CFE Fraud Risk Assessment 3

Question 1

Which internal control is most effective at preventing a billing scheme involving fictitious vendors?

Accepted Answer

Vendor master file maintenance with independent approval

Answer

Maintaining a controlled vendor master file with independent approval of new vendors prevents employees from adding fictitious vendors to submit fraudulent invoices.

Question 2

Which of the following is an example of a detective control in a fraud risk management program?

Accepted Answer

Surprise cash counts

Answer

Surprise cash counts detect discrepancies after they occur rather than preventing them, making them a detective rather than preventive control.

Question 3

An organization's ethics hotline is BEST classified as which type of anti-fraud control?

Accepted Answer

Detective

Answer

An ethics hotline allows employees to report suspected fraud after it has begun, making it a detective control that helps uncover ongoing schemes.

Question 4

Which concept describes the idea that fraud risk is heightened when one employee handles multiple phases of the same transaction?

Accepted Answer

Segregation of duties failure

Answer

Segregation of duties failure occurs when one person controls initiation, authorization, and recording of a transaction, creating an unchecked opportunity for fraud.

Question 5

Which fraud risk factor is MOST associated with management override of internal controls?

Accepted Answer

Management's incentive compensation tied to earnings targets

Answer

When management compensation is heavily tied to reported earnings, there is strong incentive to override controls to manipulate financial results.

Certified Fraud Examiner Exam Practice Test

Certified Fraud Examiner Exam Practice Test

CFE Fraud Risk Assessment 3