CFE Trivia 5 — Questions and Answers
Question 1: Which of the following best describes 'money laundering'?
- Washing currency notes to remove serial numbers
- The process of making illegally obtained money appear legitimate (Correct answer)
- Transferring funds between foreign bank accounts
- Overstating cash balances on financial statements
Correct answer: The process of making illegally obtained money appear legitimate
Money laundering is the process of concealing the origins of criminal proceeds so they appear to come from a legitimate source.
Question 2: Under U.S. federal law, what statute most directly criminalizes bank fraud?
- 18 U.S.C. § 1341 (mail fraud)
- 18 U.S.C. § 1344 (bank fraud) (Correct answer)
- 18 U.S.C. § 1956 (money laundering)
- 31 U.S.C. § 5313 (CTR reporting)
Correct answer: 18 U.S.C. § 1344 (bank fraud)
18 U.S.C. § 1344 specifically criminalizes schemes to defraud financial institutions or to obtain bank money, funds, or credits by fraud.
Question 3: Which anti-fraud control is considered most effective at reducing fraud losses according to ACFE research?
- External audits
- Surprise audits
- Fraud hotlines (Correct answer)
- Management review
Correct answer: Fraud hotlines
ACFE research consistently finds that organizations with hotlines detect fraud faster and suffer smaller losses than those without, making hotlines one of the most cost-effective controls.
Question 4: What is the primary distinction between 'fraud' and 'abuse' in the occupational fraud context?
- Fraud involves large sums; abuse involves small sums
- Fraud is illegal; abuse may be unethical but not necessarily illegal (Correct answer)
- Fraud is committed by managers; abuse by front-line staff
- There is no meaningful distinction
Correct answer: Fraud is illegal; abuse may be unethical but not necessarily illegal
Fraud involves intentional deception for financial gain that violates the law, while abuse refers to behavior that is improper or inconsistent with policy but not necessarily criminal.
Question 5: The Foreign Corrupt Practices Act (FCPA) prohibits which of the following?
- U.S. companies from operating in foreign countries without a license
- Bribing foreign government officials to obtain or retain business (Correct answer)
- Importing goods without paying customs duties
- Transferring funds to offshore accounts without disclosure
Correct answer: Bribing foreign government officials to obtain or retain business
The FCPA makes it illegal for U.S. persons and companies to bribe foreign officials to gain a business advantage, and requires accurate books and records.
Question 6: In a fraud investigation, which document would a fraud examiner most likely subpoena to trace hidden assets through real estate?
- IRS Form W-2
- County deed records (Correct answer)
- Accounts payable ledger
- Employee handbook
Correct answer: County deed records
County deed records show property ownership transfers and values, making them essential for tracing real estate assets that a subject may be trying to hide.
Question 7: Which of the following is an example of 'financial statement fraud' rather than asset misappropriation?
- An employee steals inventory
- A CFO overstates revenue to meet earnings targets (Correct answer)
- A clerk pockets petty cash
- A manager submits fake expense reports
Correct answer: A CFO overstates revenue to meet earnings targets
Overstating revenue to meet earnings targets is financial statement fraud because the intent is to mislead financial statement users, not to directly steal assets.
CFE Trivia 5
Which of the following best describes 'money laundering'?