CFE Certified Fraud Examiner (CFE) MCQ 4

Question 1

A payroll clerk adds a fictitious employee to the payroll system and diverts the paychecks to their own account. This scheme is called:

Accepted Answer

Ghost employee scheme

Answer

A ghost employee scheme involves adding a non-existent (or former) employee to payroll and diverting the wages to the perpetrator.

Question 2

Which of the following statements about Benford's Law is CORRECT?

Accepted Answer

It predicts that lower leading digits (1, 2, 3) occur more frequently in naturally occurring data sets

Answer

Benford's Law states that in many naturally occurring numerical data sets, the digit 1 appears as the leading digit about 30% of the time, with frequency decreasing for higher digits.

Question 3

Which of the following best describes a 'shell company' used in a fraudulent billing scheme?

Accepted Answer

A fictitious entity created to receive fraudulent payments from the victim organization

Answer

In fraudulent billing schemes, perpetrators set up shell companies—entities with no real operations—to receive payments for goods or services never provided.

Question 4

When conducting a fraud examination, the 'net worth method' is primarily used to:

Accepted Answer

Indirectly prove undisclosed income by analyzing changes in a suspect's net worth

Answer

The net worth method detects hidden income by showing that a suspect's net worth increased more than can be explained by known legitimate income.

Question 5

Which of the following is the MOST reliable internal control for preventing check tampering?

Accepted Answer

Requiring dual signatures on all checks above a threshold

Answer

Requiring dual signatures on large checks ensures that no single individual can unilaterally authorize disbursements, reducing the risk of tampering.

Certified Fraud Examiner Exam Practice Test

Certified Fraud Examiner Exam Practice Test

CFE Certified Fraud Examiner (CFE) MCQ 4