Certified Fraud Examiner® (CFE®) Exam Prep 2026
Comprehensive Study Guide with 100 Practice Questions,
Detailed Explanations, and Verified Answers
Key Topics Covered:
• Fraud Schemes and Financial Crimes: Financial statement fraud, asset
misappropriation, corruption, theft of data and intellectual property,
accounting concepts, fraud detection and prevention measures
• Fraud Investigations and Legal Issues: Investigation planning and
execution, evidence collection and preservation, interviewing techniques,
data analysis, report writing, legal considerations, employee rights, rules of
evidence
• Fraud Prevention and Deterrence: Fraud triangle, corporate governance,
fraud risk assessment, fraud prevention programs, ethical considerations,
roles of managers and auditors, managing fraud risk
SECTION 1: FRAUD SCHEMES AND FINANCIAL CRIMES (40
Questions)
Question 1
Which of the following BEST describes the primary difference between fraud and
abuse in the workplace?
A) Fraud always involves physical theft; abuse does not
B) Fraud is an intentional act involving deception for financial gain; abuse is a
violation of workplace rules without necessarily involving deception
C) Fraud is always a criminal offense; abuse is always a civil matter
D) There is no meaningful difference between fraud and abuse
Answer: B
Rationale: Fraud is an intentional act involving deception, misrepresentation, or
concealment for the purpose of financial or personal gain. Abuse is a violation of
,workplace rules, policies, or ethical standards that may not involve deception.
Physical theft (Option A) is not required for fraud—fraud can involve intangible
assets. Fraud may be criminal or civil depending on the jurisdiction and
circumstances (Option C). Fraud and abuse are distinct concepts (Option D).
Question 2
According to the Association of Certified Fraud Examiners (ACFE), which
category of occupational fraud is MOST costly to organizations?
A) Asset misappropriation
B) Corruption
C) Financial statement fraud
D) Theft of intellectual property
Answer: C
Rationale: While asset misappropriation is the most common type of occupational
fraud, financial statement fraud is the most costly on a median basis. Financial
statement fraud schemes typically involve large-scale manipulation of financial
results and can have devastating impacts on organizations and investors. Asset
misappropriation (Option A) is the most frequent but less costly per scheme.
Corruption (Option B) and theft of intellectual property (Option D) are also
significant but not the most costly on a median basis.
Question 3
An employee creates a fictitious vendor in the accounts payable system and issues
checks to that vendor for goods never received. This is an example of which type
of fraud scheme?
A) Billing scheme
B) Skimming
C) Financial statement fraud
D) Payroll fraud
Answer: A
,Rationale: This is a billing scheme—a fraudulent disbursement scheme where an
employee causes the organization to issue a payment for goods or services that
were never received. Skimming (Option B) is the theft of cash before it is recorded
in the accounting system. Financial statement fraud (Option C) involves
misrepresentation of financial results. Payroll fraud (Option D) involves fraudulent
compensation payments.
Question 4
A cashier takes cash from a customer's payment but does not record the sale in the
register. This is an example of:
A) Lapping
B) Skimming
C) Kiting
D) Embezzlement
Answer: B
Rationale: Skimming is the theft of cash from a victim organization prior to its
entry in the accounting system. In this scenario, the cashier takes the cash before it
is recorded. Lapping (Option A) involves using subsequent receipts to cover theft
of previous receipts. Kiting (Option C) involves creating fraudulent transfers
between bank accounts to inflate balances. Embezzlement (Option D) is a broader
term for misappropriation of funds.
Question 5
An accounts receivable clerk steals a customer payment and later applies a
subsequent payment from another customer to cover the theft. This scheme is
known as:
A) Skimming
B) Lapping
C) Kiting
D) Check tampering
Answer: B
, Rationale: Lapping involves using subsequent customer payments to cover thefts
of previous customer payments. The clerk steals a payment and then applies the
next customer's payment to the first customer's account, perpetually delaying
detection. Skimming (Option A) occurs before recording. Kiting (Option C)
involves bank accounts. Check tampering (Option D) involves altering checks.
Question 6
Which of the following is a RED FLAG indicating potential financial statement
fraud?
A) Consistent revenue growth that matches industry averages
B) Unusual or unexplained increases in accounts receivable relative to sales
C) A well-functioning internal audit department
D) Transparent and timely financial reporting
Answer: B
Rationale: Unusual or unexplained increases in accounts receivable relative to
sales can indicate that revenue is being inflated or that fictitious sales are being
recorded. Consistent growth matching industry averages (Option A) is not a red
flag. A well-functioning internal audit department (Option C) and transparent
reporting (Option D) are positive indicators, not red flags.
