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

Question 261. What should a fraud risk governance policy define

1. Employee salaries
2. Roles authority and accountability for fraud risk
3. Customer pricing
4. Audit software brands

Correct Answer: 2. Roles authority and accountability for fraud risk

Explanation:

A fraud risk governance policy should establish who is responsible for overseeing, managing, assessing, and reporting fraud risk. Clear authority and accountability help prevent significant exposures from being ignored because everyone assumes another function owns them. Governance can involve the board, senior management, compliance, internal audit, legal personnel, and business process owners. The ACFE and COSO fraud risk management approach begins with establishing fraud risk governance policies before moving into assessment, control activities, investigations, and monitoring. Clear governance therefore provides the foundation for a coordinated fraud risk management program.

Question 262. What should senior management do with fraud risk information reported to it

1. Delete unfavorable findings
2. Transfer all risks to internal audit
3. Ignore risks below financial materiality
4. Evaluate significant exposure and ensure action

Correct Answer: 4. Evaluate significant exposure and ensure action

Explanation:

Senior management should use fraud risk information to understand significant exposure, determine whether current controls are adequate, and ensure appropriate corrective action occurs. Management owns the organization’s internal control environment and fraud risk responses. Information should therefore lead to decisions rather than becoming a reporting exercise with no follow through. Significant unresolved risks might require stronger controls, process redesign, monitoring, escalation, or another response. The current CFE Fraud Prevention and Deterrence content emphasizes management responsibilities, fraud risk assessment, fraud risk management, and corporate governance as connected areas of professional knowledge.

Question 263. What should an organization identify when building a fraud risk universe

1. Major processes assets systems and possible schemes
2. Only confirmed past frauds
3. Only employee complaints
4. Only external threats

Correct Answer: 1. Major processes assets systems and possible schemes

Explanation:

A fraud risk universe should provide a broad view of where fraud exposure could exist across the organization. It can consider business processes, systems, valuable assets, employees, third parties, locations, reporting activities, and plausible fraud schemes. Restricting the analysis only to known historical cases can leave new and emerging risks unidentified. A complete view helps management determine where detailed fraud risk assessments and controls are most important. Current ACFE fraud risk management guidance emphasizes structured identification and assessment of fraud risks as part of a comprehensive program.

Question 264. What event should commonly trigger an updated fraud risk assessment

1. Routine office cleaning
2. Employee birthday
3. A major acquisition or system change
4. A normal monthly close

Correct Answer: 3. A major acquisition or system change

Explanation:

Major organizational changes can create new fraud opportunities and make existing controls less effective. Acquisitions, new technology, significant restructuring, entry into new markets, or major process changes can alter access rights, reporting lines, third party relationships, and financial incentives. Management should reassess fraud risk when such changes occur rather than waiting only for a scheduled annual review. Fraud risk management is intended to remain responsive to the organization’s current environment. The ACFE emphasizes that fraud risks evolve and that organizations should continually strengthen their fraud risk management programs as threats and technologies change.

Question 265. What is the purpose of preventive fraud controls

1. Investigate completed frauds
2. Stop or discourage misconduct before it occurs
3. Calculate fraud losses only
4. Replace management oversight

Correct Answer: 2. Stop or discourage misconduct before it occurs

Explanation:

Preventive controls are designed to reduce the likelihood that fraudulent activity can occur successfully. Examples include approvals, segregation of duties, system access restrictions, required documentation, and appropriate hiring controls. These controls differ from detective controls, which identify suspicious activity after or while it occurs. Strong fraud risk management normally uses both preventive and detective measures because no single control can address every possible scheme. ACFE and COSO guidance specifically identifies the design and deployment of fraud prevention and detection control activities as a core element of a comprehensive fraud risk management program.

Question 266. What is the purpose of detective fraud controls

1. Identify suspicious activity or control failures
2. Guarantee fraud prevention
3. Eliminate investigations
4. Replace authorization controls

Correct Answer: 1. Identify suspicious activity or control failures

Explanation:

Detective controls are intended to identify irregularities, suspicious transactions, or failures that preventive controls did not stop. Examples can include reconciliations, exception reports, transaction monitoring, audit procedures, and data analytics. A detective control does not prove that fraud occurred, but it can identify activity requiring additional review. Effective fraud risk management generally combines preventive and detective controls so the organization both reduces opportunities and has mechanisms for identifying misconduct that still occurs. ACFE fraud risk management guidance includes both prevention and detection control activities within the overall program framework.

Question 267. What should happen when management override activity is unusually frequent

1. Assume every override is valid
2. Remove approval controls
3. Stop recording overrides
4. Perform independent review of the pattern

Correct Answer: 4. Perform independent review of the pattern

Explanation:

Management override can be legitimate in limited circumstances, but frequent or unusual override activity can indicate that established controls are being bypassed too often. Independent review can determine whether overrides were authorized, documented, justified, and consistent with policy. Patterns involving senior management deserve particular attention because ordinary employees might not be able to challenge them. Corporate governance, management responsibility for controls, and fraud risk management are major parts of the current CFE Fraud Prevention and Deterrence section, making oversight of override activity an important prevention concept.

