CFE Certified Fraud Examiner (CFE) MCQ 2 — Questions and Answers
Question 1: A company controller creates fictitious vendors and approves invoices from those vendors for payment. This scheme is best classified as which type of asset misappropriation?
- Skimming
- Billing scheme (Correct answer)
- Payroll fraud
- Check tampering
Correct answer: Billing scheme
Billing schemes involve employees causing an organization to issue fraudulent payments to fictitious or real vendors under false pretenses.
Question 2: Under the ACFE's fraud tree, which of the following is a subcategory of corruption?
- Shell company schemes
- Economic extortion (Correct answer)
- Skimming
- Ghost employees
Correct answer: Economic extortion
Economic extortion is a subcategory of corruption in which an employee demands payment in exchange for a business decision favorable to the payer.
Question 3: Which interview technique involves asking open-ended, narrative questions to encourage a subject to tell a story in their own words?
- Cognitive interview (Correct answer)
- Reid Technique
- Behavioral analysis interview
- Structured interview
Correct answer: Cognitive interview
The cognitive interview uses memory-enhancing techniques including open-ended narrative questions to maximize the amount of accurate information gathered.
Question 4: The 'tone at the top' concept in fraud prevention primarily refers to which of the following?
- The volume of internal audit communications
- Management's attitude and commitment to ethical conduct (Correct answer)
- The frequency of board meetings
- The number of compliance policies issued
Correct answer: Management's attitude and commitment to ethical conduct
Tone at the top reflects how senior management's ethical behavior and commitment to integrity sets the cultural standard for the entire organization.
Question 5: A fraud examiner obtains bank records through a grand jury subpoena. This type of evidence is considered which of the following?
- Testimonial evidence
- Documentary evidence (Correct answer)
- Demonstrative evidence
- Physical evidence
Correct answer: Documentary evidence
Bank records, invoices, and other written documents obtained during an investigation are classified as documentary evidence.
Question 6: Which element is NOT required to prove civil fraud in a U.S. court?
- A material misrepresentation of fact
- Intent to deceive
- Reliance by the victim
- Criminal intent beyond a reasonable doubt (Correct answer)
Correct answer: Criminal intent beyond a reasonable doubt
Civil fraud is proven by a preponderance of the evidence standard and does not require proof of criminal intent beyond a reasonable doubt.
Question 7: Which analytical procedure compares each line item in a financial statement as a percentage of a base figure (e.g., total sales) to identify unusual relationships?
- Trend analysis
- Common-size financial statement analysis (Correct answer)
- Ratio analysis
- Benford's Law analysis
Correct answer: Common-size financial statement analysis
Common-size analysis expresses each line item as a percentage of a base amount, making it easy to spot proportions that deviate from expectations.
CFE Certified Fraud Examiner (CFE) MCQ 2
A company controller creates fictitious vendors and approves invoices from those vendors for payment.
This scheme is best classified as which type of asset misappropriation?