Practice Questions 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 Practice Questions flashcards as text
Which of the following best describes the 'net worth method' used in fraud investigations?
Answer: Estimating unreported income by comparing changes in net worth to reported income
The net worth method calculates increases in a suspect's net worth that exceed reported income, suggesting unreported income from fraud.
A company that knowingly assists a client in disguising the source of illegal funds may be liable under:
Answer: Aiding and abetting money laundering statutes
Knowingly facilitating another party's money laundering can expose a company to aiding and abetting liability under federal money laundering statutes.
Which of the following is the best example of 'structuring' (also known as smurfing)?
Answer: Breaking large cash deposits into multiple transactions below $10,000 to avoid CTR filing
Structuring involves deliberately splitting cash transactions below the $10,000 threshold to avoid Currency Transaction Report requirements.
When a CFE prepares a written report of investigation findings, it should:
Answer: Be limited to factual findings and supported by evidence
CFE investigation reports should objectively present factual findings supported by evidence without expressing opinions on guilt or recommending charges.
Which inventory fraud scheme involves an employee recording fictitious inventory to inflate assets?
Answer: Inventory padding
Inventory padding involves recording nonexistent or overvalued inventory to inflate reported assets on the balance sheet.
Under the ACFE's standards, a fraud examination differs from an audit primarily because:
Answer: A fraud examination begins with a predicate (specific allegation) while an audit tests random samples
Unlike an audit that broadly tests controls, a fraud examination is predicate-based, initiated by a specific allegation or suspicion of fraud.
Which of the following statements about the statute of limitations in fraud cases is correct?
Answer: The discovery rule may toll (pause) the statute of limitations until the fraud is discovered
The discovery rule allows the statute of limitations to begin running from the date the fraud was discovered rather than when it occurred.