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Certified Fraud Examiner (CFE)

Sample Questions
Home  Certified Fraud Examiner (CFE) Sample Questions

Advanced Sample Questions

What is the primary goal of a fraud

risk assessment?

a. To identify areas of the organization that are

susceptible to fraud.
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 b. To detect fraudulent activity that has already
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
occurred.

c. To punish employees who engage in fraudulent

activity.

Answer: a.

Explanation: The primary goal of a fraud risk assessment

is to identify areas of the organization that are
susceptible to fraud. It involves evaluating the internal
control systems, policies, and procedures that are in place
to prevent fraud, and identifying potential vulnerabilities
and risks.

Which of the following is an example

of a red flag in a financial statement?

a. A large number of bank reconciliations that have

not been completed.

b. A consistent increase in sales revenue over

several quarters.

c. A low rate of employee turnover.

Answer: a.

Explanation: A large number of bank reconciliations that

have not been completed is an example of a red flag in a
financial statement. It suggests that there may be
fraudulent activity related to cash or bank accounts, and
may require further investigation. keyboard_arrow_up
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Which of the following is a common
type of financial statement fraud?

a. Overstating expenses to reduce taxes.

b. Stealing inventory from the warehouse.

c. Diverting cash receipts to a personal account.

Answer: a.

Explanation: Overstating expenses to reduce taxes is a

common type of financial statement fraud. It involves
inflating expenses or creating fictitious expenses to
reduce taxable income.

Which of the following is an example

of a preventive control?

a. An internal audit of financial statements.

b. Segregation of duties between employees.

c. A surprise cash count by a supervisor.

Answer: b.

Explanation Segregation of duties between employees is

an example of a preventive control. It involves dividing
responsibilities among multiple employees to prevent any
one individual from having too much control over a
particular process or transaction.

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What is the primary purpose of a
fraud investigation?

a. To determine if fraud has occurred.

b. To punish individuals who have engaged in

fraudulent activity.

c. To recover losses resulting from fraudulent

activity.

Answer: a.

Explanation: The primary purpose of a fraud

investigation is to determine if fraud has occurred. This
may involve collecting evidence, conducting interviews,
and analyzing financial records to determine the extent
and nature of any fraudulent activity.

Which of the following is not a typical

step in a fraud investigation?

a. Collecting and analyzing financial data

b. Interviewing witnesses and potential suspects

c. Arresting and prosecuting individuals suspected

of fraud 
d. Issuing a public statement about the Prepare
investigation’s findings for
Assured
Answer: d. Success
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Want to
Explanation: Issuing a public statement about the qualify
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
investigation’s findings is not a typical step in a fraud Certified
investigation. Investigations are usually conducted Fraud
confidentially, and any findings or conclusions are only Examiner
made public if they are relevant to legal proceedings or (CFE)
other official actions. Exam?

Learn

Which of the following is a common More

technique used in data analysis

during a fraud investigation?

a. Regression analysis

b. T-test analysis
Are you
c. Cluster analysis
preparing
d. Frequency analysis for
Certified
Answer: d.
Fraud
Examiner
Explanation: Frequency analysis is a common technique
(CFE)
used in data analysis during a fraud investigation. It
Exam?
involves identifying patterns or anomalies in the
frequency of transactions, amounts, or other variables Take
that may be indicative of fraud. a
Quiz

Which of the following is an example

of a control designed to detect fraud?

a. Separation of duties

b. Mandatory vacation policy keyboard_arrow_up

 c. Employee background checks
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d. Surprise audits

Answer: d.

Explanation: Surprise audits are an example of a control

designed to detect fraud. They involve conducting
periodic audits or reviews of financial records, processes,
or transactions without prior notice to employees or
other stakeholders.

Which of the following is a red flag

for vendor fraud?

a. A vendor offers discounts for large orders

b. A vendor invoices for work not performed

c. A vendor’s business is located overseas

d. A vendor has a long-standing relationship with

the organization

Answer: b.

Explanation: A vendor invoicing for work not performed

is a red flag for vendor fraud. This may indicate that the
vendor is billing for services or goods that were never
delivered or were delivered at a lower cost.

What is the purpose of the fraud risk

mitigation phase of a fraud risk keyboard_arrow_up
management program?
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

a. To eliminate all fraud risk from an organization

b. To reduce the likelihood and impact of fraud

c. To detect and investigate instances of fraud after

they occur

d. To punish individuals who engage in fraudulent

activity

Answer: b.

Explanation: The purpose of the fraud risk mitigation

phase of a fraud risk management program is to reduce
the likelihood and impact of fraud. This may involve
implementing controls, policies, and procedures designed
to prevent, detect, and respond to fraudulent activity.

Basic Sample Questions

Question 1. As per the findings of a survey, in

the main culprits, males are found in the
majority of cases, accounting for ___ percent of
frauds as against___ percent in which a female
was found to be the main culprit.

A. 62 v/s 36
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 B. 61 v/s 39
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C. 62 v/s 37

D. None of the above

Correct Answer: B

Question 2. Which of the following is NOT the

cause of senior management overstating
business statements?

