CFE Exam Fraud Prevention and Deterrence
Comprehensive Certified Fraud COMPLETE EXAM
LATEST VERSION 2026-2027 QUESTIONS AND
ANSWERS
Efforts to control corporate crime generally include which of the following approaches?
A. Consumer action
B. Voluntary changes in corporate attitudes
C. Government intervention
D. All of the above - answer>>D
Efforts to control corporate crime follow three approaches: voluntary change in corporate
attitudes and structure; strong intervention by the government to force changes in corporate
structure, accompanied by legal measures to deter or punish; or consumer action. Voluntary
changes would involve the development of stronger business ethics and certain corporate
organizational reforms. Government controls might involve corporate chartering,
deconcentration and divestiture, larger and more effective enforcement staffs, stiffer penalties,
wider use of publicity as a sanction, and possibly the nationalization of corporations. Consumer
group pressures might be exerted through lobbying, selective buying, boycotts, and the
establishment of large consumer cooperatives.
Theft of competitor trade secrets, anti-competitive practices, insider trading, and trade and
customs regulations in areas of import and export are all fraud risks pertaining to:
A. Reputational risk
B. Regulatory and legal misconduct
C. Fraudulent financial reporting
D. Asset misappropriation - answer>>B
Regulatory and legal misconduct includes a wide range of risks, such as conflicts of interest,
insider trading, theft of competitor trade secrets, anti-competitive practices, environmental
violations, and trade and customs regulations in areas of import and export. Depending on the
particular organization and the nature of its business, some or all of these risks might be
applicable and should be considered in the fraud risk assessment process.
,The term _______ refers to the oversight responsibilities of different parties for an
organization's direction, operations, and performance.
A. Fraud risk assessment B. Corporate compliance C. Corporate governance D. Risk management
- answer>>C
The term corporate governance refers to a corporation's government; the term is broadly used
to describe the oversight responsibilities of different parties for an organization's direction,
operations, and performance. More specifically, the Organisation for Economic Co-operation
and Development's (OECD) "Glossary of Statistical Terms" defines corporate governance as
"[The] procedures and processes according to which an organisation is directed and controlled.
The corporate governance structure specifies the distribution of rights and responsibilities
among the different participants in the organisation—such as the board, managers,
shareholders and other stakeholders—and lays down the rules and procedures for
decisionmaking."
An organization's fraud risk management program should include which of the following
components?
A. Whistleblower protection policies
B. A way to disclose conflicts of interest
C. Quality assurance activities
D. All of the above - answer>>D
According to Managing the Business Risk of Fraud: A Practical Guide, the following are ten
essential components for effectively managing fraud risk:
Statement of commitment—A written statement of commitment to the program from the
board of directors and senior management
Fraud awareness—A formal fraud risk awareness program for all employees
Affirmation process—A requirement for directors, employees, and contractors to explicitly
affirm that they have read, understood, and complied with the organization's code of conduct
and fraud risk management program
Conflict disclosure—A system for directors, employees, and contractors to self-disclose to the
organization any potential or actual conflicts of interest
,Fraud risk assessment—The proactive identification and assessment of the organization's fraud
risks
Reporting procedures and whistleblower protection—Systems and support for receiving fraud
allegations from employees and other parties
Investigation process—A formalized process that is undertaken following all reports of
suspected fraud
Corrective action—Policies that reflect the consequences and processes for individuals who
commit or condone fraudulent activity and that identify and remediate any control deficiencies
that allowed the fraud to occur
Process evaluation and improvement (quality assurance)—Formal procedures to periodically
evaluate the fraud risk management program's effectiveness
Continuous monitoring—Ongoing review of the program to ensure it is addressing the
organization's current needs and risks
Which of the following parties is responsible for directing employees to execute business
activities and managing their performance of those tasks?
