CFE Trivia 3 — Questions and Answers
Question 1: The term 'skimming' in occupational fraud refers to which type of scheme?
- Removing cash before it is recorded in the accounting system (Correct answer)
- Inflating reported sales figures
- Manipulating bank reconciliations
- Falsifying vendor invoices
Correct answer: Removing cash before it is recorded in the accounting system
Skimming is an off-book fraud where cash is stolen before it is entered into the accounting records, making it difficult to detect through normal reconciliations.
Question 2: Which element is NOT part of the classic fraud triangle?
- Pressure
- Opportunity
- Capability (Correct answer)
- Rationalization
Correct answer: Capability
The classic fraud triangle consists of pressure, opportunity, and rationalization; 'capability' was added by David Wolfe and Dana Hermanson to form the fraud diamond.
Question 3: What does the term 'shell company' refer to in a fraud context?
- A company that sells petroleum products
- A fictitious or inactive entity used to disguise financial transactions (Correct answer)
- A holding company with multiple subsidiaries
- A company in the process of liquidation
Correct answer: A fictitious or inactive entity used to disguise financial transactions
A shell company is an entity with no real operations used to funnel fraudulent payments, launder money, or conceal asset ownership.
Question 4: Under the ACFE's occupational fraud classification system, which category includes financial statement fraud?
- Asset misappropriation
- Corruption
- Financial statement fraud (Correct answer)
- Embezzlement
Correct answer: Financial statement fraud
The ACFE Occupational Fraud and Abuse Classification System (Fraud Tree) has three primary branches: asset misappropriation, corruption, and financial statement fraud.
Question 5: What is 'check tampering' in the context of occupational fraud?
- Altering a check's amount or payee after it is issued
- Issuing checks to fictitious employees
- Voiding checks and keeping the cash
- All of the above (Correct answer)
Correct answer: All of the above
Check tampering encompasses altering checks, forging signatures, intercepting and redirecting checks, and concealing the fraud — making 'all of the above' correct.
Question 6: Which ratio is commonly used to detect potential revenue fraud by comparing recorded cash receipts to reported sales?
- Current ratio
- Accounts receivable turnover
- Cash-to-sales ratio (Correct answer)
- Debt-to-equity ratio
Correct answer: Cash-to-sales ratio
The cash-to-sales ratio helps detect revenue fraud — if reported sales rise but cash receipts do not keep pace, it may indicate fictitious revenue.
Question 7: The concept of 'tone at the top' in fraud prevention primarily refers to which of the following?
- Loud warning announcements about fraud policies
- Management's visible commitment to ethical conduct (Correct answer)
- The pitch of a fraud examiner's voice during interviews
- The volume of anti-fraud training materials
Correct answer: Management's visible commitment to ethical conduct
Tone at the top describes how senior management's ethical attitude and visible commitment to integrity shapes the organization's culture and reduces fraud risk.
CFE Trivia 3
The term 'skimming' in occupational fraud refers to which type of scheme?