Free ACFE CFE-Financial-Transactions-and-Fraud-Schemes Practice Exam with Questions & Answers

Detailed Explanation:

Rationale for Correct Answer:New account fraud occurs when fraudsters open accounts with false or stolen identities to exploit financial institutions before controls detect suspicious activity. Mobile deposits are particularly vulnerable because criminals can use counterfeit or altered images to deposit fraudulent checks quickly. This aligns with the Fraud Examiners Manual (2020) discussion of high-risk delivery channels for new account fraud.

Analysis of Incorrect Options:

A. Established accounts – Incorrect; fraud risk is higher in new accounts due to limited history and weaker controls.

C. Six months definition – Not an ACFE standard; there is no fixed six-month definition.

D. ATMs rarely targeted – Incorrect; ATMs are frequently exploited in new account fraud schemes.

Key Concept: New account fraud in identity theft and corruption-related schemes.

Detailed Explanation:

Rationale for Correct Answer:Key GAAP principles include Conservatism, Historical Cost, and Full Disclosure. Quality control is not a GAAP principle; rather, it is a concept from auditing standards related to ensuring audit quality.

Analysis of Incorrect Options:

A. Conservatism – GAAP principle requiring cautious reporting of uncertain outcomes.

B. Cost – Historical cost principle is central to GAAP.

C. Full disclosure – Requires all relevant information to be presented.

D. Quality control – Belongs to auditing, not GAAP.

Key Concept:GAAP principles — distinguishing accounting standards from auditing practices.

Detailed Explanation:

Rationale for Correct Answer:John created a completely false expense claim for a meal that he did not personally pay for. This is a fictitious expense reimbursement scheme, where employees invent expenses and submit them for reimbursement.

Analysis of Incorrect Options:

A. Mischaracterized expense – Legitimate expenses claimed as business when they are personal. Not applicable here.

C. Multiple reimbursement – Involves submitting the same receipt more than once. Not the case here.

D. Overstated expense – Inflating a legitimate expense, which is not what John did.

Key Concept: Expense reimbursement fraud — fictitious expenses.

Detailed Explanation:

Rationale for Correct Answer:Card skimming/shimming occurs when a fraudster captures payment card data with a hidden device. In this case, the employee secretly scans the customer’s card with a small device — a textbook example of skimming.

Analysis of Incorrect Options:

A. Server keeps the card – This is theft of the card, not skimming.

B. Imitation website – This is phishing, not skimming.

D. None of the above – Incorrect since option C is correct.

Key Concept: Payment card fraud — skimming/shimming devices.

Detailed Explanation:

Rationale for Correct Answer: Corporate spies do use social engineering, but their primary methods include surveillance, infiltration (e.g., posing as employees), and technical monitoring. The statement in option C is false because searching desks/workstations is a tactic, but it is not the primary method.

Analysis of Incorrect Options:

A – True; fake badges are a common infiltration tactic.

B – True; low-level jobs provide physical access.

D – True; technical surveillance is a recognized method.

Key Concept: Methods of corporate espionage.

Detailed Explanation:

Rationale for Correct Answer:Fictitious or fabricated revenues are one of the most common forms of financial statement fraud. They involve recording revenues for transactions that never occurred, thereby inflating income and misleading stakeholders.

Analysis of Incorrect Options:

B. Financial revenues – Not a fraud scheme.

C. Red flag revenues – “Red flags” are indicators of fraud, not a type of revenue.

D. Concealed revenues – Refers to hiding income, not creating fictitious sales.

Key Concept:Fictitious revenues as a core financial statement fraud scheme.

Detailed Explanation:

Rationale for Correct Answer:

Detailed Explanation:

Rationale for Correct Answer:This is a tech-support scam, in which fraudsters trick victims into believing their computers are infected and then charge fees for unnecessary or fake repairs. The scam often targets elderly victims.

Analysis of Incorrect Options:

A. Pharming – Redirects users to fake websites, not fake support calls.

B. Bait and switch – Advertising deception, not fraudulent computer support.

D. Smishing – Fraud via SMS text messages, not on-screen computer popups.

Key Concept: Consumer fraud schemes — tech-support scams.

Detailed Explanation:

Rationale for Correct Answer:Conflict of interest cases are difficult to detect because the transactions often appear legitimate on their face. However, they can be prevented more effectively through proactive controls such as disclosure requirements, vendor vetting, and employee training. The Fraud Examiners Manual (2020) emphasizes that prevention mechanisms are more effective than detection when it comes to conflicts of interest.

Analysis of Incorrect Options:

B. False – Incorrect because detection is challenging; prevention is comparatively easier.

Key Concept: Prevention vs. detection in Conflict of Interest schemes.

Detailed Explanation:

Rationale for Correct Answer:In double-entry accounting, a debit increases assets and expenses while decreasing liabilities and equity. Debits are entries on the left side of an account.

Analysis of Incorrect Options:

A. Journal Entries – General record of transactions, not the specific effect.

C. Credit – Opposite effect: increases liabilities/equity, decreases assets/expenses.

D. None of all – Incorrect because “debit” is the recognized effect.

Key Concept:Debit rules in double-entry accounting.