A. The board of directors
B. Shareholders
C. External auditors
D. Management - answer>>D
An organization's management team leads the organization and its employees. Management is
responsible for making the daily decisions that affect company performance and, ultimately,
shareholder wealth. Management's roles relating to corporate governance include:
Establishing strategic goals and operating objectives under the board's oversight
Directing employees to execute business activities and managing their performance of those
tasks
Determining the use and allocation of company resources and assets
Evaluating the organization's successes or failures and recalibrating the strategic approach
accordingly
Holding responsibility for the design and operation of the organization's internal controls Setting
the organization's true ethical tone
, An effective system of anti-fraud controls:
A. Involves balancing preventive controls and detective controls B. Mitigates the risk of fraud
but cannot completely eliminate it C. Increases the perception that fraud will be detected D. All
of the above - answer>>D
No system of anti-fraud controls can fully eliminate the risk of fraud, but well-designed and
effective anti-fraud controls can deter the average fraudster by reducing the opportunity to
commit the fraud and increasing the perception of detection. With the right balance of
preventive and detective controls, a good system of anti-fraud controls can greatly reduce an
organization's vulnerability to fraud.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recommends
that corporations implement control activities through formal policies that establish what is
expected and procedures that put policies into action.
A. True B. False - answer>>A
According to the Committee of Sponsoring Organizations of the Treadway Commission's (COSO)
Internal Control—Integrated Framework (the Framework), control activities are the policies and
procedures that enforce management's directives intended to mitigate risk. These actions are
performed at all levels of the organization, at all stages of business processes, and through both
manual and automated procedures. They can be designed to prevent the occurrence of risks,
detect the occurrence of risks, or both.
The following principles concern an organization's control activities:
The organization selects and develops control activities that mitigate risks to the achievement of
objectives to acceptable levels.
The organization selects and develops general control activities over technology to support the
achievement of objectives.
The organization deploys control activities through policies that establish what is expected and
procedures that put policies into action.
For analytical review procedures performed during a financial statement audit to be most
effective in uncovering fraud, the scheme must materially impact the financial statements. A.
True B. False - answer>>A
Comprehensive Certified Fraud COMPLETE EXAM
LATEST VERSION 2026-2027 QUESTIONS AND
ANSWERS
Efforts to control corporate crime generally include which of the following approaches?
A. Consumer action
B. Voluntary changes in corporate attitudes
C. Government intervention
D. All of the above - answer>>D
Efforts to control corporate crime follow three approaches: voluntary change in corporate
attitudes and structure; strong intervention by the government to force changes in corporate
structure, accompanied by legal measures to deter or punish; or consumer action. Voluntary
changes would involve the development of stronger business ethics and certain corporate
organizational reforms. Government controls might involve corporate chartering,
deconcentration and divestiture, larger and more effective enforcement staffs, stiffer penalties,
wider use of publicity as a sanction, and possibly the nationalization of corporations. Consumer
group pressures might be exerted through lobbying, selective buying, boycotts, and the
establishment of large consumer cooperatives.
Theft of competitor trade secrets, anti-competitive practices, insider trading, and trade and
customs regulations in areas of import and export are all fraud risks pertaining to:
A. Reputational risk
B. Regulatory and legal misconduct
C. Fraudulent financial reporting
D. Asset misappropriation - answer>>B
Regulatory and legal misconduct includes a wide range of risks, such as conflicts of interest,
insider trading, theft of competitor trade secrets, anti-competitive practices, environmental
violations, and trade and customs regulations in areas of import and export. Depending on the
particular organization and the nature of its business, some or all of these risks might be
applicable and should be considered in the fraud risk assessment process.
,The term _______ refers to the oversight responsibilities of different parties for an
organization's direction, operations, and performance.
A. Fraud risk assessment B. Corporate compliance C. Corporate governance D. Risk management
- answer>>C
The term corporate governance refers to a corporation's government; the term is broadly used
to describe the oversight responsibilities of different parties for an organization's direction,
operations, and performance. More specifically, the Organisation for Economic Co-operation
and Development's (OECD) "Glossary of Statistical Terms" defines corporate governance as
"[The] procedures and processes according to which an organisation is directed and controlled.
