Certified Fraud Examiner (CFE) Sample Questions

Advanced Sample Questions

What is the primary goal of a fraud risk assessment?

a. To identify areas of the organization that are susceptible to fraud.
b. To detect fraudulent activity that has already occurred.
c. To punish employees who engage in fraudulent activity.

Answer: a.

Explanation: The primary goal of a fraud risk assessment is to identify areas of the organization that are susceptible to fraud. It involves evaluating the internal control systems, policies, and procedures that are in place to prevent fraud, and identifying potential vulnerabilities and risks.

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

a. A large number of bank reconciliations that have not been completed.
b. A consistent increase in sales revenue over several quarters.
c. A low rate of employee turnover.

Answer: a.

Explanation: A large number of bank reconciliations that have not been completed is an example of a red flag in a financial statement. It suggests that there may be fraudulent activity related to cash or bank accounts, and may require further investigation.

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

a. Overstating expenses to reduce taxes.
b. Stealing inventory from the warehouse.
c. Diverting cash receipts to a personal account.

Answer: a.

Explanation: Overstating expenses to reduce taxes is a common type of financial statement fraud. It involves inflating expenses or creating fictitious expenses to reduce taxable income.

Which of the following is an example of a preventive control?

a. An internal audit of financial statements.
b. Segregation of duties between employees.
c. A surprise cash count by a supervisor.

Answer: b.

Explanation Segregation of duties between employees is an example of a preventive control. It involves dividing responsibilities among multiple employees to prevent any one individual from having too much control over a particular process or transaction.

What is the primary purpose of a fraud investigation?

a. To determine if fraud has occurred.
b. To punish individuals who have engaged in fraudulent activity.
c. To recover losses resulting from fraudulent activity.

Answer: a.

Explanation: The primary purpose of a fraud investigation is to determine if fraud has occurred. This may involve collecting evidence, conducting interviews, and analyzing financial records to determine the extent and nature of any fraudulent activity.

Which of the following is not a typical step in a fraud investigation?

a. Collecting and analyzing financial data
b. Interviewing witnesses and potential suspects
c. Arresting and prosecuting individuals suspected of fraud
d. Issuing a public statement about the investigation’s findings

Answer: d.

Explanation: Issuing a public statement about the investigation’s findings is not a typical step in a fraud investigation. Investigations are usually conducted confidentially, and any findings or conclusions are only made public if they are relevant to legal proceedings or other official actions.

Which of the following is a common technique used in data analysis during a fraud investigation?

a. Regression analysis
b. T-test analysis
c. Cluster analysis
d. Frequency analysis

Answer: d.

Explanation: Frequency analysis is a common technique used in data analysis during a fraud investigation. It involves identifying patterns or anomalies in the frequency of transactions, amounts, or other variables that may be indicative of fraud.

Which of the following is an example of a control designed to detect fraud?

a. Separation of duties
b. Mandatory vacation policy
c. Employee background checks
d. Surprise audits

Answer: d.

Explanation: Surprise audits are an example of a control designed to detect fraud. They involve conducting periodic audits or reviews of financial records, processes, or transactions without prior notice to employees or other stakeholders.

Which of the following is a red flag for vendor fraud?

a. A vendor offers discounts for large orders
b. A vendor invoices for work not performed
c. A vendor’s business is located overseas
d. A vendor has a long-standing relationship with the organization

Answer: b.

Explanation: A vendor invoicing for work not performed is a red flag for vendor fraud. This may indicate that the vendor is billing for services or goods that were never delivered or were delivered at a lower cost.

What is the purpose of the fraud risk mitigation phase of a fraud risk management program?

a. To eliminate all fraud risk from an organization
b. To reduce the likelihood and impact of fraud
c. To detect and investigate instances of fraud after they occur
d. To punish individuals who engage in fraudulent activity

Answer: b.

Explanation: The purpose of the fraud risk mitigation phase of a fraud risk management program is to reduce the likelihood and impact of fraud. This may involve implementing controls, policies, and procedures designed to prevent, detect, and respond to fraudulent activity.

Basic Sample Questions

Question 1. As per the findings of a survey, in the main culprits, males are found in the majority of cases, accounting for _ percent of frauds as against_ percent in which a female was found to be the main culprit.

A. 62 v/s 36
B. 61 v/s 39
C. 62 v/s 37
D. None of the above

Correct Answer: B

Question 2. Which of the following is NOT the cause of senior management overstating business statements?

A. Compliance with debt covenants
B. Meeting personal performance criteria
C. Triggering performance-related compensation
D. Demonstrating a pattern of growth to support the sale of a business

Correct Answer: A

Question 3. __________ is the practice of offering, giving, receiving, or soliciting anything of value with the goal of influencing an official.

A. Corruption
B. Diverting business to vendors
C. Bribery
D. Lacking approval authority

Correct Answer: C

Question 4. You may also eliminate competition in the solicitation phase of the selection process by:

A. