CFE Certified Fraud Examiner Fraud Law and Legal Elements 1 — Questions and Answers
Question 1: Which element is NOT required to prove civil fraud in the United States?
- A material false representation
- Knowledge of falsity or reckless disregard for truth
- A criminal conviction of the perpetrator (Correct answer)
- Justifiable reliance by the victim
Correct answer: A criminal conviction of the perpetrator
Civil fraud does not require a criminal conviction; it only requires proof of the core elements by a preponderance of the evidence.
Question 2: Under the Foreign Corrupt Practices Act (FCPA), which of the following payments is explicitly permitted?
- Payments to foreign officials to win government contracts
- Facilitating payments to expedite routine governmental actions (Correct answer)
- Gifts given to influence business decisions of foreign officials
- Payments disguised as consulting fees to foreign officials
Correct answer: Facilitating payments to expedite routine governmental actions
The FCPA contains a narrow exception for facilitating payments (also called grease payments) made to expedite routine, non-discretionary governmental actions.
Question 3: The Sarbanes-Oxley Act Section 806 primarily protects which group?
- External auditors who report audit deficiencies
- Employees of publicly traded companies who report securities fraud (Correct answer)
- Shareholders who file derivative lawsuits
- Foreign investors in U.S. companies
Correct answer: Employees of publicly traded companies who report securities fraud
SOX Section 806 protects whistleblower employees of publicly traded companies who report fraud or securities law violations from retaliation.
Question 4: Which doctrine holds that a corporation is criminally liable for crimes committed by its employees acting within the scope of their employment?
- Respondeat superior (Correct answer)
- Alter ego doctrine
- Piercing the corporate veil
- Vicarious immunity
Correct answer: Respondeat superior
Respondeat superior ('let the master answer') is the doctrine under which corporations can be held criminally liable for employee misconduct within the scope of employment.
Question 5: Which standard of proof applies in a civil fraud lawsuit in the United States?
- Beyond a reasonable doubt
- Clear and convincing evidence
- Preponderance of the evidence (Correct answer)
- Probable cause
Correct answer: Preponderance of the evidence
Civil fraud cases require proof by a preponderance of the evidence, meaning it is more likely than not that fraud occurred.
Question 6: Which federal statute criminalizes the use of mail or wire communications in furtherance of a scheme to defraud?
- RICO Act
- Mail and Wire Fraud Statutes (18 U.S.C. §§ 1341, 1343) (Correct answer)
- Bank Secrecy Act
- Computer Fraud and Abuse Act
Correct answer: Mail and Wire Fraud Statutes (18 U.S.C. §§ 1341, 1343)
The federal mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343) statutes prohibit using mail or wire communications in furtherance of a scheme to defraud.
CFE Certified Fraud Examiner Fraud Law and Legal Elements 1
Which element is NOT required to prove civil fraud in the United States?