The corporate governance structure specifies the distribution of rights and responsibilities
among the different participants in the organisation—such as the board, managers,
shareholders and other stakeholders—and lays down the rules and procedures for
decisionmaking."
An organization's fraud risk management program should include which of the following
components?
A. Whistleblower protection policies
B. A way to disclose conflicts of interest
C. Quality assurance activities
D. All of the above - answer>>D
According to Managing the Business Risk of Fraud: A Practical Guide, the following are ten
essential components for effectively managing fraud risk:
Statement of commitment—A written statement of commitment to the program from the
board of directors and senior management
Fraud awareness—A formal fraud risk awareness program for all employees
Affirmation process—A requirement for directors, employees, and contractors to explicitly
affirm that they have read, understood, and complied with the organization's code of conduct
and fraud risk management program
Conflict disclosure—A system for directors, employees, and contractors to self-disclose to the
organization any potential or actual conflicts of interest
,Fraud risk assessment—The proactive identification and assessment of the organization's fraud
risks
Reporting procedures and whistleblower protection—Systems and support for receiving fraud
allegations from employees and other parties
Investigation process—A formalized process that is undertaken following all reports of
suspected fraud
Corrective action—Policies that reflect the consequences and processes for individuals who
commit or condone fraudulent activity and that identify and remediate any control deficiencies
that allowed the fraud to occur
Process evaluation and improvement (quality assurance)—Formal procedures to periodically
evaluate the fraud risk management program's effectiveness
Continuous monitoring—Ongoing review of the program to ensure it is addressing the
organization's current needs and risks
Which of the following parties is responsible for directing employees to execute business
activities and managing their performance of those tasks?
A. The board of directors
B. Shareholders
C. External auditors
D. Management - answer>>D
An organization's management team leads the organization and its employees. Management is
responsible for making the daily decisions that affect company performance and, ultimately,
shareholder wealth. Management's roles relating to corporate governance include:
Establishing strategic goals and operating objectives under the board's oversight
Directing employees to execute business activities and managing their performance of those
tasks
Determining the use and allocation of company resources and assets
Evaluating the organization's successes or failures and recalibrating the strategic approach
accordingly
Holding responsibility for the design and operation of the organization's internal controls Setting
the organization's true ethical tone
, An effective system of anti-fraud controls:
A. Involves balancing preventive controls and detective controls B. Mitigates the risk of fraud
but cannot completely eliminate it C. Increases the perception that fraud will be detected D. All
of the above - answer>>D
No system of anti-fraud controls can fully eliminate the risk of fraud, but well-designed and
effective anti-fraud controls can deter the average fraudster by reducing the opportunity to
commit the fraud and increasing the perception of detection. With the right balance of
preventive and detective controls, a good system of anti-fraud controls can greatly reduce an
organization's vulnerability to fraud.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recommends
that corporations implement control activities through formal policies that establish what is
expected and procedures that put policies into action.
A. True B. False - answer>>A
According to the Committee of Sponsoring Organizations of the Treadway Commission's (COSO)
Internal Control—Integrated Framework (the Framework), control activities are the policies and
procedures that enforce management's directives intended to mitigate risk. These actions are
performed at all levels of the organization, at all stages of business processes, and through both
manual and automated procedures. They can be designed to prevent the occurrence of risks,
detect the occurrence of risks, or both.
The following principles concern an organization's control activities:
The organization selects and develops control activities that mitigate risks to the achievement of
objectives to acceptable levels.
The organization selects and develops general control activities over technology to support the
achievement of objectives.
The organization deploys control activities through policies that establish what is expected and
procedures that put policies into action.
For analytical review procedures performed during a financial statement audit to be most
effective in uncovering fraud, the scheme must materially impact the financial statements. A.
True B. False - answer>>A