Question 268. What does a control frequency determine

1. Who owns the organization
2. Whether fraud is criminal
3. How often the control operates
4. Whether auditors are independent

Correct Answer: 3. How often the control operates

Explanation:

Control frequency describes how often a control is performed, such as continuously, daily, monthly, quarterly, or annually. Frequency matters because a control performed too infrequently might allow fraudulent activity to continue for a long period before detection. The appropriate frequency depends on the speed, volume, and significance of the underlying risk. High volume payment activity might require frequent monitoring, while another lower risk process might justify periodic review. Fraud risk management requires controls to be designed according to the characteristics of the identified exposure rather than applying identical procedures everywhere.

Question 269. What should an organization require employees to do with its code of conduct

1. Acknowledge understanding and compliance expectations
2. Keep it secret from coworkers
3. Use it only during investigations
4. Replace all training with the document

Correct Answer: 1. Acknowledge understanding and compliance expectations

Explanation:

Requiring employees to acknowledge the code of conduct reinforces awareness of organizational expectations and creates a record that the standards were communicated. Acknowledgment alone does not prove employees understand every requirement or guarantee ethical behavior, so organizations should also provide training, reporting channels, leadership support, and consistent enforcement. The code should apply meaningfully across organizational levels rather than functioning as a document employees sign and forget. Ethics programs and anti fraud policies are specific topics in the current Fraud Prevention and Deterrence body of knowledge.

Question 270. What is the best reason to separate ethics advice from investigation decisions

1. Reduce ethical awareness
2. Prevent employees from asking questions
3. Eliminate reporting channels
4. Allow employees to seek guidance without assuming misconduct

Correct Answer: 4. Allow employees to seek guidance without assuming misconduct

Explanation:

Employees sometimes need advice about gifts, conflicts, outside employment, confidentiality, or other ethical questions before any violation occurs. Providing an advice channel encourages people to ask questions early without feeling that they are automatically opening an investigation. Allegation reporting and investigative procedures can remain available separately when misconduct is suspected. This distinction can strengthen an ethics program by supporting prevention as well as response. The Fraud Examiners Manual includes ethics programs, anti fraud policies, and professional ethics within the current Fraud Prevention and Deterrence material.

Question 271. What should a retaliation monitoring process examine

1. Product sales
2. Treatment of employees after good faith reporting
3. Customer payment history
4. External audit fees

Correct Answer: 2. Treatment of employees after good faith reporting

Explanation:

Anti retaliation policies are more effective when organizations monitor what happens to employees after they make good faith reports. Sudden negative evaluations, undesirable transfers, exclusion, threats, or other adverse treatment might require review. Monitoring does not mean every employment action after a report is retaliatory, but unusual patterns deserve attention. Employees are less likely to use reporting systems if they believe speaking up will harm their careers. Reporting programs and whistleblower protection are core fraud prevention concepts because tips and employee observations can provide important information about misconduct.

Question 272. What should an organization do with substantiated retaliation

1. Ignore it
2. Reward the manager involved
3. Address it consistently under policy
4. Close the reporting channel

Correct Answer: 3. Address it consistently under policy

Explanation:

Substantiated retaliation should receive an appropriate and consistent response under organizational policy and applicable law. Failure to address retaliation can undermine reporting mechanisms and signal that management values silence more than ethical conduct. Employees should be able to raise concerns in good faith without improper punishment. Appropriate action may include discipline, remediation, restoring affected employment conditions, and strengthening controls around the reporting process. Effective fraud prevention programs rely on trusted reporting systems, consistent enforcement, and leadership support for ethical conduct.

Question 273. What should an anti fraud investigation protocol define

1. Who receives reports and how investigations are authorized
2. Employee salary bands
3. Product development schedules
4. Customer discount limits

Correct Answer: 4. Who receives reports and how investigations are authorized

Explanation:

An investigation protocol should define how allegations are received, assessed, escalated, authorized, and assigned. It can also identify when legal counsel, human resources, compliance, internal audit, security, or outside specialists should become involved. Clear procedures reduce confusion and help sensitive allegations receive consistent treatment. The fraud risk management framework promoted by ACFE and COSO includes conducting fraud investigations and corrective action as a core program component. Organizations benefit from establishing the process before a serious allegation occurs rather than improvising during a crisis.

