CFE Ethical Obligations & Professional Conduct 3 — Questions and Answers
Question 1: A CFE discovers that a colleague has submitted a fraudulent expense report to their employer. What is the CFE's primary ethical obligation?
- Ignore it to avoid workplace conflict
- Report the misconduct through appropriate channels (Correct answer)
- Confront the colleague directly and demand repayment
- Conduct a personal investigation before taking any action
Correct answer: Report the misconduct through appropriate channels
CFEs have an ethical duty to report known fraud or misconduct through appropriate internal or external channels rather than ignoring it.
Question 2: Which of the following best describes the concept of 'professional skepticism' for a CFE?
- Assuming all clients are dishonest
- Questioning everything without any basis
- Maintaining a questioning mind and critically assessing evidence (Correct answer)
- Refusing to accept any documentary evidence
Correct answer: Maintaining a questioning mind and critically assessing evidence
Professional skepticism means maintaining a questioning mind and critically evaluating evidence rather than accepting information at face value.
Question 3: A CFE is offered a percentage of the recovered funds as compensation for a fraud investigation. This arrangement is:
- Acceptable if disclosed to all parties
- Prohibited as it creates a conflict of interest (Correct answer)
- Standard practice in forensic investigations
- Permitted only with written client consent
Correct answer: Prohibited as it creates a conflict of interest
Contingency fees based on investigation outcomes are prohibited because they compromise the CFE's objectivity and independence.
Question 4: When a CFE is retained by defense counsel in a criminal matter, the CFE's ultimate duty is to:
- Advocate zealously for the defendant
- Provide objective, truthful findings regardless of who retained them (Correct answer)
- Find evidence that supports the defense theory
- Refuse to testify if findings are unfavorable to the client
Correct answer: Provide objective, truthful findings regardless of who retained them
A CFE's duty to provide objective and truthful findings supersedes any obligation to advocate for the retaining party.
Question 5: A CFE is asked to backdate a work product document. The appropriate response is to:
- Comply if the client provides a valid business reason
- Refuse, as this constitutes falsification of records (Correct answer)
- Consult with legal counsel before deciding
- Comply only if the document is marked as amended
Correct answer: Refuse, as this constitutes falsification of records
Backdating documents is a form of falsification that violates ACFE ethical standards and potentially constitutes fraud itself.
Question 6: The ACFE Code of Professional Ethics requires members to refrain from which of the following?
- Accepting engagements outside their primary expertise
- Conducting investigations without prior client approval
- Using information obtained in an engagement to personally benefit (Correct answer)
- Disclosing their CFE credentials to opposing counsel
Correct answer: Using information obtained in an engagement to personally benefit
The ACFE code explicitly prohibits using confidential information gained during an engagement for personal gain or benefit.
Question 7: A CFE who knowingly signs off on a report containing material misstatements is most likely guilty of:
- Negligent misrepresentation only
- A breach of professional ethics and potentially fraud (Correct answer)
- An administrative violation subject to a fine
- An honest mistake requiring only correction
Correct answer: A breach of professional ethics and potentially fraud
Knowingly certifying false information constitutes a serious breach of professional ethics and may expose the CFE to fraud liability.
CFE Ethical Obligations & Professional Conduct 3
A CFE discovers that a colleague has submitted a fraudulent expense report to their employer.
What is the CFE's primary ethical obligation?