CFE-Financial Transactions and Fraud
Schemes 2 Exam UPDATED QUESTIONS
AND CORRECT ANSWERS
Laura is afraid sales revenue for the period is not going to meet company goals. To make up for the
shortfall, she decides to mail invoices to fake customers and credit (increase) revenue on the books for
these sales. What account will she most likely debit to balance these fictitious revenue entries and
conceal her scheme? - CORRECT ANSWER Accounts receivable.
A CFE has received a tip that an employee in the claims department is processing claims for his own
benefit during non-working hours. To gather information about the validity of this tip, the CFE should
look at which of the following reports? - CORRECT ANSWER Address similarity report,
exception report, and manual override report.
In a financial statement fraud scheme in which capital expenditures are recorded as expenses rather
than assets, the transactions will have the following effect on the organization's financial statements: -
CORRECT ANSWER Total assets will be understated.
In order to understate net income, therefore lowering income tax liability, an accountant could
fraudulently expensing costs rather than properly capitalizing them to an asset account. - CORRECT
ANSWER True.
The statement of cash flows is often used: - CORRECT ANSWER in tandem with the income
statement to determine a company's true financial performance.
A system by which the bank verifies checks presented for payment against the list provided by the
company of approved checks written on the account. - CORRECT ANSWER Positive pay
Percentage-of-completion method - CORRECT ANSWER Is one of two methods for
recognizing revenue on long-term construction contracts.
A fraud scheme in which an accountant fails to write down obsolete inventory to its current fair
market value has what effect on the company's current ratio? - CORRECT ANSWER The
current ratio will be artificially inflated.
, Bank reconciliations should: - CORRECT ANSWER NEVER be performed by an authorized
signatory on the account.
The debt-to-equity ratio is computed by dividing: - CORRECT ANSWER Total liabilities by
total equity
Generally, expense account review uses one of two methods: - CORRECT ANSWER historical
comparisons or comparisons with budgeted amounts
Is calculated by dividing current assets by current liabilities: - CORRECT ANSWER The
current ratio.
The asset turnover ratio is used to: - CORRECT ANSWER determine the efficiency with
which asset resources are used by the entity.
Several types of ponzi schemes: - CORRECT ANSWER Pure cash (chain schemes and fill-
and-split games) and product fronts (financial institutions, MultiLevelMarketing and speculations).
Red Flag Rules require: - CORRECT ANSWER Financial institutions and creditors develop
and implement a written identity theft prevention program.
Computer crime defined: Note diff from computer fraud - CORRECT ANSWER An illegal act
from which knowledge of computer technology is used to commit the crime. Computer fraud is just
one type of computer crme.
When someone dupes victims into providing PII by pretending to be from an actual bank, business, or
other entity that the target does business with. Typically use emails to direct the target to another site:
- CORRECT ANSWER Phishing
Spear phishing is generally used against: - CORRECT ANSWER Corporations, usually pretend
to be from the corporations own IT or HR dept.
Over the phone (voice) phishing. - CORRECT ANSWER Vishing.
Schemes 2 Exam UPDATED QUESTIONS
AND CORRECT ANSWERS
Laura is afraid sales revenue for the period is not going to meet company goals. To make up for the
shortfall, she decides to mail invoices to fake customers and credit (increase) revenue on the books for
these sales. What account will she most likely debit to balance these fictitious revenue entries and
conceal her scheme? - CORRECT ANSWER Accounts receivable.
A CFE has received a tip that an employee in the claims department is processing claims for his own
benefit during non-working hours. To gather information about the validity of this tip, the CFE should
look at which of the following reports? - CORRECT ANSWER Address similarity report,
exception report, and manual override report.
In a financial statement fraud scheme in which capital expenditures are recorded as expenses rather
than assets, the transactions will have the following effect on the organization's financial statements: -
CORRECT ANSWER Total assets will be understated.
In order to understate net income, therefore lowering income tax liability, an accountant could
fraudulently expensing costs rather than properly capitalizing them to an asset account. - CORRECT
ANSWER True.
The statement of cash flows is often used: - CORRECT ANSWER in tandem with the income
statement to determine a company's true financial performance.
A system by which the bank verifies checks presented for payment against the list provided by the
company of approved checks written on the account. - CORRECT ANSWER Positive pay
Percentage-of-completion method - CORRECT ANSWER Is one of two methods for
recognizing revenue on long-term construction contracts.
A fraud scheme in which an accountant fails to write down obsolete inventory to its current fair
market value has what effect on the company's current ratio? - CORRECT ANSWER The
current ratio will be artificially inflated.
, Bank reconciliations should: - CORRECT ANSWER NEVER be performed by an authorized
signatory on the account.
The debt-to-equity ratio is computed by dividing: - CORRECT ANSWER Total liabilities by
total equity
Generally, expense account review uses one of two methods: - CORRECT ANSWER historical
comparisons or comparisons with budgeted amounts
Is calculated by dividing current assets by current liabilities: - CORRECT ANSWER The
current ratio.
The asset turnover ratio is used to: - CORRECT ANSWER determine the efficiency with
which asset resources are used by the entity.
Several types of ponzi schemes: - CORRECT ANSWER Pure cash (chain schemes and fill-
and-split games) and product fronts (financial institutions, MultiLevelMarketing and speculations).
Red Flag Rules require: - CORRECT ANSWER Financial institutions and creditors develop
and implement a written identity theft prevention program.
Computer crime defined: Note diff from computer fraud - CORRECT ANSWER An illegal act
from which knowledge of computer technology is used to commit the crime. Computer fraud is just
one type of computer crme.
When someone dupes victims into providing PII by pretending to be from an actual bank, business, or
other entity that the target does business with. Typically use emails to direct the target to another site:
- CORRECT ANSWER Phishing
Spear phishing is generally used against: - CORRECT ANSWER Corporations, usually pretend
to be from the corporations own IT or HR dept.
Over the phone (voice) phishing. - CORRECT ANSWER Vishing.
