Certified Fraud Examiner (CFE) MCQ Flashcards

What does a fraud risk assessment try to do most?

Answer: To identify areas of the organization that are susceptible to fraud

Explanation: The main purpose of a fraud risk assessment is to find places in an organization where fraud could happen. It means looking at the internal control systems, policies, and procedures to stop fraud and determining possible weaknesses and risks.

Which of the following is an example of a red flag on a financial statement?

Answer: A large number of bank reconciliations have not been completed

Explanation: In a financial statement, a red flag is something like many unfinished bank reconciliations. It suggests that there may be fraud involving cash or bank accounts, which may need to be looked into further.

Which of the following is a common form of financial statement fraud?

Answer: Overstating expenses to reduce taxes

Explanation: One common type of financial statement fraud is overstating expenses to lower taxes. It involves making up expenses or making expenses that don't exist to lower taxable income.

Which of these is an example of preventive control?

Answer: Segregation of duties between employees

Explanation: Having different employees do different jobs is an example of preventive control. It means giving other jobs to additional employees so that no one has too much control over a certain process or transaction.

Why is a fraud investigation done in the first place?

Answer: To determine if fraud has occurred

Explanation: The main goal of a fraud investigation is to find out if fraud has happened. This could mean gathering evidence, talking to people, and looking at financial records to determine the fraud size and type.

Which of the following is common for looking at data during a fraud investigation?

Answer: Frequency analysis

Explanation: During a fraud investigation, one of the most common ways to look at data is through frequency analysis. It involves looking for patterns or oddities in how often transactions happen, how much they cost, or other things that could be signs of fraud.

Which of the following is an example of a way to keep fraud from happening?

Answer: Surprise audits

Explanation: Surprise audits are an example of control designed to detect fraud. They involve auditing or reviewing financial records, processes, or transactions regularly without informing employees or other stakeholders beforehand.