Practice Test Geeks(CFE) Certified Financial Examiner Practice Test
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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

  1. Which element of the Fraud Triangle addresses why a trusted employee might rationalize committing fraud?

    Answer: Rationalization

    Rationalization is the cognitive justification a fraudster uses to excuse dishonest behavior, such as believing they are only 'borrowing' funds.

  2. A financial examiner notices that a company's gross margin has increased significantly while its revenue has remained flat. This MOST likely warrants investigation for:

    Answer: Inventory or cost manipulation

    Rising gross margins with flat revenue often indicate understated cost of goods sold, which may result from inventory theft or falsified cost records.

  3. Which type of data mining technique groups transactions by similar characteristics to identify unusual clusters?

    Answer: Cluster analysis

    Cluster analysis groups similar data points together, making outliers or unusual groupings—potential fraud indicators—easier to spot.

  4. A payroll examiner identifies an employee whose net pay consistently exceeds gross pay. This anomaly MOST likely indicates:

    Answer: Unauthorized payroll adjustments or system manipulation

    Net pay exceeding gross pay is mathematically impossible under normal processing and signals unauthorized overrides or system-level manipulation.

  5. Under ACFE guidance, which category accounts for the LARGEST percentage of occupational fraud cases by frequency?

    Answer: Asset misappropriation

    Asset misappropriation, including theft of cash and inventory, is the most common form of occupational fraud, representing the majority of cases.

  6. Which anti-fraud control has been shown to have the GREATEST impact on reducing fraud losses according to ACFE research?

    Answer: Internal audit departments

    ACFE research consistently shows that organizations with internal audit functions detect fraud faster and suffer lower median losses.

  7. A 'fictitious refund' scheme in retail environments is BEST prevented by which control?

    Answer: Dual authorization for all refunds above a set threshold

    Requiring a second approver for refunds above a threshold prevents employees from issuing fraudulent refunds to themselves or accomplices.