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

Question 341. Who should own an operational fraud risk

1. External auditor
2. Management with authority over the process
3. Customer
4. Regulator

Correct Answer: 2. Management with authority over the process

Explanation:

Operational fraud risks should normally be owned by management personnel who have enough authority and knowledge to manage the affected process. The risk owner should understand the exposure, oversee relevant controls, monitor changes, and ensure corrective actions are completed. Internal audit can evaluate whether the risk is being managed effectively, but it should not normally take ownership because that could impair independence. Clear responsibility is an important part of a structured fraud risk management program and supports accountability when identified risks require action.

Question 342. What distinguishes anonymous reporting from confidential reporting

1. Anonymous reports require management approval
2. Confidential reports are always public
3. Anonymous reports cannot involve fraud
4. Anonymous reporting does not identify the reporter

Correct Answer: 4. Anonymous reporting does not identify the reporter

Explanation:

Anonymous reporting allows a person to provide information without revealing their identity, while confidential reporting generally means the reporter’s identity is known to authorized personnel but protected from unnecessary disclosure. Both approaches can support an effective reporting program. Organizations should clearly explain available reporting options so employees understand how their information will be handled. Trust in reporting channels can influence whether people speak up about suspected misconduct. Reporting programs should also include appropriate escalation, investigation, and protection against retaliation.

Question 343. What is the main purpose of an anti retaliation policy

1. Protect good faith reporters from improper punishment
2. Prevent all employee discipline
3. Hide reporter identities from investigators
4. Eliminate hotline reviews

Correct Answer: 1. Protect good faith reporters from improper punishment

Explanation:

An anti retaliation policy is intended to protect people who raise concerns in good faith from improper punishment, harassment, demotion, or other adverse treatment because they reported suspected misconduct. Employees may remain silent when they believe reporting will harm their careers. Strong protection can therefore improve the effectiveness of a hotline or other reporting channel. The organization should communicate the policy clearly, investigate retaliation allegations, and discipline those who violate the protection. Whistleblower protection is an important element of a credible fraud prevention program.

Question 344. What should a fraud risk assessment scope include

1. Only accounting employees
2. Only frauds from the prior year
3. Significant processes systems and external relationships
4. Only confirmed losses

Correct Answer: 3. Significant processes systems and external relationships

Explanation:

A fraud risk assessment should be broad enough to identify meaningful exposure across business processes, information systems, locations, third parties, and other relevant activities. Restricting the assessment to past frauds or the accounting department can leave significant risks unidentified. The organization should consider plausible schemes, potential perpetrators, control weaknesses, incentives, opportunities, and possible consequences. The Fraud Examiners Manual identifies preparation, frameworks, identified fraud risks, residual risk responses, reporting, and assessment tools as important elements of the fraud risk assessment process.

Question 345. What is the purpose of monitoring control overrides

1. Identify unusual bypasses of established controls
2. Encourage employees to ignore approvals
3. Remove segregation of duties
4. Eliminate transaction reviews

Correct Answer: 1. Identify unusual bypasses of established controls

Explanation:

Control overrides can be legitimate in unusual circumstances, but repeated or unexplained overrides can create significant fraud exposure. Monitoring override activity helps management identify who bypassed the control, why it occurred, how often it happens, and whether the action received appropriate approval. This is especially important when senior personnel have authority to circumvent ordinary procedures. Override monitoring can therefore serve as a detective and deterrent measure. Organizations should investigate patterns rather than assuming that every override is justified simply because an authorized person performed it.

Question 346. How can a compensation clawback support fraud deterrence

1. It eliminates internal controls
2. It guarantees ethical behavior
3. It removes board oversight
4. It can require repayment of improperly earned compensation

Correct Answer: 4. It can require repayment of improperly earned compensation

Explanation:

A clawback provision can require an executive or employee to repay incentive compensation obtained under circumstances defined by the organization’s policy or applicable rules. When people know improperly earned rewards may later be recovered, the expected benefit of manipulating performance can be reduced. Clawbacks should not replace internal controls, independent oversight, or ethical culture, but they can complement those measures. Incentive structures should be designed carefully so employees are rewarded for sustainable and ethical performance rather than encouraged to achieve targets through misconduct.

Question 347. What can an ethical culture survey help management assess

1. Product demand
2. Employee perceptions of ethics and speaking up
3. Customer credit limits
4. Market share

Correct Answer: 2. Employee perceptions of ethics and speaking up

Explanation:

An ethical culture survey can provide information about how employees perceive leadership behavior, fairness, pressure, retaliation, reporting channels, and the consistency of policy enforcement. These perceptions can reveal weaknesses that formal policies do not show. For example, an organization might have a well written hotline policy while employees still believe that reporting concerns is unsafe. Survey results should be analyzed for patterns and followed by appropriate corrective actions. Culture information can therefore complement transaction controls and fraud risk assessments when evaluating the organization’s prevention environment.

