View Full ACFE CFE – Fraud Prevention Exam Dumps and Practice Test Dumps.

Question 201. What does management remain responsible for even when controls are outsourced

1. External audit independence
2. Effective internal control
3. Government regulation
4. Customer investigations

Correct Answer: 2. Effective internal control

Explanation:

Management remains responsible for establishing and maintaining effective internal controls even when certain business activities are outsourced to service providers. Outsourcing a process does not automatically transfer responsibility for the related fraud risks. Management should understand the provider’s controls, establish appropriate contractual expectations, monitor performance, and address significant weaknesses. This principle reflects the broader responsibility management has for internal control and fraud risk management. The current Fraud Examiners Manual includes management responsibility for internal controls and management of third party fraud risks within the Fraud Prevention and Deterrence section.

Question 202. What should happen when litigation requires certain records to be preserved

1. Destroy them according to the normal schedule
2. Move them to personal storage
3. Allow employees to choose what to keep
4. Suspend normal destruction for relevant records

Correct Answer: 4. Suspend normal destruction for relevant records

Explanation:

When litigation, investigation, or another preservation obligation requires records to be retained, normal destruction procedures for relevant information should be suspended. Organizations commonly use a legal hold process to preserve documents and electronic information that might otherwise be destroyed under the ordinary retention schedule. The purpose is to prevent loss of potentially relevant evidence and ensure the organization meets legal obligations. Document retention policies are specifically included within management’s fraud related responsibilities in the current Fraud Examiners Manual.

Question 203. What should a board primarily do regarding management fraud risk

1. Provide independent oversight
2. Prepare every journal entry
3. Operate transaction controls
4. Approve employee timesheets

Correct Answer: 1. Provide independent oversight

Explanation:

The board’s role is primarily one of governance and oversight rather than daily operation of controls. Directors should understand significant fraud risks, challenge management when appropriate, review important control weaknesses, and ensure management responds adequately to major concerns. This role becomes particularly important when fraud risk involves senior executives or possible management override. The current CFE Fraud Prevention and Deterrence content includes who is involved in corporate governance, the role of governance in fighting fraud, governance principles, and management’s separate responsibility for internal controls.

Question 204. Which factor can increase fraud risk even when controls are strong

1. Independent oversight
2. Effective reconciliations
3. Strong incentives for unethical results
4. Timely access reviews

Correct Answer: 3. Strong incentives for unethical results

Explanation:

Fraud risk is influenced by more than control strength. Strong incentives or pressures can encourage misconduct even in organizations with otherwise effective controls. Employees or managers might attempt to override, circumvent, or collude around controls when rewards or consequences tied to performance are extreme. A complete fraud risk assessment therefore considers behavioral and organizational factors as well as technical control design. The current Fraud Examiners Manual includes factors that contribute to financial crime, fraud risk factors, and management of fraud exposure as core Fraud Prevention and Deterrence topics.

Question 205. What should new employee fraud awareness training explain

1. Reporting duties and expected conduct
2. Only annual profit targets
3. How to bypass approvals
4. Only external audit procedures

Correct Answer: 1. Reporting duties and expected conduct

Explanation:

New employee fraud awareness training should explain expected ethical conduct, prohibited behavior, important controls, warning signs, and how to report concerns. Early communication helps employees understand that fraud prevention is part of their responsibilities and that the organization takes misconduct seriously. Training is most effective when reinforced by management behavior and consistent enforcement. Fraud prevention procedures, anti fraud policies, ethics programs, and management responsibility for compliance and ethics are all included in the current CFE Fraud Prevention and Deterrence body of knowledge.

Question 206. What should an audit committee provide to the head of internal audit

1. Daily transaction approval
2. Sales targets
3. Direct access for significant concerns
4. Payroll authority

Correct Answer: 3. Direct access for significant concerns

Explanation:

Effective governance should allow the head of internal audit to communicate significant concerns directly to the audit committee when necessary. This helps preserve internal audit independence and provides an escalation route if management is involved in or fails to address an important issue. The committee can then evaluate the concern without relying entirely on the same management structure being reviewed. Corporate governance and internal auditors’ fraud related responsibilities are both included in the current CFE Fraud Prevention and Deterrence section.

Question 207. What is the main reason internal audit should remain independent from control ownership

1. To increase management authority
2. To preserve objective assurance
3. To eliminate fraud risk assessments
4. To avoid reporting findings

Correct Answer: 2. To preserve objective assurance

Explanation:

Internal audit provides independent assurance concerning governance, risk management, and controls. If internal auditors design, operate, and own the controls they later evaluate, their objectivity can be impaired because they would be reviewing their own work. Management should therefore retain responsibility for operating controls and managing fraud risk. Internal audit can advise, assess, test, and recommend improvements while maintaining sufficient independence. The Fraud Examiners Manual separately identifies management’s responsibility for controls and internal auditors’ fraud related responsibilities.

