Free ACFE CFE-Fraud-Prevention-and-Deterrence Practice Exam with Questions & Answers | Set: 6

Privilege of Fraud Examination Reports:

Reports prepared by fraud examiners are not inherently privileged. Privilege depends on the legal framework, the purpose of the report, and whether the attorney-client privilege or work-product doctrine applies.

Without specific legal protection, reports may be subject to disclosure.

Conclusion:Fraud examination reports are not automatically privileged.

 Fraud Prevention Methods:

Prevention strategies often focus on education, awareness, and robust controls rather than covert methods. While covert audits can detect fraud, they are not primarily preventive.

 Why D is False:

Covert audits are reactive and focused on identifying existing fraud, not preventing it.

 Why Other Options are True:

A, B, and C accurately describe key aspects of fraud prevention, such as the importance of perception of detection and the challenges of detecting fraud​​.

Definition of Organizational Crime:

Organizational crime involves illegal actions conducted by or on behalf of organizations to benefit the organization or its management.

Why D is Correct:

Bid rigging is a classic example of organizational crime, where multiple companies collude to manipulate competitive bidding processes for mutual benefit.

Why Other Options are Incorrect:

A, B, and C:These represent individual crimes for personal gain, not organizational-level misconduct​​.

References for All Questions:

COSO Internal Control–Integrated Framework​​.

Criminological theories and studies on deterrence and organizational crime​​.

Diane Vaughan's research on organizational factors contributing to deviance​​.

 ACFE Code of Professional Ethics:

Article II prohibits all illegal and unethical conduct, with no exceptions for unknowing violations of the law. CFEs are expected to maintain a high standard of professional integrity and responsibility.

 Why B is Correct:

Ignorance of the law is not an acceptable defense under the ACFE Code of Ethics. Professionals must ensure they understand and comply with applicable laws.

 References:

ACFE Code of Professional Ethics​​.

 Definition of Corporate Governance:

Corporate governance establishes the framework for decision-making and accountability within an organization. It includes roles, rights, and responsibilities of stakeholders such as the board, management, and shareholders.

 Why D is Correct:

The governance structure formalizes the distribution of roles and ensures clarity in accountability and oversight.

 Why Other Options are Incorrect:

A:Fraud risk management supports governance but is not its foundation.

B:Governance encompasses more than financial reporting accuracy.

C:Governance practices are essential even when owners are setting strategy​​.

Importance of Documenting Organizational Hierarchies:

Clearly defined hierarchies help establish accountability, delineate responsibilities, and ensure the proper flow of information, reducing opportunities for fraud.

It minimizes ambiguity in roles and reporting lines, which are often exploited in fraudulent schemes.

Preventive Value:

By ensuring that employees know whom to report to and how to escalate concerns, organizations foster transparency and reduce fraud risk.

Conclusion:Proper documentation and communication of hierarchies are effective tools in fraud prevention.

Comprehensive and Detailed in Depth Explanation:

Silk and Vogel’s research found that organizations often rationalize unethical or illegal behavior by diffusing responsibility across a group, thus minimizing perceived individual culpability. This"shared guilt" justification is reflected in option D. The other options either misunderstand the research or do not reflect actual rationalizations used in white-collar crime contexts.

The ACFE Code of Professional Ethics explicitly prohibits CFEs from participating in activities that create undisclosed conflicts of interest. This ensures that the examiner’s objectivity and independence remain intact throughout the investigation. While CFEs are allowed to provide professional opinions based on evidence and engage in legal activities, they must always disclose any potential conflicts of interest.