Question 274. What is the main purpose of corrective action after a fraud investigation

1. Reduce the chance that similar misconduct recurs
2. Hide control deficiencies
3. End all monitoring
4. Protect the fraud method from disclosure

Correct Answer: 1. Reduce the chance that similar misconduct recurs

Explanation:

Corrective action should address the conditions that allowed fraud to occur or continue. This can include control improvements, disciplinary action, training, process changes, access restrictions, recovery efforts, or governance changes. Punishing an individual without addressing the underlying weakness can leave the organization vulnerable to the same type of scheme by another person. ACFE and COSO fraud risk management guidance specifically includes investigations and corrective action as part of a comprehensive program. Lessons from actual incidents should therefore feed back into risk assessment and prevention activities.

Question 275. What should a culture survey help management understand

1. How employees perceive ethics reporting and leadership behavior
2. Only customer satisfaction
3. Only financial performance
4. Only product quality

Correct Answer: 3. How employees perceive ethics reporting and leadership behavior

Explanation:

Culture surveys can provide information about whether employees trust leadership, understand ethical expectations, feel safe reporting concerns, and believe misconduct is handled consistently. These perceptions can reveal risks that transactional controls do not show. A company may have strong written policies yet still have a weak ethical environment if employees believe executives ignore the rules. Fraud Prevention and Deterrence includes ethics programs, corporate governance, management responsibilities, and fraud awareness, all of which depend partly on organizational culture. Survey results should be combined with other evidence rather than viewed in isolation.

Question 276. What does behavioral reinforcement seek to do

1. Replace internal controls
2. Encourage desired ethical behavior repeatedly
3. Eliminate management supervision
4. Hide policy violations

Correct Answer: 2. Encourage desired ethical behavior repeatedly

Explanation:

Behavioral reinforcement uses repeated signals, incentives, recognition, reminders, or consequences to strengthen desired conduct. Ethical behavior becomes more credible when employees see that management consistently rewards appropriate decisions and addresses misconduct. One training session or policy acknowledgment is less effective when everyday workplace signals encourage different behavior. Fraud prevention programs should therefore consider how performance measures, leadership actions, disciplinary practices, and communication reinforce organizational expectations. Current ACFE Fraud Prevention and Deterrence material includes ethics programs and methods for building an effective prevention environment.

Question 277. What should third party due diligence verify about conflicts of interest

1. Whether undisclosed relationships could influence decisions
2. Only vendor advertising
3. Only office location
4. Only employee headcount

Correct Answer: 1. Whether undisclosed relationships could influence decisions

Explanation:

Third party due diligence should consider whether owners, employees, agents, or related parties have relationships with organizational personnel that could improperly influence purchasing or other decisions. Undisclosed conflicts can support favoritism, kickbacks, inflated pricing, or other schemes. A conflict does not automatically prove fraud, but it should be disclosed and managed appropriately. Fraud risk management should extend to vendors and other external parties because significant fraud exposure can arise outside the organization’s own workforce. ACFE guidance specifically includes management of third party fraud risks.

Question 278. What is a useful control when vendor banking information changes

1. Accept every emailed request immediately
2. Remove vendor records
3. Stop making payments permanently
4. Independently verify the change before payment

Correct Answer: 4. Independently verify the change before payment

Explanation:

Changes to vendor banking information can create an opportunity for payment diversion if fraudulent instructions are accepted without verification. An organization can reduce risk by independently confirming the change through trusted contact information already on file rather than relying only on the change request itself. The verification should be performed by personnel with appropriate authority and documented where required. This is an example of a preventive control designed around a specific fraud scenario. Fraud risk assessment helps organizations identify such vulnerabilities and select controls that directly address them.

Question 279. What should a fraud examiner do before relying heavily on confidential information from one source

1. Accept it automatically
2. Seek appropriate corroboration when possible
3. Publish it publicly
4. Ignore all other evidence

Correct Answer: 2. Seek appropriate corroboration when possible

Explanation:

Information from one confidential source can be valuable, but professional conclusions should be based on a reasonable evidential foundation. Corroborating information through documents, data, independent witnesses, or other reliable evidence can strengthen the examination and reduce the risk of acting on inaccurate or biased claims. Confidentiality should still be protected according to professional requirements. The ACFE’s ethics materials emphasize diligence, integrity, reasonable evidential basis, confidential information, and complete reporting. These principles support careful evaluation rather than unquestioning reliance on a single source.

Question 280. What is the best way to strengthen a mature fraud risk management program

1. Stop reassessing established controls
2. Focus only on historical fraud losses
3. Continuously evaluate risks technology controls and culture
4. Transfer all responsibility to auditors

Correct Answer: 3. Continuously evaluate risks technology controls and culture

Explanation:

A mature fraud risk management program evolves as the organization changes. Management should reassess fraud risks, evaluate control effectiveness, monitor emerging technology and external threats, review culture and reporting data, and learn from incidents. The ACFE’s current Anti Fraud Blueprint emphasizes strengthening fraud risk management programs as risks and technologies continue to evolve. The current CFE exam likewise includes fraud prevention programs, risk assessment, risk management, governance, and ethics. Continuous evaluation allows the program to remain relevant instead of relying on controls that were designed for an earlier risk environment.