Question 348. What should a fraud response plan address first after an allegation is received

1. Publicly identify the suspect
2. Destroy routine records
3. Preserve relevant information and control the response
4. Suspend every employee

Correct Answer: 3. Preserve relevant information and control the response

Explanation:

Once a serious allegation is received, the organization should protect potentially relevant information and follow a controlled response process. Records, electronic data, communications, and other evidence might otherwise be altered or destroyed through normal business activity. The response plan should identify responsibilities, escalation paths, legal involvement, investigation procedures, communication rules, and remediation steps. Acting without a plan can compromise evidence or expose the organization to unnecessary legal and reputational risk. Fraud prevention programs should therefore include preparation for responding to incidents rather than focusing only on prevention.

Question 349. What does a high false positive rate in fraud analytics indicate

1. Every alert is fraudulent
2. The model is legally invalid
3. Fraud risk has disappeared
4. The model may need refinement

Correct Answer: 4. The model may need refinement

Explanation:

A false positive occurs when an analytics rule flags activity that is ultimately legitimate. Some false positives are expected, but an excessive rate can overwhelm reviewers and reduce confidence in the monitoring system. Management should evaluate thresholds, data quality, rule design, and changing transaction patterns to improve the model. Refinement should not simply suppress difficult alerts because doing so could hide real risk. Data analytics is specifically included in the current Fraud Examiners Manual as a tool for managing fraud risk.

Question 350. Why should vendor master changes receive independent review

1. To identify unauthorized changes to supplier information
2. To eliminate vendor payments
3. To increase purchase prices
4. To remove procurement controls

Correct Answer: 2. To identify unauthorized changes to supplier information

Explanation:

Changes to vendor bank accounts, addresses, ownership information, or payment instructions can create fraud opportunities if one person can make changes without review. Independent approval or verification can help identify fictitious vendors, unauthorized bank changes, or attempts to redirect legitimate payments. The control is particularly important because vendor master data affects many later transactions. Strong preventive controls should focus on sensitive changes before money is disbursed rather than relying entirely on detection after a fraudulent payment has already occurred.

Question 351. What should management do after a major fraud incident

1. Conduct root cause analysis
2. Focus only on the offender
3. Leave controls unchanged
4. Stop reporting incidents

Correct Answer: 1. Conduct root cause analysis

Explanation:

Root cause analysis examines why the fraud was possible rather than focusing only on who committed it. The organization should consider control weaknesses, override activity, cultural problems, poor supervision, inadequate training, incentives, system vulnerabilities, and other contributing factors. Correcting only the individual offender can leave the same opportunity available to someone else. The findings should therefore inform remediation, policy improvements, training, monitoring, and future fraud risk assessments. A mature fraud prevention program learns from actual incidents and uses them to strengthen the control environment.

Question 352. What is the purpose of a fraud case management system

1. Replace all investigators
2. Determine guilt automatically
3. Track allegations actions and outcomes consistently
4. Make every case public

Correct Answer: 3. Track allegations actions and outcomes consistently

Explanation:

A case management system can provide a structured method for recording allegations, assignments, investigation steps, status, findings, remediation, and final outcomes. Consistent records help management monitor response times, identify recurring themes, and demonstrate that reports are handled according to established procedures. The system should include appropriate access restrictions because case information can be highly sensitive. Case management does not determine whether misconduct occurred. It supports an organized response process and provides data that can later improve fraud risk monitoring and prevention efforts.

Question 353. What is a leading fraud risk indicator

1. A signal that may show increasing risk before a loss occurs
2. A confirmed historical fraud loss
3. A final court judgment
4. A completed recovery amount

Correct Answer: 2. A signal that may show increasing risk before a loss occurs

Explanation:

Leading indicators provide information that may reveal increasing fraud exposure before a confirmed loss occurs. Examples can include growing override activity, declining control compliance, excessive access privileges, unusual vendor changes, or increased employee concerns. Lagging indicators, by contrast, describe events that have already occurred, such as confirmed fraud losses. Monitoring leading indicators allows management to intervene earlier. No single indicator proves fraud, so unusual results should lead to additional analysis rather than automatic accusations.