A. Compliance with debt covenants

B. Meeting personal performance criteria

C. Triggering performance-related compensation

D. Demonstrating a pattern of growth to support

the sale of a business

Correct Answer: A

Question 3. __________ is the practice of offering,

giving, receiving, or soliciting anything of value
with the goal of influencing an official.

A. Corruption

B. Diverting business to vendors

C. Bribery

D. Lacking approval authority

Correct Answer: C

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Question 4. You may also eliminate keyboard_arrow_down
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competition in the solicitation phase of the
selection process by:

A. Solicit bid from fictitious suppliers

B. Solicit transactions from fictitious vendors

C. Solicit bid-splitting from fictitious vendors

D. None of the above

Correct Answer: A

Question 5. A scheme is called a Conflict of

interest:

A. An employee must have some sort of ownership

interest or employment relationship with the
vendor.

B. A salesman must have ownership or employment

rights in the vendor who submits the sales request.

C. A purchase must be made by a purchaser who has

at least an ownership or employment interest in the
vendor who is submitting the offer.

D. The vendor supplying stock must have some kind

of dealership interest in the dealer.

Correct Answer: A

Question 6. A check tempering fraud is

committed when an employee prepares a fake keyboard_arrow_up
check and submits it alongside legitimate
checks to an authorized maker, who signskeyboard_arrow_down keyboard_arrow_down
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it
without properly reviewing it?

A. Endorse check scheme

B. Legitimate check scheme

C. Payable check scheme

D. Concealed check scheme

Correct Answer: D

Question 7. What does Larceny by Fraud or

deception mean?

A. Creates or reinforces a false impression

B. Fails to correct a false impression

C. Omits to disclose a lien, adverse claim, or another

legal obstacle that may be in the way of completing
the transaction

D. All of the above

Correct Answer: D

Question 8. Misappropriation of assets was the

middle child of the study; it was more common
than fraudulent statements and more costly
than corruption.

A. True

B. False keyboard_arrow_up
Correct Answer: B
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Question 9. Expenses that are incurred but not

paid by the end of the year are recorded in
profit and loss records, and are referred to as:

A. Accruals

B. Depreciations

C. Expenses

D. Financial record

Correct Answer: A

Question 10. Whenever a total is carried from

the journal to the ledger or from the ledger to
the financial statements, it is known as:

A. Forced Balance

B. Out-of-balance

C. False balance

D. None of all

Correct Answer: A

Question 11. When comparing the cash on

hand in a register with the cash shown in the
register tape, it is possible to detect _______.

A. Employee theft
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 B. Recorded sales
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C. Internal audits

D. Occupational frauds

Correct Answer: A

Question 12. Late fees and parking fees are the

most popular targets for skimming schemes
because they are difficult to monitor and
predict:

A. Revenue sources

B. Recorded sales

C. Internal audits

D. Register manipulations

Correct Answer: A

Question 13. Across all industry sectors,

respondents’ perception of the likelihood of
theft being detected is directly correlated with
employee theft, meaning the more likely they
were to engage in misconduct, the greater the
likelihood the employee would be caught.

A. True

B. False

Correct Answer: B

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Question 14. Financial statement fraud iskeyboard_arrow_down keyboard_arrow_down
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committed to:

A. Hide false business performances

B. Protect personal status/control

C. Maintain personal income

D. Stay outside the accounting system

Correct Answer: B

Question 15. When properly installed and

implemented, which of the following four basic
measures may prevent inventory fraud?

A. Independent checks, proper documentation,

segregation of duties, and physical safeguards

B. Independent checks, proper documentation,

inventory control, segregation of duties,
independent checks

C. Independent checks, proper documentation,

physical safeguards, physical padding,

D. Physical safeguards, pre-numbered affiliations,

segregation of duties, independent checks

Correct Answer: A

Question 16. An undisclosed payment made by

a vendor to an employee of a purchasing
company is referred to as: keyboard_arrow_up
 A. Bid-rigging
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B. Kickbacks

C. Presolicitation

D. None of the above

Correct Answer: B

Question 17. What is the phase of the

competitive bidding process where fraudsters
try to affect the selection of a contractor by
restricting the pool of bidders?

A. Need recognition

B. Solicitation

C. False specification

D. Submission

Correct Answer: B

Question 18. Which of the following might be

included in the behavior profile of employees
who are involved in bribery schemes:

A. Gambling habit

B. Extravagant lifestyle

C. Drug and/or alcohol addiction

D. All of the above

Correct Answer: D keyboard_arrow_up

Question 19. What is the special scheme keyboard_arrow_down keyboard_arrow_down
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in
which employees are aware that their
employer is intending to buy a certain asset
and benefit from the situation by buying the
asset themselves is:

A. Conflict of interest in the sale

B. Turnaround sale or flip

C. Unauthorized sale

D. Written sale of unique assets

Correct Answer: B

Question 20. What is the term used for fake

names and the post office box that an
employee uses to collect disbursements from
false billings is called:

A. Accomplice residence

B. Shell company

C. Perpetrator check

D. Cash generator

Correct Answer: B

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