Question 7
In a check tampering scheme, an employee steals a check intended for a vendor
and forges the endorsement. This is an example of:
A) Forged maker scheme
B) Forged endorsement scheme
C) Altered payee scheme
D) Concealed check scheme
Answer: B
Rationale: In a forged endorsement scheme, the perpetrator steals a check made
payable to someone else and forges the endorsement to convert the check. A
forged maker scheme (Option A) involves forging the signature of the maker (the
Comprehensive Study Guide with 100 Practice Questions,
Detailed Explanations, and Verified Answers
Key Topics Covered:
• Fraud Schemes and Financial Crimes: Financial statement fraud, asset
misappropriation, corruption, theft of data and intellectual property,
accounting concepts, fraud detection and prevention measures
• Fraud Investigations and Legal Issues: Investigation planning and
execution, evidence collection and preservation, interviewing techniques,
data analysis, report writing, legal considerations, employee rights, rules of
evidence
• Fraud Prevention and Deterrence: Fraud triangle, corporate governance,
fraud risk assessment, fraud prevention programs, ethical considerations,
roles of managers and auditors, managing fraud risk
SECTION 1: FRAUD SCHEMES AND FINANCIAL CRIMES (40
Questions)
Question 1
Which of the following BEST describes the primary difference between fraud and
abuse in the workplace?
A) Fraud always involves physical theft; abuse does not
B) Fraud is an intentional act involving deception for financial gain; abuse is a
violation of workplace rules without necessarily involving deception
C) Fraud is always a criminal offense; abuse is always a civil matter
D) There is no meaningful difference between fraud and abuse
Answer: B
Rationale: Fraud is an intentional act involving deception, misrepresentation, or
concealment for the purpose of financial or personal gain. Abuse is a violation of
,workplace rules, policies, or ethical standards that may not involve deception.
Physical theft (Option A) is not required for fraud—fraud can involve intangible
assets. Fraud may be criminal or civil depending on the jurisdiction and
circumstances (Option C). Fraud and abuse are distinct concepts (Option D).
Question 2
According to the Association of Certified Fraud Examiners (ACFE), which
category of occupational fraud is MOST costly to organizations?
A) Asset misappropriation
B) Corruption
C) Financial statement fraud
D) Theft of intellectual property
Answer: C
Rationale: While asset misappropriation is the most common type of occupational
fraud, financial statement fraud is the most costly on a median basis. Financial
statement fraud schemes typically involve large-scale manipulation of financial
results and can have devastating impacts on organizations and investors. Asset
misappropriation (Option A) is the most frequent but less costly per scheme.
Corruption (Option B) and theft of intellectual property (Option D) are also
significant but not the most costly on a median basis.
Question 3
An employee creates a fictitious vendor in the accounts payable system and issues
checks to that vendor for goods never received. This is an example of which type
of fraud scheme?
A) Billing scheme
B) Skimming
C) Financial statement fraud
D) Payroll fraud
Answer: A
,Rationale: This is a billing scheme—a fraudulent disbursement scheme where an
employee causes the organization to issue a payment for goods or services that
were never received. Skimming (Option B) is the theft of cash before it is recorded
in the accounting system. Financial statement fraud (Option C) involves
misrepresentation of financial results. Payroll fraud (Option D) involves fraudulent
compensation payments.
Question 4
A cashier takes cash from a customer's payment but does not record the sale in the
register. This is an example of:
A) Lapping
B) Skimming
C) Kiting
D) Embezzlement
Answer: B
Rationale: Skimming is the theft of cash from a victim organization prior to its
entry in the accounting system. In this scenario, the cashier takes the cash before it
is recorded. Lapping (Option A) involves using subsequent receipts to cover theft
of previous receipts. Kiting (Option C) involves creating fraudulent transfers
between bank accounts to inflate balances. Embezzlement (Option D) is a broader
term for misappropriation of funds.
Question 5
An accounts receivable clerk steals a customer payment and later applies a
subsequent payment from another customer to cover the theft. This scheme is
known as:
A) Skimming
B) Lapping
C) Kiting
D) Check tampering
Answer: B
, Rationale: Lapping involves using subsequent customer payments to cover thefts
of previous customer payments. The clerk steals a payment and then applies the
next customer's payment to the first customer's account, perpetually delaying
detection. Skimming (Option A) occurs before recording. Kiting (Option C)
involves bank accounts. Check tampering (Option D) involves altering checks.
Question 6
Which of the following is a RED FLAG indicating potential financial statement
fraud?
A) Consistent revenue growth that matches industry averages
B) Unusual or unexplained increases in accounts receivable relative to sales
C) A well-functioning internal audit department
D) Transparent and timely financial reporting
Answer: B
Rationale: Unusual or unexplained increases in accounts receivable relative to
sales can indicate that revenue is being inflated or that fictitious sales are being
recorded. Consistent growth matching industry averages (Option A) is not a red
flag. A well-functioning internal audit department (Option C) and transparent
reporting (Option D) are positive indicators, not red flags.
Question 7
In a check tampering scheme, an employee steals a check intended for a vendor
and forges the endorsement. This is an example of:
A) Forged maker scheme
B) Forged endorsement scheme
C) Altered payee scheme
D) Concealed check scheme
Answer: B
Rationale: In a forged endorsement scheme, the perpetrator steals a check made
payable to someone else and forges the endorsement to convert the check. A
forged maker scheme (Option A) involves forging the signature of the maker (the
