Free CFE-Fraud-Schemes-and-Financial-Crimes Exam Braindumps - New 2026 ACFE Pratice Exam
Practice Test for CFE-Fraud-Schemes-and-Financial-Crimes Certification Real 2026 Mock Exam
NEW QUESTION # 159
A fraudster uses the name and picture of another individual to create a social media profile. This scheme can BEST be described as:
- A. Synthetic identity theft
- B. New account identity theft
- C. Criminal identity theft
- D. Traditional identity theft
Answer: D
Explanation:
The correct answer is D. Traditional identity theft involves using the real identifying information of another person to impersonate that individual. Here, the fraudster uses another person's actual name and picture to create a social media profile, meaning the fraudster is posing directly as a real person rather than creating a hybrid or fictitious identity. Synthetic identity theft combines real and fabricated information to create a new identity, which is not described here. Criminal identity theft involves using another person's identity in a law enforcement or criminal justice context. New account identity theft is not the best ACFE category for this question because the facts emphasize impersonation using real identity information. The ACFE materials distinguish traditional identity theft from synthetic and criminal identity theft.
NEW QUESTION # 160
Which of the following is FALSE concerning methods that corporate spies generally use to steal information from other organizations?
- A. Spies primarily use social engineering to search for confidential information on employee desks or workstations at the target company.
- B. Spies use technical surveillance to obtain nondocumentary information about target companies that cannot be found through open sources.
- C. Spies often gain direct access to a target company by obtaining employment as a security officer or a member of the maintenance staff.
- D. Spies often create counterfeit employee badges to gain entry into a target company.
Answer: A
Explanation:
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.
Reference: ACFE Manual, Fraud Prevention and Deterrence - Competitive Intelligence and Espionage .
NEW QUESTION # 161
Which of the following can constitute a bribe, even if the illicit payment is never actually made?
- A. Corruption in payment
- B. Kickback payment
- C. Overbilling in payment
- D. Offering a payment
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Under anti-bribery laws and fraud examination principles, the offer of a payment itself may constitute a bribe, regardless of whether money changes hands. Intent to improperly influence is enough to establish bribery.
* Analysis of Incorrect Options:
* B. Corruption in payment - Too vague, not a legal element.
* C. Kickback payment - Requires an actual payment; not just an offer.
* D. Overbilling in payment - A disbursement scheme, not a bribe.
* Key Concept: Bribery offense can occur upon the offer alone.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Corruption - Bribery Elements .
NEW QUESTION # 162
Which of the following is a recommended activity that organizations should engage in to protect their proprietary information from threats?
- A. Enlisting a company task force to identify the information security practices of competitors
- B. Prohibiting all nonemployees from entering the organization's premises
- C. Storing devices that contain sensitive data in specially constructed quiet rooms
- D. Practicing data minimization to limit the information available during a data breach
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Data minimization -the practice of limiting the collection, storage, and retention of sensitive data to only what is necessary-reduces the potential harm in case of a breach. This is a widely recommended control for protecting proprietary information.
* Analysis of Incorrect Options:
* A - Monitoring competitors' practices does not secure one's own information.
* C - Quiet rooms are not a standard security safeguard.
* D - Restricting nonemployees is helpful, but overly broad and impractical as a primary recommendation.
* Key Concept: Information security strategies to safeguard proprietary data.
Reference: ACFE Manual, Fraud Prevention and Deterrence - Protecting Proprietary Information .
NEW QUESTION # 163
Which of the following statements is MOST ACCURATE?
- A. Government and public sector organizations are required to reprioritize areas of focus for fraud detection less frequently than private sector organizations.
- B. Government and public sector organizations might need to conduct and respond to fraud risk assessments more frequently than private sector organizations.
- C. Government and public sector organizations can usually accept more fraud risk than private sector organizations because there are no shareholders.
- D. Government and public sector organizations have more autonomy in how they practice fraud detection than private sector organizations.
Answer: B
Explanation:
The correct answer is C. Government and public sector organizations might need to conduct and respond to fraud risk assessments more frequently because their risks can change with political priorities, public programs, emergency funding, legislative mandates, and changing public expectations. Public entities are accountable to citizens, regulators, oversight bodies, and funding authorities. Option A is incorrect because the absence of shareholders does not permit higher fraud tolerance; public stewardship often requires strong accountability. Option B is inaccurate because public sector priorities can shift quickly based on laws, budgets, and government initiatives. Option D is also incorrect because public organizations usually have less autonomy than private entities due to statutory requirements, public scrutiny, procurement rules, and oversight obligations. Fraud risk assessment should therefore be dynamic and responsive.
