CFE EXAMINATION – PRACTICE QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2026 Q&A
| INSTANT DOWNLOAD PDF.
*CORE DOMAINS*
*Financial Transactions*
*Fraud Schemes*
*Law and Legal Environment*
*Investigation Techniques*
*Fraud Prevention and Deterrence*
*Ethics and Compliance*
*Internal Controls*
*Data Analytics and Forensic A
*INTRODUCTION*
*The Certified Fraud Examiner (CFE) practice assessment is
*proficiency across the four primary pillars of the anti-f
*to validate technical knowledge regarding financial fraud
*methodology, and the psychological factors behind white-c
*a rigorous combination of foundational theory and complex
*reflect real-world forensic challenges. Mastery of these
*possess the critical thinking and decision-making skills
*and prevent fraudulent activity within any organizational
*to mirror the complexity of the official examination envi
SECTION ONE
1. Which of the following is the most common method used to
conceal inventory shrinkage?
,A. Performing a physical count of the assets
B. Altering the perpetual inventory records
C. Recording fictitious sales to existing customers
D. Writing off the inventory as scrap or spoilage
🟢 B. Altering the perpetual inventory records
🔴 RATIONALE: Perpetrators often alter inventory records to match
the physical count, thereby hiding the fact that items are missing from
the warehouse or retail floor.
2. In the context of the Fraud Triangle, which factor represents
the person's internal mindset or excuse for committing the
act?
A. Pressure
B. Opportunity
C. Rationalization
D. Capability
🟢 C. Rationalization
🔴 RATIONALE: Rationalization is the cognitive process where the
fraudster justifies their illegal actions to maintain their self-image as
an honest person.
3. Which legal standard refers to the "guilty mind" or the intent to
commit a crime?
,A. Mens rea
B. Actus reus
C. Certiorari
D. Res judicata
🟢 A. Mens rea
🔴 RATIONALE: Mens rea is the legal term for the intention or
knowledge of wrongdoing that constitutes part of a crime, as opposed
to the action itself.
4. A "ghost employee" scheme is most effectively detected by
which of the following actions?
A. Reviewing the list of employees for duplicate Social Security
numbers
B. Comparing bank statements to the general ledger
C. Verifying the authorization of overtime hours
D. Inspecting the physical security of the payroll office
🟢 A. Reviewing the list of employees for duplicate Social Security
numbers
🔴 RATIONALE: Identifying duplicate identifiers such as SSNs or
bank account numbers within the payroll database is a primary
method for spotting fictitious or "ghost" employees.
5. What is the primary purpose of a "kickback" in a procurement
fraud scheme?
, A. To lower the price of goods for the buyer
B. To reward an employee for influencing a contract award
C. To provide a discount to the vendor's primary customers
D. To cover up a shortfall in the accounts receivable department
🟢 B. To reward an employee for influencing a contract award
🔴 RATIONALE: Kickbacks involve an undisclosed payment from a
vendor to an employee of the purchasing company to ensure the
vendor wins a contract or receives favorable terms.
6. Under the ACFE Code of Professional Ethics, a CFE is
prohibited from:
A. Providing expert testimony in a civil case
B. Expressing an opinion on the guilt or innocence of any party
C. Using data analytics to identify fraud red flags
D. Working on a contingency fee basis for an investigation
🟢 B. Expressing an opinion on the guilt or innocence of any party
🔴 RATIONALE: Ethical standards dictate that CFEs must present
findings of fact and are prohibited from expressing legal opinions
regarding the guilt or innocence of individuals.
7. Which of the following is a classic "red flag" of a Ponzi
scheme?
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2026 Q&A
| INSTANT DOWNLOAD PDF.
*CORE DOMAINS*
*Financial Transactions*
*Fraud Schemes*
*Law and Legal Environment*
*Investigation Techniques*
*Fraud Prevention and Deterrence*
*Ethics and Compliance*
*Internal Controls*
*Data Analytics and Forensic A
*INTRODUCTION*
*The Certified Fraud Examiner (CFE) practice assessment is
*proficiency across the four primary pillars of the anti-f
*to validate technical knowledge regarding financial fraud
*methodology, and the psychological factors behind white-c
*a rigorous combination of foundational theory and complex
*reflect real-world forensic challenges. Mastery of these
*possess the critical thinking and decision-making skills
*and prevent fraudulent activity within any organizational
*to mirror the complexity of the official examination envi
SECTION ONE
1. Which of the following is the most common method used to
conceal inventory shrinkage?
,A. Performing a physical count of the assets
B. Altering the perpetual inventory records
C. Recording fictitious sales to existing customers
D. Writing off the inventory as scrap or spoilage
🟢 B. Altering the perpetual inventory records
🔴 RATIONALE: Perpetrators often alter inventory records to match
the physical count, thereby hiding the fact that items are missing from
the warehouse or retail floor.
2. In the context of the Fraud Triangle, which factor represents
the person's internal mindset or excuse for committing the
act?
A. Pressure
B. Opportunity
C. Rationalization
D. Capability
🟢 C. Rationalization
🔴 RATIONALE: Rationalization is the cognitive process where the
fraudster justifies their illegal actions to maintain their self-image as
an honest person.
3. Which legal standard refers to the "guilty mind" or the intent to
commit a crime?
,A. Mens rea
B. Actus reus
C. Certiorari
D. Res judicata
🟢 A. Mens rea
🔴 RATIONALE: Mens rea is the legal term for the intention or
knowledge of wrongdoing that constitutes part of a crime, as opposed
to the action itself.
4. A "ghost employee" scheme is most effectively detected by
which of the following actions?
A. Reviewing the list of employees for duplicate Social Security
numbers
B. Comparing bank statements to the general ledger
C. Verifying the authorization of overtime hours
D. Inspecting the physical security of the payroll office
🟢 A. Reviewing the list of employees for duplicate Social Security
numbers
🔴 RATIONALE: Identifying duplicate identifiers such as SSNs or
bank account numbers within the payroll database is a primary
method for spotting fictitious or "ghost" employees.
5. What is the primary purpose of a "kickback" in a procurement
fraud scheme?
, A. To lower the price of goods for the buyer
B. To reward an employee for influencing a contract award
C. To provide a discount to the vendor's primary customers
D. To cover up a shortfall in the accounts receivable department
🟢 B. To reward an employee for influencing a contract award
🔴 RATIONALE: Kickbacks involve an undisclosed payment from a
vendor to an employee of the purchasing company to ensure the
vendor wins a contract or receives favorable terms.
6. Under the ACFE Code of Professional Ethics, a CFE is
prohibited from:
A. Providing expert testimony in a civil case
B. Expressing an opinion on the guilt or innocence of any party
C. Using data analytics to identify fraud red flags
D. Working on a contingency fee basis for an investigation
🟢 B. Expressing an opinion on the guilt or innocence of any party
🔴 RATIONALE: Ethical standards dictate that CFEs must present
findings of fact and are prohibited from expressing legal opinions
regarding the guilt or innocence of individuals.
7. Which of the following is a classic "red flag" of a Ponzi
scheme?
