Updated CFCI Study Guide | Certified Fire
Code Inspector 2025/2026 Latest Exam Prep
Fraud - correct answer"Any illegal acts characterized by deceit, concealment, or
violation of trust. These acts are not dependent upon the perpetrated by individuals and
organizations to obtain money, property, or services; to avoid payment or loss of
services; or to secure personal or business ad-vantage."
Main types of fraud - correct answerInternal Fraud and External Fraud
Internal Fraud - correct answerActivities that may be criminal, committed within an
organization, typically by the employee against the employer.
External Fraud - correct answerDeceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
Embezzlement - correct answerThe theft of money, property, or other assets of the
employer.
Larceny - correct answerThe taking away of the property of another, with the intent to
convert it to his/her own use.
Financial Fraud - correct answer"Cooking the books." This type of fraud generally refers
to falsely representing the financial condition of the company, so as to inflate the value
of stock, fraudulently boost executive bonuses, or otherwise mislead shareholders,
lenders, employees, investment analysts, or other users of the information.
Skimming (cash larceny) - correct answerAccounts receivable fraud, this involves
simply stealing cash before it enters the organization's accounting system.
Billing Schemes - correct answerUsing false documentation to cause a targeted
organization to issue a payment for false services and/or purchases.
Check Tampering - correct answerCommon method (Taking advantage of employee
access to blank company checks, using a password to
steal computer-generated checks or producing counterfeit checks).
Employee reimbursement scheme - correct answerMaking false claims for
reimbursement or inflating or creating fictitious business expenses. (Travel /meal
reimbursement.
,Corruption - correct answerBribery, illegal gratuities, and/or extortion.
Bribery - correct answerWhen something of value is offered or given to influence a
business decision.
Illegal Gratuities - correct answerWhen something of value is given to an employee to
reward a business decision.
Extortion - correct answerWhen a person demands payment or seeks to influence a
business decision by threat of harm through loss of business or personal injury.
Kickback Schemes - correct answerForms of corruption involving employees and
vendors, often using inflated billing or invoices for which the employee is paid a portion
of the inflated or fictitious invoice.
Credit Card Fraud - correct answerThe creation, sale, or use of a counterfeit credit card,
or the use of a stolen credit or debit card.
C.N.P - correct answerCard not present transactions
Identity Theft - correct answerThe fraudulent acquisition or stealing of confidential
personal information through social engineering.
Identity Fraud - correct answerInvolves the unauthorized use of another person's
personal data for illegal financial benefit. Involves abusing the stolen information to
transact personal business in the victim's name.
Wildcat Banking - correct answerAn extreme form of what was called free banking. "A
bank that issued notes without adequate security in the period before the establishment
of the national banking system in 1864".
2 categories that encompass Fraud - correct answerTheft (stealing money, ID, or
assets) and deception (cooking the books, lying to shareholders, employees or
partners)
Savings and Loan Crisis - correct answerThe failure of about 1000 savings and loan
banks as a result of risky business practices. The roots of the S&L crisis lay in
excessive lending, speculation, and risk-taking driven by the moral hazard created by
deregulation and taxpayer bailout guarantees.
Myth #1 of the Financial Services - correct answer"We have very little fraud here" ex:
subprime mortgage fraud
Myth #2 of Financial Services - correct answer"Ethics and training compliance has us
covered" Fraud is not always covered in ethics policy or training.
, Myth #3 of Financial Services - correct answer"Fraud is an unavoidable cost of doing
business" Fraud is usually not serious enough to destroy a financial service firm, it is
much more than necessary cost of doing business.
Chapter 1 review points - correct answer• Statistical picture of fraud. The numbers do
not lie: Fraud is a huge worldwide problem—for all organizations.
• Financial services fraud. Seventy-four percent of financial institutions experienced
attempted payment fraud (check fraud, ACH fraud, or credit card fraud in 2020).
• Definitions of fraud. The broad definition of fraud is illegal activity representing either
theft or deception, or a combination of both.
• Myths about fraud. It is easy to become complacent about fraud but doing so can be
very costly. Fraud does occur in every organization and is potentially serious enough to
cause major long-term damage.
• Main types of fraud. Countless varieties of fraud threaten financial institutions.
Fraudsters are constantly thinking up new ways to target financial services institutions.
20-60-20 rule of human component of fraud - correct answer20% of people will never
commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest
2 types of insider fraud threat - correct answerEmployee level fraud and management
level fraud
True or False: Managment Level Fraud is committed less frequently than employee
level fraud? - correct answerTrue: Management level fraud is committed less frequently
than employee level fraud however the financial loss is almost always greater.
Fraud Triangle - correct answerCreated by leading criminologist Donald Cressey. The
three factors that contribute to fraudulent activity by employees: opportunity, financial
pressure, and rationalization.
Financial pressure - correct answerFinancial difficulties, such as large amounts of credit
card debt, an overwhelming burden of unpaid medical bills, large gambling debts,
extended unemployment, or similar financial difficulties.
Opportunity - correct answerEmployee identifies a weakness in the organization's anti-
fraud controls. For example, if an employee is able to set up a phony vendor, have
fraudulent invoices approved, and have payment sent to an address that he or she
controls.