NEW QUESTION # 164
Which of the following measures would help prevent the theft of company inventory?
- A. Using nonconsecutive shipping documents, job cost sheets, and inventory receiving reports
- B. Appointing one individual to receive incoming inventory shipments and then distribute them
- C. Having the purchasing agent perform the physical inventory count
- D. Restricting the ability to access inventory to authorized personnel
Answer: D
Explanation:
The correct answer is A. Restricting inventory access to authorized personnel is a basic preventive control against theft of inventory and other assets. Limiting physical access reduces opportunities for employees or outsiders to remove goods without authorization. Option B is weak because concentrating receiving and distribution duties in one person reduces segregation of duties and increases concealment risk. Option C is also improper because purchasing personnel should not independently perform physical inventory counts; independent counts help detect theft and manipulation. Option D is incorrect because documents should be prenumbered and controlled, not nonconsecutive, so missing or altered forms can be detected. The ACFE materials discuss inventory theft prevention through access controls, proper documentation, segregation of duties, and independent inventory counts.
NEW QUESTION # 165
Asset misappropriation schemes were the "middle children" of the study; they were more common than fraudulent statements and more costly than corruption.
- A. False
- B. True
Answer: A
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: This statement is False . According to ACFE studies, asset misappropriation is the most common but least costly category of occupational fraud. Fraudulent statements are the least common but most costly, while corruption falls in the middle in both frequency and cost.
* Key Concept: Fraud Tree Statistics - frequency and cost comparison of asset misappropriation, corruption, and financial statement fraud.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraud Tree - Comparative Analysis of Fraud Categories .
NEW QUESTION # 166
Jake is building a cybersecurity training program to educate his company about the different types and vehicles of malware that could threaten the company's network and computer systems. Which of the following statements is MOST ACCURATE?
- A. A botnet is a secret entry point into a program that allows someone to gain access and bypass security procedures.
- B. A logic bomb is code embedded into a legitimate program that is set to activate under specific conditions.
- C. An infostealer is a software program that monitors and logs the keys pressed on a computer system's keyboard.
- D. A trapdoor is a type of malware designed to execute various instructions every time a computer is turned on.
Answer: B
Explanation:
The correct answer is D. A logic bomb is malicious code hidden in a legitimate program that activates when specific conditions are met, such as a date, event, user action, or system change. Option A incorrectly describes a trapdoor; a trapdoor or backdoor is a hidden entry point that allows access while bypassing normal security controls. Option B describes a keylogger, not an infostealer. Option C describes a trapdoor or backdoor, not a botnet. A botnet is a network of compromised computers controlled by an attacker. The ACFE computer and internet fraud materials classify viruses, worms, Trojan horses, trapdoors, logic bombs, keyloggers, botnets, and other tools as important malware-related cyberfraud concepts.
NEW QUESTION # 167
Kara owns a business selling rare goods. Some of the goods Kara sells are of high value, but she reports significantly lower values to the taxing authority for those transactions. Which of the following options BEST describes Kara's scheme?
- A. Wealth tax evasion scheme
- B. Falsified tax deduction scheme
- C. Tax credit scheme
- D. Consumption tax scheme
Answer: D
NEW QUESTION # 168
Which of the following is a red flag that might indicate that someone is attempting to commit insurance fraud?
- A. A theft claim includes items that were purchased recently and the receipts.
- B. The insured made one other insurance claim within the past five years.
- C. A burglary loss claim includes small electronic items and jewelry.
- D. A claim is made soon after an insurance policy commences.
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Filing a claim shortly after a policy begins is a classic red flag of potential insurance fraud, as it may indicate the loss occurred before coverage or is fabricated.
* Analysis of Incorrect Options:
* B. One prior claim in five years - Not unusual by itself.
* C. Small electronics/jewelry - Common theft items, not automatically suspicious.
* D. Recently purchased items with receipts - Strong documentation actually supports legitimacy.
* Key Concept: Insurance fraud red flags .
Reference: ACFE Fraud Examiners Manual (2020) , Insurance Fraud Indicators .
NEW QUESTION # 169
Which of the following scenarios is an example of upcoding ?
