CFA Fraud Detection & Prevention Techniques 3

Question 1

In a purchasing fraud scheme, an employee splits a $25,000 purchase into five $4,999 orders. This is BEST described as:

Accepted Answer

Structuring or 'smurfing'

Answer

Structuring (also called smurfing) involves breaking large transactions into smaller amounts to avoid approval thresholds or reporting requirements.

Question 2

Which of the following is an example of a DETECTIVE fraud control?

Accepted Answer

Monthly reconciliation of bank statements

Answer

Bank reconciliations are detective controls that identify discrepancies after transactions have occurred, unlike preventive controls that stop fraud before it happens.

Question 3

A fraud examiner is investigating expense reimbursement fraud. Which analytical procedure would BEST identify fictitious expense claims?

Accepted Answer

Matching expense receipts to calendar data such as weekends and holidays

Answer

Cross-referencing claimed business expenses against dates when the business was closed (weekends, holidays) exposes fabricated receipts for non-existent business activities.

Question 4

What does 'lapping' refer to in the context of accounts receivable fraud?

Accepted Answer

Using one customer's payment to cover a stolen payment from another customer

Answer

Lapping involves stealing a customer payment and then covering it with the next customer's payment, creating a cycle of temporary concealment.

Question 5

Which whistleblower protection mechanism is MOST associated with encouraging reporting of securities fraud in the United States?

Accepted Answer

The Dodd-Frank Act whistleblower program

Answer

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.

CFA Practice Test

CFA Practice Test

CFA Fraud Detection & Prevention Techniques 3