CERTIFIED FRAUD EXAMINER FINAL PAPER 2026
COMPLETE QUESTIONS AND ANSWERS
◉ Haley, an investment professional, was responsible for managing
the brokerage account of her client Tammie. Tammie had little
investment experience and trusted Haley to control her account.
Over an eight-month period, Haley executed more than one hundred
trades on Tammie's behalf for the purpose of increasing her own
commissions. Haley executed the trades without regard for
Tammie's investment goals. This securities fraud scheme is BEST
known as:
A. Selling away
B. Churning
C. Running
D. Insider trading. Answer: B. Churning
CHURNING IS the excessive trading of a customer account to
generate commissions while disregarding the customer's interests.
Churning occurs when an investment professional excessively trades
an account for the purpose of increasing their commissions, instead
of furthering the customer's investment goals
◉ If an employee commits internal fraud, then THE ONLY FEASIBLE
WAY the employer can recover the losses is to get them from the
employee through agreement or litigation.
,A. True
B. False. Answer: B. False
Given the prevalence of fraud & that IT'S DIFFICULT TO RECOVER
ALL LOSSES FROM FRAUD, many biz have FIDELITY INSURANCE.
Fidelity insurance or crime insurance or employee-dishonesty
insurance is often overlooked as a method of recovery. Fidelity
insurance is a type of insurance under which the Insured is covered
against losses caused by dishonest or fraudulent acts by its
employees
◉ The main distinction between mediation and arbitration is that
with arbitration, the arbitrator decides who wins the case. In
contrast, in mediation, the mediator tries to help the parties reach a
settlement.
A. True
B. False. Answer: A. True
◉ In a bustout scheme, which of the following types of assets does
the fraudster typically purchase and then sell prior to closing the
business?
A. Real estate
B. Inventory or goods
C. Legal or accounting services
D. Business insurance policies. Answer: B. Inventory or goods
,BUSTOUT SCHEME IS a planned & fraudulent bankruptcy. The basic
approach is for an apparently legitimate biz to order large quantities
of inventory or other goods using credit, then dispose of those goods
through legitimate or illegitimate channels. Because the point of
Bustout Scheme is to quickly resell the goods for cash, the Fraudster
is likely to purchase more liquid items like inventory than real
estate, insurance policies, or services. The perpetrator then closes
the biz, absconding with the proceeds, & leaving the suppliers
unpaid. The Debtor might then go into bankruptcy. Often by this
point, the Debtor has already made false accounting entries or taken
other steps to conceal the assets or make the sales look legitimate.
Other times, the Debtor flee the jurisdiction or don't show up at the
proceedings
◉ Which of the following statements concerning expert witnesses in
most inquisitorial jurisdictions is FALSE?
A. An expert who is certified in a specific field is always qualified to
testify as an expert witness
B. Experts are often allowed to serve as expert witnesses in multiple
cases
C. Expert witnesses are often selected from a list maintained by
courts, chambers of commerce, or other organizations
D. The judge makes the final determination of whether an expert is
qualified. Answer: A. An expert who is certified in a specific field is
always qualified to testify as an expert witness
, The primary experts in inquisitorial jurisdictions is usually
appointed & presented by the Judge rather than the parties. Like in
adversarial jurisdictions, the Judge makes the final determination of
whether an expert is qualified. However, most inquisitorial
jurisdictions have more standardized qualification requirements.
Many jurisdictions maintain lists of experts in certain fields from
which the Court may choose for a particular case. These experts are
generally qualified if they meet national standards (being certified in
a specific field); however, the Judge will take the issues involved in
the case into consideration & make the final decision. Some
jurisdictions allow judges to look outside of the lists for experts. Due
to the maintenance of expert lists & the relatively low-perceived bias
of experts in inquisitorial jurisdictions, it's acceptable for expert
witnesses to offer their services in court more often than in
adversarial jurisdictions
◉ The presence of securities regulation tends to DECREASE
investors' confidence in the market.
