CFE Fraud Detection & Prevention 4

Question 1

Which of the following BEST describes a 'pass-through' billing scheme?

Accepted Answer

An employee creates a shell company that buys and resells goods to the employer at inflated prices

Answer

In a pass-through scheme, an employee's shell company acts as a middleman, purchasing goods at cost and reselling them to the employer at a markup.

Question 2

Which statistical technique is used to identify journal entries that deviate significantly from expected patterns?

Accepted Answer

Standard deviation analysis

Answer

Standard deviation analysis flags journal entries that fall far outside the normal distribution, highlighting unusual or potentially fraudulent postings.

Question 3

An examiner reviewing purchase orders notices several approved by a manager whose approval limit was exceeded. This MOST likely indicates:

Accepted Answer

Authorization control override or collusion

Answer

Approvals that exceed stated limits suggest either the authorization controls were bypassed or the approver colluded with the requester.

Question 4

Which forensic technique involves reconstructing a subject's net worth over time to detect unreported income?

Accepted Answer

Net worth method

Answer

The net worth method tracks changes in a subject's assets and liabilities over time; unexplained increases in net worth may indicate unreported income.

Question 5

A company's accounts payable clerk processes a payment to a vendor whose address matches the clerk's personal address. This is BEST categorized as:

Accepted Answer

Billing fraud via shell company or self-dealing

Answer

Matching vendor and employee addresses is a classic red flag for a shell company or self-dealing billing scheme where the employee controls the vendor.

(CFE) Certified Financial Examiner Practice Test

(CFE) Certified Financial Examiner Practice Test

CFE Fraud Detection & Prevention 4