- A. Dr. Loomis uses three procedure codes when submitting a claim for a surgery that she performed that is supposed to be billed using one procedure code
- B. Landon inflates a medical bill that he wants to receive reimbursement for by misrepresenting the amount of the bill
- C. Cindy receives payment in exchange for allowing an unnecessary surgical procedure to be completed on her that is then billed to her health care program
- D. Dr. Raul advises a patient with a small fracture in her leg to use crutches, but he submits the claim using a code to indicate that he placed a cast on the patient
Answer: D
Explanation:
Comprehensive and Detailed Explanation
Definition of Upcoding (ACFE Manual Reference)
The ACFE Manual identifies upcoding as a type of health care billing fraud in which the provider submits a claim for a more expensive or more complex service than what was actually provided.
Although the exact term "upcoding" appears within the health care fraud discussions, the broader category is part of Financial Transactions and Fraud Schemes concerning fraudulent billing practices . The manual describes fraud schemes in which the perpetrator:
* Bills for services not provided ,
* Bills for more expensive services than were actually delivered, or
* Uses codes that misrepresent the level or nature of medical procedures.
Upcoding specifically involves:
Billing for a higher-cost procedure than what was actually performed, by using a code representing a more expensive service.
Why Option D Is Correct
Dr. Raul advised a patient with a small fracture to use crutches, but he submitted a claim using a code indicating that he placed a cast on the patient.
* Actual service: Advice and crutches
* Billed service: Application of a cast (more expensive procedure)
This is a textbook example of upcoding , as the provider is using a higher-cost CPT code to obtain greater reimbursement than the service warrants.
Why the Other Options Are Incorrect
Option A - Not Upcoding
Cindy receives a payment to undergo an unnecessary procedure , which is then billed fraudulently.
This is medically unnecessary services fraud , not upcoding.
Option B - Not Upcoding
Dr. Loomis uses three procedure codes instead of one .
This is an example of unbundling , which involves billing separate codes for procedures that should be billed as a single package.
Option C - Not Upcoding
Landon inflates the amount of a medical bill he wants reimbursed.
This is billing inflation or overstatement , but not misrepresentation via coding.
ACFE Manual Supporting Reference
The Manual's section on fraudulent billing schemes discusses cases where perpetrators misrepresent medical procedures , including using false or inflated codes to obtain higher reimbursements.
NEW QUESTION # 170
Physical assets including _________ and ________ are the most commonly misappropriated noncash assets in our study.
- A. Inventory & Purchase
- B. Inventory & Equipment
- C. Interest & Collusion
- D. Sales & Equipment
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Studies by the ACFE consistently show that inventory and equipment are the most commonly misappropriated noncash assets. They are highly liquid, valuable, and often difficult to monitor without strong controls.
* Analysis of Incorrect Options:
* A. Interest & Collusion - Not physical assets.
* C. Inventory & Purchase - Purchase is a process, not a physical asset.
* D. Sales & Equipment - Sales are transactions, not assets.
* Key Concept: Noncash asset misappropriation - inventory and equipment are the primary targets.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Inventory and Other Assets - Common Targets of Misappropriation .
NEW QUESTION # 171
____________ is a process by which a bookkeeper records all transactions and can adjust the books.
- A. Financial statement
- B. None of all
- C. Accounting Cycle
- D. Journal Entries
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: The accounting cycle is the complete process of recording transactions, adjusting the books, preparing trial balances, and producing financial statements. Journal entries are part of the process, but the entire structured sequence is called the accounting cycle.
* Analysis of Incorrect Options:
* A. Journal Entries - Steps within the cycle, not the entire process.
* C. Financial statement - Output of the cycle, not the process itself.
* D. None of all - Incorrect since the accounting cycle is the correct term.
* Key Concept: Accounting Cycle - structured process of recording and adjusting transactions.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts - The Accounting Cycle .
NEW QUESTION # 172
Which of the following statements is MOST ACCURATE concerning common methods that identity thieves use to steal information?
- A. Pharming involves searching for sensitive personal or business information on used computers that have been purchased from a third-party reseller.
- B. Shoulder surfing involves gathering personal information by listening to a conversation or observing an individual entering a PIN into a device.
- C. Phishing is the practice of searching through discarded credit card receipts, bank statements, and other identifying documentation for personal and business information.
- D. Baiting is the practice of manipulating an individual into releasing confidential information by impersonating their bank or a financial institution with which they do business.
