CFE Forensic Accounting & Financial Fraud Investigation

Question 1

Which financial statement fraud scheme involves recording fictitious revenues to inflate a company's reported income?

Accepted Answer

Fictitious revenue scheme

Answer

Fictitious revenue schemes involve recording sales or revenue that never actually occurred in order to inflate reported financial results.

Question 2

The Fraud Triangle, developed by criminologist Donald Cressey, identifies which three elements present in most fraud cases?

Accepted Answer

Pressure, Opportunity, and Rationalization

Answer

Cressey's Fraud Triangle consists of Pressure (the perceived need), Opportunity (the ability to commit fraud), and Rationalization (the mindset justifying the act).

Question 3

In forensic accounting, what does the term 'benford's law' refer to?

Accepted Answer

A mathematical pattern predicting the frequency distribution of leading digits in natural datasets

Answer

Benford's Law describes the expected frequency of leading digits in naturally occurring datasets; deviations from this distribution can indicate data manipulation or fraud.

Question 4

Which type of asset misappropriation scheme involves an employee manipulating accounts receivable records to conceal the theft of customer payments?

Accepted Answer

Lapping

Answer

Lapping is a scheme where an employee steals a customer payment and covers it by applying a subsequent customer's payment to the first account, creating a rotating shortage.

Question 5

What is the primary purpose of a 'net worth analysis' in a financial fraud investigation?

Accepted Answer

To estimate unreported income by comparing changes in net worth to known income sources

Answer

A net worth analysis compares increases in a subject's net worth against known legitimate income sources; unexplained increases suggest unreported income from fraud.

(CFE) Certified Forensic Examiner Practice Test

(CFE) Certified Forensic Examiner Practice Test

CFE Forensic Accounting & Financial Fraud Investigation