CFE-FINANCIAL TRANSACTIONS AND
FRAUD SCHEMES EXAM
Which of the following is a typical method used to make corrupt payments in bribery and
corruption schemes? - Correct Answers -Payment of credit card bills, gifts, travel,
entertainment, checks, and other financial interests.
Laura, the sales manager of Sam Corp., is afraid sales revenue for the period is not
going to meet company goals. To make up for the shortfall, she decides to mail invoices
to fake customers and credit (increase) revenue on the books for these sales. What
account will she most likely debit to balance these fictitious revenue entries and conceal
her scheme? - Correct Answers -Accounts receivable.
James runs an electronics store. One of the main challenges in his business is keeping
up with technological advances. Because of this, his auditors want to ensure inventory
is not fraudulently overstated on the store's balance sheet. Which of the following
actions should the auditors take to ensure inventory is not overstated? - Correct
Answers -View the inventory and conduct a physical count, make sure obsolete
inventory has been written off, and ensure that inventory is recorded at the lower of cost
or market value.
Which of the following statements is true regarding the statement of cash flows? -
Correct Answers -The statement of cash flows does NOT shows a company's financial
position at a specific point in time.
The means of measuring the relationship between two different financial statement
amounts: - Correct Answers -Ratio analysis
A CFE has received a tip that an employee in the claims department is processing
claims for his own benefit during non-working hours. To gather information about the
validity of this tip, the CFE should look at which of the following reports? - Correct
Answers -Address similarity report, exception report, and manual override report.
In a financial statement fraud scheme in which capital expenditures are recorded as
expenses rather than assets, the transactions will have the following effect on the
organization's financial statements: - Correct Answers -Total assets will be understated.
, In order to understate net income, therefore lowering income tax liability, an accountant
could fraudulently expense costs rather than properly capitalizing them to an asset
account. - Correct Answers -True.
A company's financial statements must include information on changes in accounting
methods, contingent liabilities, significant subsequent events, and all other information
necessary for users to make valid, informed decisions. This is the concept of: - Correct
Answers -Full disclosure.
How does vertical analysis differ from horizontal analysis? - Correct Answers -Vertical
analysis expresses the percentage of component items to a specific base item, while
horizontal analysis analyzes the percentage change in individual financial statement
items from one year to the next.
The statement of cash flows is often used: - Correct Answers -in tandem with the
income statement to determine a company's true financial performance.
Julia runs a printing company and has an antique printing press that she uses in her
business. She purchased the press ten years ago for $5,000. Similar presses are selling
on the market today for about $8,000. Julia mentioned she's thinking about retiring and
her friend offered to give Julia $9,000 for the press. According to GAAP, how much
should the printing press be listed for on Julia's books? - Correct Answers -$5,000.00
ABC Company purchases a material amount of products from another entity whose
operating policies can be controlled by ABC Company's management, but it does not
disclose this situation on its financial statements. Which type of improper disclosure
scheme has ABC Company engaged in? - Correct Answers -Related party transaction.
The wrongful use of influence to procure a benefit for the actor or another person,
contrary to the duty or the rights of others. - Correct Answers -Corruption defined
At the end of each fiscal year, the accounts reflected on the income statement: - Correct
Answers -are reduced to a zero balance.
Another term for unbundling is: - Correct Answers -Coding fragmentation.
Unbundling can be detected through: - Correct Answers -A computer program that
determines whether each code submitted is a component of one or more
comprehensive codes.
The exchange of electronic data between computers where there is no human reaction:
- Correct Answers -Electronic Data Interchange
Effective internal controls designed to ensure that company operations adhere to the
guidelines, regulations, and law affecting the company. - Correct Answers -Compliance
programs.
FRAUD SCHEMES EXAM
Which of the following is a typical method used to make corrupt payments in bribery and
corruption schemes? - Correct Answers -Payment of credit card bills, gifts, travel,
entertainment, checks, and other financial interests.
Laura, the sales manager of Sam Corp., is afraid sales revenue for the period is not
going to meet company goals. To make up for the shortfall, she decides to mail invoices
to fake customers and credit (increase) revenue on the books for these sales. What
account will she most likely debit to balance these fictitious revenue entries and conceal
her scheme? - Correct Answers -Accounts receivable.
James runs an electronics store. One of the main challenges in his business is keeping
up with technological advances. Because of this, his auditors want to ensure inventory
is not fraudulently overstated on the store's balance sheet. Which of the following
actions should the auditors take to ensure inventory is not overstated? - Correct
Answers -View the inventory and conduct a physical count, make sure obsolete
inventory has been written off, and ensure that inventory is recorded at the lower of cost
or market value.
Which of the following statements is true regarding the statement of cash flows? -
Correct Answers -The statement of cash flows does NOT shows a company's financial
position at a specific point in time.
The means of measuring the relationship between two different financial statement
amounts: - Correct Answers -Ratio analysis
A CFE has received a tip that an employee in the claims department is processing
claims for his own benefit during non-working hours. To gather information about the
validity of this tip, the CFE should look at which of the following reports? - Correct
Answers -Address similarity report, exception report, and manual override report.
In a financial statement fraud scheme in which capital expenditures are recorded as
expenses rather than assets, the transactions will have the following effect on the
organization's financial statements: - Correct Answers -Total assets will be understated.
, In order to understate net income, therefore lowering income tax liability, an accountant
could fraudulently expense costs rather than properly capitalizing them to an asset
account. - Correct Answers -True.
A company's financial statements must include information on changes in accounting
methods, contingent liabilities, significant subsequent events, and all other information
necessary for users to make valid, informed decisions. This is the concept of: - Correct
Answers -Full disclosure.
How does vertical analysis differ from horizontal analysis? - Correct Answers -Vertical
analysis expresses the percentage of component items to a specific base item, while
horizontal analysis analyzes the percentage change in individual financial statement
items from one year to the next.
The statement of cash flows is often used: - Correct Answers -in tandem with the
income statement to determine a company's true financial performance.
Julia runs a printing company and has an antique printing press that she uses in her
business. She purchased the press ten years ago for $5,000. Similar presses are selling
on the market today for about $8,000. Julia mentioned she's thinking about retiring and
her friend offered to give Julia $9,000 for the press. According to GAAP, how much
should the printing press be listed for on Julia's books? - Correct Answers -$5,000.00
ABC Company purchases a material amount of products from another entity whose
operating policies can be controlled by ABC Company's management, but it does not
disclose this situation on its financial statements. Which type of improper disclosure
scheme has ABC Company engaged in? - Correct Answers -Related party transaction.
The wrongful use of influence to procure a benefit for the actor or another person,
contrary to the duty or the rights of others. - Correct Answers -Corruption defined
At the end of each fiscal year, the accounts reflected on the income statement: - Correct
Answers -are reduced to a zero balance.
Another term for unbundling is: - Correct Answers -Coding fragmentation.
Unbundling can be detected through: - Correct Answers -A computer program that
determines whether each code submitted is a component of one or more
comprehensive codes.
The exchange of electronic data between computers where there is no human reaction:
- Correct Answers -Electronic Data Interchange
Effective internal controls designed to ensure that company operations adhere to the
guidelines, regulations, and law affecting the company. - Correct Answers -Compliance
programs.