A. True
B. False. Answer: B. False
Securities regulation must balance the legitimate needs of biz to
raise capital against the need to protect investors. Securities
regulation also:
· Promoting an active & competitive market
· Maintaining market confidence
COMPLETE QUESTIONS AND ANSWERS
◉ Haley, an investment professional, was responsible for managing
the brokerage account of her client Tammie. Tammie had little
investment experience and trusted Haley to control her account.
Over an eight-month period, Haley executed more than one hundred
trades on Tammie's behalf for the purpose of increasing her own
commissions. Haley executed the trades without regard for
Tammie's investment goals. This securities fraud scheme is BEST
known as:
A. Selling away
B. Churning
C. Running
D. Insider trading. Answer: B. Churning
CHURNING IS the excessive trading of a customer account to
generate commissions while disregarding the customer's interests.
Churning occurs when an investment professional excessively trades
an account for the purpose of increasing their commissions, instead
of furthering the customer's investment goals
◉ If an employee commits internal fraud, then THE ONLY FEASIBLE
WAY the employer can recover the losses is to get them from the
employee through agreement or litigation.
,A. True
B. False. Answer: B. False
Given the prevalence of fraud & that IT'S DIFFICULT TO RECOVER
ALL LOSSES FROM FRAUD, many biz have FIDELITY INSURANCE.
Fidelity insurance or crime insurance or employee-dishonesty
insurance is often overlooked as a method of recovery. Fidelity
insurance is a type of insurance under which the Insured is covered
against losses caused by dishonest or fraudulent acts by its
employees
◉ The main distinction between mediation and arbitration is that
with arbitration, the arbitrator decides who wins the case. In
contrast, in mediation, the mediator tries to help the parties reach a
settlement.
A. True
B. False. Answer: A. True
◉ In a bustout scheme, which of the following types of assets does
the fraudster typically purchase and then sell prior to closing the
business?
A. Real estate
B. Inventory or goods
C. Legal or accounting services
D. Business insurance policies. Answer: B. Inventory or goods
,BUSTOUT SCHEME IS a planned & fraudulent bankruptcy. The basic
approach is for an apparently legitimate biz to order large quantities
of inventory or other goods using credit, then dispose of those goods
through legitimate or illegitimate channels. Because the point of
Bustout Scheme is to quickly resell the goods for cash, the Fraudster
is likely to purchase more liquid items like inventory than real
estate, insurance policies, or services. The perpetrator then closes
the biz, absconding with the proceeds, & leaving the suppliers
unpaid. The Debtor might then go into bankruptcy. Often by this
point, the Debtor has already made false accounting entries or taken
other steps to conceal the assets or make the sales look legitimate.
Other times, the Debtor flee the jurisdiction or don't show up at the
proceedings
◉ Which of the following statements concerning expert witnesses in
most inquisitorial jurisdictions is FALSE?
A. An expert who is certified in a specific field is always qualified to
testify as an expert witness
B. Experts are often allowed to serve as expert witnesses in multiple
cases
C. Expert witnesses are often selected from a list maintained by
courts, chambers of commerce, or other organizations
D. The judge makes the final determination of whether an expert is
qualified. Answer: A. An expert who is certified in a specific field is
always qualified to testify as an expert witness
, The primary experts in inquisitorial jurisdictions is usually
appointed & presented by the Judge rather than the parties. Like in
adversarial jurisdictions, the Judge makes the final determination of
whether an expert is qualified. However, most inquisitorial
jurisdictions have more standardized qualification requirements.
Many jurisdictions maintain lists of experts in certain fields from
which the Court may choose for a particular case. These experts are
generally qualified if they meet national standards (being certified in
a specific field); however, the Judge will take the issues involved in
the case into consideration & make the final decision. Some
jurisdictions allow judges to look outside of the lists for experts. Due
to the maintenance of expert lists & the relatively low-perceived bias
of experts in inquisitorial jurisdictions, it's acceptable for expert
witnesses to offer their services in court more often than in
adversarial jurisdictions
◉ The presence of securities regulation tends to DECREASE
investors' confidence in the market.
A. True
B. False. Answer: B. False
Securities regulation must balance the legitimate needs of biz to
raise capital against the need to protect investors. Securities
regulation also:
· Promoting an active & competitive market
· Maintaining market confidence