Question 354. What is the purpose of an executive certification process

1. Transfer all responsibility to auditors
2. Eliminate control testing
3. Replace financial reporting
4. Reinforce management accountability for information and controls

Correct Answer: 4. Reinforce management accountability for information and controls

Explanation:

Executive certifications require responsible leaders to formally acknowledge responsibility for information, controls, or compliance within their areas. The process can increase accountability because executives must actively consider whether the representation they are making is accurate. Certifications can be supported by lower level subcertifications so information flows upward from process owners. These statements do not replace audits or control testing, but they can strengthen governance and discourage managers from ignoring known deficiencies. Management’s responsibility for internal control is specifically included in the current Fraud Examiners Manual.

Question 355. Why should an audit committee meet privately with internal audit

1. To bypass every executive
2. To approve payroll
3. To allow candid discussion without management present
4. To manage daily controls

Correct Answer: 3. To allow candid discussion without management present

Explanation:

Private sessions between the audit committee and internal audit can provide a confidential opportunity to discuss significant concerns, management interference, control weaknesses, or other issues that might be difficult to raise in a meeting attended by senior executives. Such meetings support internal audit independence and stronger governance oversight. The audit committee should not take over daily control responsibilities, but it should provide an escalation channel when necessary. Independent governance becomes especially important when fraud allegations or control concerns involve senior management.

Question 356. What is the main benefit of control self assessment

1. Engage process owners in evaluating their controls
2. Replace independent assurance
3. Eliminate fraud risk ownership
4. Guarantee control effectiveness

Correct Answer: 1. Engage process owners in evaluating their controls

Explanation:

Control self assessment involves process owners and employees in evaluating risks and the controls used to address them. These individuals often understand operational weaknesses that may not be immediately visible to auditors or senior management. Self assessment can improve awareness and ownership, but it should not replace independent review because participants may be biased or may overlook weaknesses in their own processes. Used appropriately, it can complement fraud risk assessments, control testing, and internal audit assurance by bringing operational knowledge into the evaluation process.

Question 357. What should happen when a fraud analytics rule becomes outdated

1. Keep it unchanged
2. Stop all monitoring
3. Ignore new fraud methods
4. Update the rule using current risks and data

Correct Answer: 4. Update the rule using current risks and data

Explanation:

Analytics rules can become outdated as systems, transactions, business models, and fraud techniques change. A rule that once identified meaningful anomalies may later generate too many irrelevant alerts or miss new schemes entirely. Organizations should periodically review rule logic, thresholds, data inputs, alert quality, and emerging fraud risks. The Fraud Examiners Manual specifically recognizes data analytics as part of fraud risk management, which means analytics should evolve with the risk environment instead of being treated as a permanent one time configuration.

Question 358. What is the main purpose of independent hotline administration

1. Eliminate management reporting
2. Increase confidence in the reporting process
3. Make every report anonymous
4. Prevent investigations

Correct Answer: 1. Increase confidence in the reporting process

Explanation:

Independent administration can strengthen employee confidence that reports will be received objectively and will not be suppressed by people implicated in the allegation. Independence can be provided internally through a sufficiently separate function or externally through a service provider. The key objective is a trustworthy reporting process with appropriate confidentiality, escalation, recordkeeping, and anti retaliation protections. Independence does not mean that management and governance are removed from the response. Instead, it supports reliable intake and proper routing of allegations.

Question 359. What should a conflict of interest disclosure process require

1. No employee reporting
2. Disclosure only after fraud occurs
3. Timely disclosure of relevant personal interests
4. Automatic termination for every conflict

Correct Answer: 3. Timely disclosure of relevant personal interests

Explanation:

Employees and managers should disclose relevant financial, family, business, or other interests that could influence or appear to influence their professional decisions. Disclosure allows the organization to evaluate the conflict and determine an appropriate response, such as recusal, additional review, reassignment, or another safeguard. A conflict does not automatically prove fraud or require termination. The important preventive measure is transparency and proper management of the relationship before it affects organizational decisions. Ethical conduct and conflicts of interest are explicit topics in the ACFE Code of Professional Ethics.

Question 360. What best describes a mature fraud risk management program

1. Fraud is considered only after losses
2. Fraud risk is integrated into ongoing governance and risk management
3. Internal audit owns every fraud risk
4. One annual checklist is considered sufficient

Correct Answer: 2. Fraud risk is integrated into ongoing governance and risk management

Explanation:

A mature fraud risk management program treats fraud as an ongoing business risk rather than an isolated compliance exercise. Fraud risks are identified, assessed, assigned to responsible owners, addressed through appropriate controls, monitored with relevant information, and reported through governance channels. The program adapts as operations and threats change and is integrated with broader risk management activities. The current Fraud Examiners Manual specifically includes integration of anti fraud initiatives into risk management, program objectives, development steps, components, third party risks, and data analytics.