Answer: B
Explanation:
Shoulder surfing is the practice of obtaining personal or confidential information by watching or listening while a victim uses or discloses it. Common examples include observing someone enter a PIN, password, access code, or account number, or overhearing a person provide sensitive details during a conversation.
Option A is inaccurate because impersonating a bank or financial institution to obtain confidential information is closer to phishing or vishing, not baiting. Option B is inaccurate because pharming redirects users to fraudulent websites, while searching used devices is a discarded-device or data-recovery risk. Option D describes dumpster diving, not phishing. The ACFE identity theft materials distinguish these methods because recognizing the specific technique is important for prevention, investigation, and victim response.
NEW QUESTION # 173
A journal in which all sales made on credit or cash are listed is:
- A. Accounts payable journal
- B. Accounts receivable journal
- C. General journal
- D. Disbursement journal
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: The accounts receivable journal (also called the sales journal) records all sales transactions, whether on credit or cash. It provides a detailed subsidiary record of customer accounts and sales activity.
* Analysis of Incorrect Options:
* A. Disbursement journal - Records cash outflows, not sales.
* C. Accounts payable journal - Records amounts owed to vendors, not sales.
* D. General journal - Records miscellaneous entries not suited to specialized journals.
* Key Concept: Special journals - sales activity recorded in the accounts receivable journal.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts - Subsidiary Journals .
NEW QUESTION # 174
Aja is implementing measures to help ABC Company detect signs that its proprietary information has been stolen. Which of the following practices would be MOST HELPFUL for Aja to implement?
- A. Assess how frequently employees are accessing the data that they have been provided permission to access.
- B. Identify any employees leaving the company who have downloaded an unusually large number of data files.
- C. Conduct regular online searches for competitor financial information that indicates abnormal success.
- D. Monitor competitor websites to determine product release dates and how often new products are launched.
Answer: B
Explanation:
The best practice is to identify employees leaving the company who have downloaded an unusually large number of data files. Departing employees present a heightened risk of proprietary information theft because they might take customer lists, pricing data, product designs, research, formulas, source code, or strategic plans for use with a competitor or new venture. Monitoring abnormal downloading activity is a targeted detective control that focuses on actual access and extraction of sensitive data. Options A and C rely on external competitor activity and might reveal only indirect indicators after damage occurs. Option B is too broad because permitted access alone does not show theft. The ACFE material emphasizes insider threats, safeguarding proprietary information, and monitoring unusual access or transfer of sensitive data.
NEW QUESTION # 175
On the balance sheet, assets must equal the sum of which two components?
- A. Revenues and cost of goods sold
- B. Liabilities and owners' equity
- C. Liabilities and expenses
- D. Expenses and gross profit
Answer: B
Explanation:
The correct answer is D. The balance sheet is based on the fundamental accounting equation: Assets = Liabilities + Owners' Equity. Assets represent resources owned or controlled by the entity. Liabilities represent obligations owed to creditors, while owners' equity represents the owners' residual interest after liabilities are deducted from assets. Because every accounting transaction affects at least two accounts, the equation must remain in balance. Revenues, expenses, cost of goods sold, and gross profit are primarily income statement elements, not the two main components that balance against assets on the statement of financial position. Understanding this equation is essential for fraud examiners because improper entries, concealed liabilities, overstated assets, and equity manipulation can distort financial statements.
NEW QUESTION # 176
Which of the following search is used for unusually high incidence of returns and allowances scheme?
- A. None of the above
- B. Allowances by vendors
- C. Disposals of allowances than reorders
- D. Returns and allowances
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Fraudulent schemes involving returns and allowances can be detected by analyzing accounts for unusually high transactions in these categories. This is a common red flag for concealment of theft or manipulation of sales.
* Analysis of Incorrect Options:
* A. Allowances by vendors - Too narrow, not a standard analytic test.
* B. Disposals of allowances than reorders - Not a recognized search method.
* D. None of the above - Incorrect, since option C is valid.
* Key Concept: Returns and allowances analysis for fraud detection.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraudulent Disbursements - Analytical Procedures .
