Fraud Detection & Prevention Techniques Flashcards
7 cards from real CFA 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 Detection & Prevention Techniques flashcards as text
In a purchasing fraud scheme, an employee splits a $25,000 purchase into five $4,999 orders. This is BEST described as:
Answer: Structuring or 'smurfing'
Structuring (also called smurfing) involves breaking large transactions into smaller amounts to avoid approval thresholds or reporting requirements.
Which of the following is an example of a DETECTIVE fraud control?
Answer: Monthly reconciliation of bank statements
Bank reconciliations are detective controls that identify discrepancies after transactions have occurred, unlike preventive controls that stop fraud before it happens.
A fraud examiner is investigating expense reimbursement fraud. Which analytical procedure would BEST identify fictitious expense claims?
Answer: Matching expense receipts to calendar data such as weekends and holidays
Cross-referencing claimed business expenses against dates when the business was closed (weekends, holidays) exposes fabricated receipts for non-existent business activities.
What does 'lapping' refer to in the context of accounts receivable fraud?
Answer: Using one customer's payment to cover a stolen payment from another customer
Lapping involves stealing a customer payment and then covering it with the next customer's payment, creating a cycle of temporary concealment.
Which whistleblower protection mechanism is MOST associated with encouraging reporting of securities fraud in the United States?
Answer: The Dodd-Frank Act whistleblower program
The Dodd-Frank Act established the SEC's whistleblower program with financial awards of 10-30% of sanctions exceeding $1 million, incentivizing securities fraud reporting.
A forensic accountant uses 'linkage analysis' during a fraud investigation. What is the PRIMARY purpose of this technique?
Answer: Identifying relationships and connections between entities, people, and transactions
Linkage analysis maps relationships between individuals, organizations, accounts, and transactions to reveal networks involved in fraud schemes.
Which element is NOT part of the Fraud Triangle?
Answer: Greed
The Fraud Triangle consists of Pressure (motivation), Opportunity (ability to commit fraud), and Rationalization (justification); greed is a motivator but not a separate triangle element.