Fraud Detection & Prevention Flashcards
7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fraud Detection & Prevention flashcards as text
Which analytical technique involves comparing a company's financial ratios to industry benchmarks to identify potential fraud?
Answer: Ratio analysis
Ratio analysis compares key financial metrics against industry norms, helping examiners spot anomalies that may indicate fraud.
An employee submits expense reports every Friday for exactly $49.99. What fraud scheme does this pattern most likely suggest?
Answer: Structuring to avoid approval thresholds
Submitting amounts just below a common approval threshold (often $50) is a classic structuring tactic to avoid managerial review.
Which internal control is MOST effective at preventing fictitious vendor schemes?
Answer: Segregation of duties between vendor approval and payment processing
Separating vendor creation from payment authorization prevents a single employee from both adding a fictitious vendor and approving payments to it.
Benford's Law is MOST useful for detecting fraud in which type of data?
Answer: Naturally occurring financial transaction amounts
Benford's Law predicts leading-digit frequency in naturally occurring numerical data; deviations in transaction amounts can signal manipulation.
A company discovers that its accounts receivable aging report shows several large balances written off shortly after quarter-end. This is MOST consistent with:
Answer: Revenue recognition fraud
Recording fictitious revenue to inflate quarter-end results, then writing off the fake receivables, is a hallmark of revenue recognition fraud.
Which of the following BEST describes a 'lapping' scheme?
Answer: Diverting new customer payments to cover stolen earlier receipts
Lapping involves using one customer's payment to cover a previously stolen amount, creating a perpetual cycle of misappropriation.
Which document comparison technique helps detect altered or forged checks?
Answer: Positive pay reconciliation
Positive pay is a bank service that matches issued check data against presented checks, flagging items with altered amounts or payees.