Question 208. How does fraud differ from an unintentional financial statement error

1. Fraud always involves cash theft
2. Errors are always material
3. Fraud cannot involve estimates
4. Fraud involves intentional deception

Correct Answer: 4. Fraud involves intentional deception

Explanation:

The key distinction between fraud and error is intent. An error is an unintentional misstatement or omission, while fraud involves deliberate deception intended to obtain an improper benefit or mislead another party. Both can affect financial statements, and both may be material, but the intentional nature of fraud creates additional audit and governance concerns. External auditors’ fraud related responsibilities and financial statement materiality are included in the current CFE Fraud Prevention and Deterrence content.

Question 209. What should government auditors consider beyond financial accuracy

1. Only employee bonuses
2. Customer loyalty
3. Compliance and public accountability
4. Private marketing strategy

Correct Answer: 3. Compliance and public accountability

Explanation:

Government auditing can involve more than checking financial statement accuracy. Depending on the engagement, government auditors may evaluate compliance with laws and regulations, internal controls, program performance, and stewardship of public resources. Public sector auditing therefore often includes accountability considerations that differ from private commercial objectives. The current Fraud Examiners Manual specifically separates government auditors’ fraud related responsibilities from those of internal and external auditors, and the revised CFE Exam expects candidates to understand these different roles.

Question 210. What is the strongest business case for investing in fraud prevention

1. Reduce expected losses and organizational disruption
2. Eliminate every audit
3. Guarantee no employee misconduct
4. Avoid documenting controls

Correct Answer: 1. Reduce expected losses and organizational disruption

Explanation:

A useful business case for fraud prevention explains how effective prevention can reduce financial losses, regulatory exposure, reputational damage, investigation costs, operational disruption, and other consequences of fraud. Management is more likely to support prevention initiatives when the benefits are connected to organizational objectives and risk reduction rather than presented only as compliance costs. The current Fraud Examiners Manual specifically includes Selling Fraud Prevention to Management and the nonfinancial costs of financial crime within Fraud Prevention and Deterrence.

Question 211. Who should normally be subject to an anti fraud policy

1. Only junior employees
2. Everyone covered by the organization’s policy scope
3. Only internal auditors
4. Only accounting personnel

Correct Answer: 4. Everyone covered by the organization’s policy scope

Explanation:

An anti fraud policy should apply consistently to the individuals and parties included within its defined scope rather than only to lower level employees. Depending on the organization, this can include executives, managers, employees, contractors, or other relevant parties. Unequal application weakens credibility and can undermine deterrence. The policy should clearly describe prohibited conduct, responsibilities, reporting channels, and consequences. Anti Fraud Policy and Ethics Programs are specifically listed as current Fraud Prevention Programs topics in the Fraud Examiners Manual.

Question 212. What is a useful feature of an ethics advice channel

1. It allows employees to ask questions before acting
2. It replaces the reporting hotline
3. It approves all exceptions automatically
4. It eliminates management responsibility

Correct Answer: 2. It allows employees to ask questions before acting

Explanation:

An ethics advice channel gives employees a place to seek guidance when they are uncertain about conflicts, gifts, outside activities, reporting duties, or other ethical issues. This can prevent misconduct by helping people resolve uncertainty before making a questionable decision. An advice channel differs from a reporting mechanism because its primary purpose is guidance rather than allegation intake, although organizations can coordinate the two functions. Ethics programs and codes of conduct are established topics within the current CFE Fraud Prevention and Deterrence materials.

Question 213. What should fraud risk assessment participants challenge during brainstorming

1. Only confirmed fraud cases
2. Only accounting errors
3. Assumptions that a process is too controlled for fraud
4. Every existing policy regardless of relevance

Correct Answer: 1. Assumptions that a process is too controlled for fraud

Explanation:

Fraud risk assessment participants should avoid assuming that a process is safe simply because controls exist or because no fraud has previously been reported. They should consider how controls might fail, be overridden, or be defeated through collusion. Challenging assumptions encourages more realistic scenario development and can reveal risks that routine control discussions overlook. The current Fraud Examiners Manual includes fraud risk assessment preparation, frameworks, identified fraud risks, and residual risk responses as distinct parts of the assessment process.

