CBA Fraud Examination and Prevention 1 — Questions and Answers
Question 1: What is the primary purpose of a fraud risk assessment in banking?
- To identify and evaluate the likelihood and impact of potential fraud schemes (Correct answer)
- To calculate the total annual dollar loss from past fraud incidents
- To determine staffing requirements for the fraud examination department
- To assess customer satisfaction with existing fraud prevention measures
Correct answer: To identify and evaluate the likelihood and impact of potential fraud schemes
A fraud risk assessment identifies and evaluates potential fraud schemes, their likelihood, and potential impact to help prioritize prevention and detection controls.
Question 2: According to the ACFE Fraud Triangle, which three elements must all be present for occupational fraud to occur?
- Motivation, rationalization, and capability
- Pressure, opportunity, and rationalization (Correct answer)
- Greed, access, and deception
- Intent, means, and motive
Correct answer: Pressure, opportunity, and rationalization
The ACFE Fraud Triangle identifies pressure (incentive or need), opportunity (weak controls), and rationalization (personal justification) as the three necessary conditions for occupational fraud.
Question 3: Which type of bank fraud involves an employee creating fictitious loans to generate fraudulent commissions or misappropriate proceeds?
- Check kiting
- Identity theft
- Loan origination fraud (Correct answer)
- Embezzlement through payroll manipulation
Correct answer: Loan origination fraud
Loan origination fraud occurs when employees create fictitious or unsupported loans to earn commissions or divert loan proceeds for personal gain.
Question 4: What is 'check kiting' in the banking context?
- Forging endorsement signatures on checks
- Exploiting float time between banks to artificially inflate account balances (Correct answer)
- Stealing blank checks from a customer's checkbook
- Altering the dollar amount on a check after it has been issued
Correct answer: Exploiting float time between banks to artificially inflate account balances
Check kiting exploits the float period between when a check is deposited and when it clears, allowing a fraudster to artificially inflate available balances across multiple accounts at different banks.
Question 5: Which internal control is most effective at preventing unauthorized wire transfers?
- Monthly reconciliation of wire transfer accounts
- Dual control requiring two authorized individuals to initiate and approve each transfer (Correct answer)
- Annual fraud awareness training for all wire transfer employees
- Quarterly external auditor review of all wire transfer transactions
Correct answer: Dual control requiring two authorized individuals to initiate and approve each transfer
Dual control requiring two authorized individuals to both initiate and approve wire transfers is the most effective preventive control, ensuring no single person can unilaterally execute a transfer.
Question 6: Which behavioral red flag most commonly indicates potential employee embezzlement at a bank?
- An employee who consistently takes all scheduled vacation days
- An employee living beyond apparent financial means who refuses to take vacation (Correct answer)
- A teller who processes a high volume of customer transactions daily
- An employee who frequently asks questions about internal audit procedures
Correct answer: An employee living beyond apparent financial means who refuses to take vacation
Employees living beyond their means and refusing to take vacation — to prevent another employee from discovering their scheme — are classic behavioral red flags for embezzlement.
Question 7: What is the primary role of a Certified Fraud Examiner (CFE) during a bank internal audit engagement?
- To approve all transactions above a defined dollar threshold
- To investigate suspected fraud, gather evidence, and support potential legal or disciplinary action (Correct answer)
- To manage insurance claims submitted for fraud-related losses
- To conduct customer-facing fraud awareness training sessions
Correct answer: To investigate suspected fraud, gather evidence, and support potential legal or disciplinary action
A CFE's primary role is to investigate suspected fraud using specialized techniques, gather and preserve evidence, document findings, and support potential prosecution or disciplinary proceedings.
CBA Fraud Examination and Prevention 1
What is the primary purpose of a fraud risk assessment in banking?