NEW QUESTION # 177
Oona goes to an expensive restaurant for lunch while on a business trip and pays for the meal with a company credit card. She later submits an expense reimbursement claim for several expenses she paid for using a personal credit card while on the trip and includes the receipt from the lunch. Oona's scheme can BEST be characterized as:
- A. An overstated expense reimbursement scheme
- B. A mischaracterized expense reimbursement scheme
- C. A multiple expense reimbursement scheme
- D. A fictitious expense reimbursement scheme
Answer: C
Explanation:
The correct answer is A. Oona's conduct is a multiple expense reimbursement scheme because she is attempting to obtain reimbursement for an expense that the company has already paid through the company credit card. In expense reimbursement fraud, multiple reimbursement schemes occur when an employee submits the same expense more than once, or submits an expense paid through one channel as though it was paid personally. This differs from a mischaracterized expense, where a personal cost is falsely described as business-related. It also differs from an overstated expense, where the amount is inflated, and from a fictitious expense, where no expense occurred. The key issue is duplicate recovery of the same lunch expense.
NEW QUESTION # 178
Which of the following is a TRUE statement about counterfeit payment cards?
- A. The production of counterfeit payment cards is too complicated for the use of high-speed printers.
- B. All of the above are true statements about counterfeit payment cards.
- C. Counterfeit payment cards can be created with blank plastic cards.
- D. The hologram on payment cards is relatively simple to reproduce.
Answer: C
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Blank plastic cards are a common basis for counterfeit card production. Fraudsters encode stolen magnetic stripe or chip data onto blank cards.
* Analysis of Incorrect Options:
* A - False; holograms are designed to be difficult to reproduce.
* B - False; high-speed printers and embossers make counterfeiting easier, not harder.
* D - Incorrect, since A and B are false.
* Key Concept: Counterfeit card fraud methods.
Reference: ACFE Manual, Financial Transactions - Payment Card Fraud .
NEW QUESTION # 179
A fictitious revenue scheme often results in which of the following situations?
- A. Accounts receivable that are consistently paid several days late
- B. An increase in accounts receivable that are long overdue
- C. A lack of accounts receivable written off as bad debt expense
- D. A low amount of outstanding accounts receivable
Answer: B
Explanation:
The correct answer is A. Fictitious revenue schemes involve recording sales that did not actually occur.
Because no real customer owes money for the fake sale, the related accounts receivable often remain unpaid and become long overdue. A rising amount of old or uncollectible receivables can therefore be a red flag that revenue was fabricated to inflate income. Option B is less direct because companies might fail to write off bad receivables for several reasons, including improper allowance estimates. Option C is inconsistent with many fictitious revenue schemes because fake credit sales commonly increase receivables. Option D, receivables paid only a few days late, does not strongly indicate fictitious sales. The ACFE materials identify fictitious revenues and accounts receivable anomalies as common financial statement fraud indicators.
NEW QUESTION # 180
According to Hollinger and Clark, for policy development, management must pay attention to:
- A. Enforcement of sanctions
- B. Both A & B
- C. A clear understanding regarding theft behavior
- D. Neither A nor B
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: Hollinger and Clark's research emphasized that management policy should focus on: (1) developing a clear understanding of theft behavior and its causes, and (2) enforcing sanctions consistently. Both are necessary to reduce employee deviance and occupational fraud. Thus, C). Both A & B is correct.
* Key Concept: Hollinger-Clark Study - policy implications for managing employee theft.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraud Theory - Hollinger-Clark Research Findings .
NEW QUESTION # 181
Which of the following statements regarding financial statement disclosures is TRUE?
- A. Changes in accounting principles do not need to be disclosed in the financial statements.
- B. Events occurring after the close of a reporting period that might significantly affect the financial statements do not need to be disclosed.
- C. Management must disclose potential losses from ongoing litigation if the likelihood of the related liability is reasonably possible.
- D. Related-party transactions only need to be disclosed if they might financially harm the company's stakeholders.
Answer: C
Explanation:
The correct answer is A. Financial statement disclosures are required when information is necessary for users to understand the entity's financial position and risks. Potential losses from ongoing litigation generally must be disclosed when the likelihood of loss is reasonably possible, even if the amount is not yet certain. Option B is incorrect because significant subsequent events after the reporting period might require disclosure. Option C is incorrect because changes in accounting principles must generally be disclosed to preserve comparability and transparency. Option D is too narrow because related-party transactions require disclosure when material or relevant, not only when they financially harm stakeholders. The ACFE financial statement fraud materials identify improper disclosures, concealed liabilities, subsequent events, and related-party transactions as important fraud risk areas.
NEW QUESTION # 182
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