CFE ACTUAL EXAM PAPER 2026
QUESTIONS AND SOLUTIONS GRADED A+
◉ New account fraud
Answer: Fraud that occurs on an account within the first ninety days
that it is open; often, perpetrators open these accounts with the sole
intent of committing fraud. Prompt, decisive action is necessary to
manage and/or close apparent problem accounts. Some of the more
common red flags of potential new account schemes are:
* Customer residence outside the bank's trade area
* Dress and/or actions inconsistent or inappropriate for the
customer's stated age, occupation, or income level
* New account holder requesting immediate cash withdrawal upon
deposit
* Request for large quantity of temporary checks
* Services included with the account that do not match the
customer's purpose
* Missing or inaccurate customer application information
* Invalid phone numbers or addresses in customer account
information
* Use of a mail drop address (a service where a non-affiliated party
collects and distributes mail for individuals or entities)
* Large check or automated teller machine (ATM) deposits followed
by rapid withdrawal or transfer of funds (a pass-through account)
,* Business accounts without standard business transactions, such as
payroll or transactions that would be expected in that business
* Transactions without a clear purpose in jurisdictions known for
high levels of corruption
* Opening deposit that is a nominal cash amount
* Rare customer ID type
* Applicants over the age of 25 with no credit history
* Customers who cannot remember basic application information
(i.e., phone number, address)
◉ Markey Division
Answer: (or market allocation) schemes involve agreements among
competitors to divide and allocate markets and to refrain from
competing in each other's designated portion of the market.
◉ Ratio Analysis
Answer: a means of measuring the relationship between any two
different financial statement amounts. The relationship and
comparison are the keys to the analysis, which allows for internal
evaluations using financial statement data. Traditionally, financial
statement ratios are used in comparisons to an entity's industry
average. They can be very useful in detecting red flags for a fraud
examination.
◉ Separation of Duties
,Answer: The primary means of preventing cash fraud; Whenever
one individual has control over the entire accounting transaction
(e.g., authorization, recording, and custody), the opportunity is
present for cash fraud. Each of the following duties/responsibilities
should be separated:
- Cash receipts
- Bank deposits
- Bank reconciliation
- Cash disbursements
If one person has the authority to collect the cash, deposit the
receipts, record that collection, and disburse company funds, the
risk of fraud is high.
◉ Entries to the left side of an account are referred to as:
Answer: Debits
◉ Entries on the right side of the account are:
Answer: Credits
◉ 3 basic ways to prove corrupt payments
Answer: 1) Turn an inside witness.
2) Secretly infiltrate or record ongoing transactions.
3) Identify and trace the corrupt payments through audit steps.
, ◉ Pay-and-return scheme
Answer: an employee intentionally mishandles payments that are
owed to legitimate vendors. One way to do this is to purposely
double pay an invoice. For instance, a clerk might intentionally pay
an invoice twice and then call the vendor to request that one of the
checks be returned. The clerk then intercepts the returned check.
◉ Ponzi Scheme
Answer: an illegal business practice in which new investors' money
is used to make payments to earlier investors. The investment
opportunity is typically presented with the promise of uncommonly
high returns. While the scam is presented as a legitimate investment,
there is little or no actual commerce involved. When an enterprise
promotes an investment opportunity that invests little or none of
the participants' money and uses new investments to make dividend
payments, the enterprise is running this.
◉ Human Intelligence
Answer: gathered from subject-matter experts and informed
individuals. Such efforts typically target individuals who can provide
the most valuable information.
This approach exploits two weaknesses of corporate culture: (1) all
salespeople want to make a sale and (2) many salespeople will do
almost anything to make a sale. Other approaches include:
- Employment interviews (real and fake)
QUESTIONS AND SOLUTIONS GRADED A+
◉ New account fraud
Answer: Fraud that occurs on an account within the first ninety days
that it is open; often, perpetrators open these accounts with the sole
intent of committing fraud. Prompt, decisive action is necessary to
manage and/or close apparent problem accounts. Some of the more
common red flags of potential new account schemes are:
* Customer residence outside the bank's trade area
* Dress and/or actions inconsistent or inappropriate for the
customer's stated age, occupation, or income level
* New account holder requesting immediate cash withdrawal upon
deposit
* Request for large quantity of temporary checks
* Services included with the account that do not match the
customer's purpose
* Missing or inaccurate customer application information
* Invalid phone numbers or addresses in customer account
information
* Use of a mail drop address (a service where a non-affiliated party
collects and distributes mail for individuals or entities)
* Large check or automated teller machine (ATM) deposits followed
by rapid withdrawal or transfer of funds (a pass-through account)
,* Business accounts without standard business transactions, such as
payroll or transactions that would be expected in that business
* Transactions without a clear purpose in jurisdictions known for
high levels of corruption
* Opening deposit that is a nominal cash amount
* Rare customer ID type
* Applicants over the age of 25 with no credit history
* Customers who cannot remember basic application information
(i.e., phone number, address)
◉ Markey Division
Answer: (or market allocation) schemes involve agreements among
competitors to divide and allocate markets and to refrain from
competing in each other's designated portion of the market.
◉ Ratio Analysis
Answer: a means of measuring the relationship between any two
different financial statement amounts. The relationship and
comparison are the keys to the analysis, which allows for internal
evaluations using financial statement data. Traditionally, financial
statement ratios are used in comparisons to an entity's industry
average. They can be very useful in detecting red flags for a fraud
examination.
◉ Separation of Duties
,Answer: The primary means of preventing cash fraud; Whenever
one individual has control over the entire accounting transaction
(e.g., authorization, recording, and custody), the opportunity is
present for cash fraud. Each of the following duties/responsibilities
should be separated:
- Cash receipts
- Bank deposits
- Bank reconciliation
- Cash disbursements
If one person has the authority to collect the cash, deposit the
receipts, record that collection, and disburse company funds, the
risk of fraud is high.
◉ Entries to the left side of an account are referred to as:
Answer: Debits
◉ Entries on the right side of the account are:
Answer: Credits
◉ 3 basic ways to prove corrupt payments
Answer: 1) Turn an inside witness.
2) Secretly infiltrate or record ongoing transactions.
3) Identify and trace the corrupt payments through audit steps.
, ◉ Pay-and-return scheme
Answer: an employee intentionally mishandles payments that are
owed to legitimate vendors. One way to do this is to purposely
double pay an invoice. For instance, a clerk might intentionally pay
an invoice twice and then call the vendor to request that one of the
checks be returned. The clerk then intercepts the returned check.
◉ Ponzi Scheme
Answer: an illegal business practice in which new investors' money
is used to make payments to earlier investors. The investment
opportunity is typically presented with the promise of uncommonly
high returns. While the scam is presented as a legitimate investment,
there is little or no actual commerce involved. When an enterprise
promotes an investment opportunity that invests little or none of
the participants' money and uses new investments to make dividend
payments, the enterprise is running this.
◉ Human Intelligence
Answer: gathered from subject-matter experts and informed
individuals. Such efforts typically target individuals who can provide
the most valuable information.
This approach exploits two weaknesses of corporate culture: (1) all
salespeople want to make a sale and (2) many salespeople will do
almost anything to make a sale. Other approaches include:
- Employment interviews (real and fake)
