Fraud Risk Assessment Flashcards
7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fraud Risk Assessment flashcards as text
Which element of the Fraud Triangle refers to a perpetrator's ability to rationalize fraudulent behavior as acceptable?
Answer: Rationalization
Rationalization is the cognitive process by which a fraudster justifies dishonest acts to themselves, completing the Fraud Triangle.
During a fraud risk assessment, which approach involves analyzing data to identify anomalies that may indicate fraud?
Answer: Data analytics
Data analytics involves examining large volumes of transactional data to detect patterns, outliers, or anomalies that could signal fraudulent activity.
A fraud risk assessment should be updated most frequently when which of the following occurs?
Answer: A significant organizational change such as a merger occurs
Material organizational changes such as mergers, acquisitions, or restructurings introduce new fraud risks that require the assessment to be revised promptly.
Which fraud scheme would most likely be identified by reviewing split purchase orders?
Answer: Bid rigging
Split purchase orders are a red flag for bid rigging or circumventing competitive bidding thresholds, allowing purchases to be made without proper approval.
Which of the following best describes 'inherent risk' in the context of fraud risk assessment?
Answer: The raw risk of fraud existing before any controls are considered
Inherent risk is the level of fraud risk present in a process or account before considering the effect of any internal controls.
Which technique involves walking through a process from beginning to end to identify potential fraud opportunities?
Answer: Process walk-through
A process walk-through traces a transaction from initiation to recording, helping assessors spot control gaps and fraud opportunities at each step.
When prioritizing fraud risks, organizations typically plot likelihood against which other dimension?
Answer: Potential impact or significance
Risk matrices plot the likelihood of a fraud scheme occurring against its potential impact, allowing organizations to prioritize high-risk areas for control investment.