Rationalization - correct answerPersons who have committed fraud convince
themselves that the act is either not wrong or that even though it may be wrong, it will
be corrected because they will eventually return the money. Another, often more
damaging form of rationalization occurs when employees justify the fraud by taking the
attitude that they deserve the stolen money—because the company unfairly denied
Code Inspector 2025/2026 Latest Exam Prep
Fraud - correct answer"Any illegal acts characterized by deceit, concealment, or
violation of trust. These acts are not dependent upon the perpetrated by individuals and
organizations to obtain money, property, or services; to avoid payment or loss of
services; or to secure personal or business ad-vantage."
Main types of fraud - correct answerInternal Fraud and External Fraud
Internal Fraud - correct answerActivities that may be criminal, committed within an
organization, typically by the employee against the employer.
External Fraud - correct answerDeceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
Embezzlement - correct answerThe theft of money, property, or other assets of the
employer.
Larceny - correct answerThe taking away of the property of another, with the intent to
convert it to his/her own use.
Financial Fraud - correct answer"Cooking the books." This type of fraud generally refers
to falsely representing the financial condition of the company, so as to inflate the value
of stock, fraudulently boost executive bonuses, or otherwise mislead shareholders,
lenders, employees, investment analysts, or other users of the information.
Skimming (cash larceny) - correct answerAccounts receivable fraud, this involves
simply stealing cash before it enters the organization's accounting system.
Billing Schemes - correct answerUsing false documentation to cause a targeted
organization to issue a payment for false services and/or purchases.
Check Tampering - correct answerCommon method (Taking advantage of employee
access to blank company checks, using a password to
steal computer-generated checks or producing counterfeit checks).
Employee reimbursement scheme - correct answerMaking false claims for
reimbursement or inflating or creating fictitious business expenses. (Travel /meal
reimbursement.
,Corruption - correct answerBribery, illegal gratuities, and/or extortion.
Bribery - correct answerWhen something of value is offered or given to influence a
business decision.
Illegal Gratuities - correct answerWhen something of value is given to an employee to
reward a business decision.
Extortion - correct answerWhen a person demands payment or seeks to influence a
business decision by threat of harm through loss of business or personal injury.
Kickback Schemes - correct answerForms of corruption involving employees and
vendors, often using inflated billing or invoices for which the employee is paid a portion
of the inflated or fictitious invoice.
Credit Card Fraud - correct answerThe creation, sale, or use of a counterfeit credit card,
or the use of a stolen credit or debit card.
C.N.P - correct answerCard not present transactions
Identity Theft - correct answerThe fraudulent acquisition or stealing of confidential
personal information through social engineering.
Identity Fraud - correct answerInvolves the unauthorized use of another person's
personal data for illegal financial benefit. Involves abusing the stolen information to
transact personal business in the victim's name.
Wildcat Banking - correct answerAn extreme form of what was called free banking. "A
bank that issued notes without adequate security in the period before the establishment
of the national banking system in 1864".
2 categories that encompass Fraud - correct answerTheft (stealing money, ID, or
assets) and deception (cooking the books, lying to shareholders, employees or
partners)
Savings and Loan Crisis - correct answerThe failure of about 1000 savings and loan
banks as a result of risky business practices. The roots of the S&L crisis lay in
excessive lending, speculation, and risk-taking driven by the moral hazard created by
deregulation and taxpayer bailout guarantees.
Myth #1 of the Financial Services - correct answer"We have very little fraud here" ex:
subprime mortgage fraud
Myth #2 of Financial Services - correct answer"Ethics and training compliance has us
covered" Fraud is not always covered in ethics policy or training.
, Myth #3 of Financial Services - correct answer"Fraud is an unavoidable cost of doing
business" Fraud is usually not serious enough to destroy a financial service firm, it is
much more than necessary cost of doing business.
Chapter 1 review points - correct answer• Statistical picture of fraud. The numbers do
not lie: Fraud is a huge worldwide problem—for all organizations.
• Financial services fraud. Seventy-four percent of financial institutions experienced
attempted payment fraud (check fraud, ACH fraud, or credit card fraud in 2020).
• Definitions of fraud. The broad definition of fraud is illegal activity representing either
theft or deception, or a combination of both.
• Myths about fraud. It is easy to become complacent about fraud but doing so can be
very costly. Fraud does occur in every organization and is potentially serious enough to
cause major long-term damage.
• Main types of fraud. Countless varieties of fraud threaten financial institutions.
Fraudsters are constantly thinking up new ways to target financial services institutions.
20-60-20 rule of human component of fraud - correct answer20% of people will never
commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest
2 types of insider fraud threat - correct answerEmployee level fraud and management
level fraud
True or False: Managment Level Fraud is committed less frequently than employee
level fraud? - correct answerTrue: Management level fraud is committed less frequently
than employee level fraud however the financial loss is almost always greater.
Fraud Triangle - correct answerCreated by leading criminologist Donald Cressey. The
three factors that contribute to fraudulent activity by employees: opportunity, financial
pressure, and rationalization.
Financial pressure - correct answerFinancial difficulties, such as large amounts of credit
card debt, an overwhelming burden of unpaid medical bills, large gambling debts,
extended unemployment, or similar financial difficulties.
Opportunity - correct answerEmployee identifies a weakness in the organization's anti-
fraud controls. For example, if an employee is able to set up a phony vendor, have
fraudulent invoices approved, and have payment sent to an address that he or she
controls.
Rationalization - correct answerPersons who have committed fraud convince
themselves that the act is either not wrong or that even though it may be wrong, it will
be corrected because they will eventually return the money. Another, often more
damaging form of rationalization occurs when employees justify the fraud by taking the
attitude that they deserve the stolen money—because the company unfairly denied
