questions and Answers
Question 1: Which of the following is the primary purpose of benchmarking during a fraud risk assessment?
- To compare employee salaries against industry averages
- To compare an organization's fraud controls against peer organizations or best practices (Correct answer)
- To measure the time it takes to detect a fraud scheme
- To calculate the dollar value of past fraud losses
Correct answer: To compare an organization's fraud controls against peer organizations or best practices
Benchmarking in fraud risk assessment involves comparing an organization's controls and risk posture against industry peers or established best practices to identify gaps.
Question 2: An organization's fraud risk assessment reveals a high-likelihood, low-impact risk. The most appropriate management response is typically to:
- Accept the risk with no action
- Implement cost-effective controls to reduce likelihood (Correct answer)
- Transfer the risk through insurance immediately
- Escalate the risk to the board for immediate resolution
Correct answer: Implement cost-effective controls to reduce likelihood
High-likelihood, low-impact risks are best addressed by implementing controls that reduce how often the fraud could occur.
Question 3: Which of the following scenarios most clearly illustrates 'collusion risk' in a fraud risk assessment?
- A single employee who has both custody of assets and recording responsibility
- Two employees who agree to circumvent segregation of duties controls together (Correct answer)
- A manager who fails to review monthly bank reconciliations
- An IT administrator with excessive system access privileges
Correct answer: Two employees who agree to circumvent segregation of duties controls together
Collusion risk arises when two or more individuals work together to bypass controls that would prevent fraud by a single person.
Question 4: In the context of fraud risk assessment, 'tone at the top' is evaluated primarily because it affects which fraud triangle element?
- Opportunity
- Rationalization
- Pressure
- All three elements (Correct answer)
Correct answer: All three elements
A poor tone at the top can create pressure through unrealistic expectations, opportunities through weak oversight, and rationalization through modeling unethical behavior.
Question 5: When using data analytics as part of a fraud risk assessment, what is the primary goal?
- To replace the need for fraud risk interviews
- To identify anomalies and patterns that may indicate fraud risk exposure (Correct answer)
- To calculate the total cost of all detected frauds
- To automate the entire fraud risk assessment process
Correct answer: To identify anomalies and patterns that may indicate fraud risk exposure
Data analytics in fraud risk assessment is used to surface anomalies, outliers, and unusual patterns that signal areas of elevated fraud risk.
Question 6: A company operates in an industry with high cash transaction volume. When conducting a fraud risk assessment, this environmental factor primarily elevates which category of fraud risk?
- Financial statement fraud
- Corruption and bribery
- Asset misappropriation (Correct answer)
- Cybersecurity fraud
Correct answer: Asset misappropriation
High cash transaction volume significantly increases the risk of asset misappropriation, particularly cash theft and skimming schemes.
Question 7: Which of the following is the MOST effective way to ensure that a fraud risk assessment remains current and relevant?
- Conducting the assessment only when a fraud is detected
- Performing a full assessment every ten years
- Updating the assessment periodically and whenever significant organizational changes occur (Correct answer)
- Delegating all updates to the external auditors annually
Correct answer: Updating the assessment periodically and whenever significant organizational changes occur
Fraud risk assessments should be refreshed on a regular schedule and triggered by major events like reorganizations, new products, or mergers.
ACFE Fraud Risk Assessment 3
Which of the following is the primary purpose of benchmarking during a fraud risk assessment?