Question 214. What should management do when a control reduces likelihood but not potential impact

1. Assume the risk is eliminated
2. Stop monitoring
3. Remove the control
4. Evaluate whether impact mitigation is also needed

Correct Answer: 4. Evaluate whether impact mitigation is also needed

Explanation:

Fraud risk responses can affect likelihood, impact, or both. A preventive control might make a scheme less likely without reducing the damage if the scheme succeeds. Management should therefore evaluate whether additional measures such as transaction limits, insurance, recovery planning, escalation procedures, or other controls are needed to address potential impact. Fraud risk management requires consideration of the complete residual exposure rather than focusing on one dimension. The current Fraud Examiners Manual includes responding to residual fraud risks and fraud risk management frameworks as core topics.

Question 215. What is a useful reason to identify fraud risk by business process

1. Avoid assigning control ownership
2. Connect risks to specific activities and controls
3. Eliminate enterprise reporting
4. Replace governance oversight

Correct Answer: 2. Connect risks to specific activities and controls

Explanation:

Organizing fraud risks by business process helps management connect each scheme to the transactions, employees, systems, and controls that could enable or prevent it. For example, procurement, payroll, sales, or expense reimbursement can each have different fraud scenarios and control requirements. Process based assessment also makes it easier to assign risk owners and remediation actions. The Fraud Examiners Manual’s fraud risk assessment and fraud risk management sections emphasize structured identification, control evaluation, responsibility, and response.

Question 216. What should fraud analytics models be tested for periodically

1. Popularity with employees
2. Marketing usefulness
3. Continued relevance and effectiveness
4. Ability to replace investigators

Correct Answer: 3. Continued relevance and effectiveness

Explanation:

Fraud analytics rules and models can become less effective as transaction patterns, systems, business processes, and fraud methods change. Organizations should periodically evaluate whether alerts still identify meaningful risk, whether thresholds need adjustment, and whether excessive false positives are reducing usefulness. Analytics supports fraud risk management but does not replace professional judgment or investigation. The current Fraud Examiners Manual specifically includes the use of data analytics in managing fraud risk as a component of the Fraud Prevention and Deterrence body of knowledge.

Question 217. What should third party due diligence seek to understand about ownership

1. Only the vendor logo
2. Only annual revenue
3. Only office size
4. Who ultimately controls or benefits from the entity

Correct Answer: 4. Who ultimately controls or benefits from the entity

Explanation:

Understanding ownership can reveal conflicts of interest, hidden relationships, sanctions exposure, or other integrity concerns that would not be obvious from a third party’s public name alone. Organizations should apply due diligence proportionate to the risk of the relationship and investigate significant ownership concerns before proceeding. Third party fraud risk management remains an explicit topic in the current Fraud Examiners Manual because fraud exposure can arise through vendors, agents, contractors, distributors, and other external relationships.

Question 218. What should a CFE do when asked to give testimony outside their expertise

1. Clearly stay within their area of competence
2. Guess when uncertain
3. Expand conclusions beyond the evidence
4. Present assumptions as facts

Correct Answer: 2. Clearly stay within their area of competence

Explanation:

A CFE should testify only within areas supported by their competence, knowledge, and evidential basis. When a question requires expertise they do not possess, the professional should make that limitation clear rather than speculate. Ethical testimony requires integrity, accuracy, and professional diligence. The ACFE Code of Professional Ethics specifically addresses integrity and competence, court orders and testimony, and the requirement for a reasonable evidential basis for opinions. These requirements help preserve the reliability and credibility of fraud examination work.

Question 219. Does a CFE duty of confidentiality generally end when an engagement ends

1. Yes immediately
2. Yes after one month
3. No confidential information should remain protected
4. Only if the client requests it

Correct Answer: 3. No confidential information should remain protected

Explanation:

Professional confidentiality generally continues after an engagement or employment relationship ends. A fraud examiner should not disclose confidential information simply because the assignment is over. Disclosure can still be appropriate when authorized or legally required, but the end of the engagement does not automatically make sensitive information public. This continuing obligation helps protect individuals, organizations, investigations, and professional trust. Confidential Information is specifically included within the current ACFE Code of Professional Ethics topics in the Fraud Examiners Manual.

Question 220. What is the best way to keep fraud prevention aligned with current CFE expectations

1. Use the current exam blueprint and fraud examination body of knowledge
2. Rely only on materials from before 2026
3. Study only investigation techniques
4. Ignore changes in fraud risk management

Correct Answer: 1. Use the current exam blueprint and fraud examination body of knowledge

Explanation:

The ACFE launched a revised CFE Exam in June 2026 based on a 2024 Job Task Analysis. The current exam has three sections, including Fraud Prevention and Deterrence, which covers why people commit fraud, governance, management and auditor responsibilities, prevention programs, fraud risk assessment, fraud risk management, and ethics. Candidates should therefore use current ACFE materials rather than relying entirely on older exam structures. The ACFE states that the content outline serves as the official blueprint for developing exam questions and maintaining alignment with current professional competencies.