CFE Bribery and Corruption 4 — Questions and Answers
Question 1: A city council member votes to award a construction contract to a firm after receiving concealed campaign contributions from the firm's owner. This BEST describes which corruption scheme?
- Political corruption through improper campaign contributions (Correct answer)
- Economic extortion by the council member
- Commercial bribery between private parties
- Conflict of interest with no corrupt intent
Correct answer: Political corruption through improper campaign contributions
Using concealed campaign contributions to influence an official vote on a government contract constitutes political corruption, a form of public sector bribery.
Question 2: Which of the following is the MOST effective internal control to prevent bribery in a company's procurement function?
- Mandatory rotation of procurement personnel and segregation of contract approval duties (Correct answer)
- Annual employee acknowledgment of the code of conduct
- Requiring all vendors to be publicly traded companies
- Limiting all contracts to amounts under a fixed dollar threshold
Correct answer: Mandatory rotation of procurement personnel and segregation of contract approval duties
Personnel rotation disrupts established corrupt relationships while segregation of duties prevents any single employee from both selecting vendors and approving payments.
Question 3: Under the FCPA's internal controls provision, which type of company is subject to the requirement?
- Issuers whose securities are registered with the SEC or required to file reports with the SEC (Correct answer)
- Any US company operating in foreign countries regardless of SEC registration
- Only companies with revenues exceeding $1 billion annually
- Any company incorporated in the United States
Correct answer: Issuers whose securities are registered with the SEC or required to file reports with the SEC
The FCPA's internal controls provisions apply to 'issuers,' meaning companies whose securities are registered under or required to file reports with the SEC.
Question 4: An employee is told by a foreign customs official that goods will be held indefinitely unless a payment is made to release them. This BEST illustrates:
- Economic extortion (Correct answer)
- Commercial bribery
- Active bribery
- Bid rigging
Correct answer: Economic extortion
When a public official demands payment under threat of harm or withholding a service, it constitutes economic extortion rather than voluntary bribery.
Question 5: A fraud examiner reviewing contracts notices a vendor consistently wins bids by exactly 1% below the next lowest competitor. This pattern MOST suggests:
- The winning vendor has access to competitors' confidential bid information through a corrupt insider (Correct answer)
- The vendor has more efficient operations than its competitors
- The procurement process is functioning as intended through fair competition
- The vendor is using aggressive but legal pricing strategies
Correct answer: The winning vendor has access to competitors' confidential bid information through a corrupt insider
Consistently winning by a narrow margin that closely tracks competitors' bids strongly suggests bid leakage—an insider is sharing competitor pricing with the winning vendor.
Question 6: Which of the following is the ACFE's recommended first step when a fraud examiner suspects a bribery scheme but lacks direct evidence?
- Conduct a detailed lifestyle analysis of suspected employees (Correct answer)
- Immediately notify law enforcement and suspend the suspect
- Interview the suspected employee to obtain a confession
- Announce an internal audit to deter further corrupt acts
Correct answer: Conduct a detailed lifestyle analysis of suspected employees
Lifestyle analysis—comparing known income to observed spending and assets—can reveal unexplained wealth that suggests undisclosed bribery income without tipping off the suspect.
Question 7: In the context of corruption, 'state capture' refers to:
- When private entities corrupt government processes to shape laws and regulations in their favor (Correct answer)
- When government officials take over private businesses through regulatory action
- The arrest and prosecution of corrupt government officials
- A government's nationalization of private companies suspected of bribery
Correct answer: When private entities corrupt government processes to shape laws and regulations in their favor
State capture describes a systemic form of grand corruption where private interests subvert government institutions to obtain favorable policies, laws, or contracts.
CFE Bribery and Corruption 4
A city council member votes to award a construction contract to a firm after receiving concealed campaign contributions from the firm's owner.
This BEST describes which corruption scheme?