CFE Practice Questions 5

Question 1

Which of the following best describes the 'net worth method' used in fraud investigations?

Accepted Answer

Estimating unreported income by comparing changes in net worth to reported income

Answer

The net worth method calculates increases in a suspect's net worth that exceed reported income, suggesting unreported income from fraud.

Question 2

A company that knowingly assists a client in disguising the source of illegal funds may be liable under:

Accepted Answer

Aiding and abetting money laundering statutes

Answer

Knowingly facilitating another party's money laundering can expose a company to aiding and abetting liability under federal money laundering statutes.

Question 3

Which of the following is the best example of 'structuring' (also known as smurfing)?

Accepted Answer

Breaking large cash deposits into multiple transactions below $10,000 to avoid CTR filing

Answer

Structuring involves deliberately splitting cash transactions below the $10,000 threshold to avoid Currency Transaction Report requirements.

Question 4

When a CFE prepares a written report of investigation findings, it should:

Accepted Answer

Be limited to factual findings and supported by evidence

Answer

CFE investigation reports should objectively present factual findings supported by evidence without expressing opinions on guilt or recommending charges.

Question 5

Which inventory fraud scheme involves an employee recording fictitious inventory to inflate assets?

Accepted Answer

Inventory padding

Answer

Inventory padding involves recording nonexistent or overvalued inventory to inflate reported assets on the balance sheet.

Certified Fraud Examiner Exam Practice Test

Certified Fraud Examiner Exam Practice Test

CFE Practice Questions 5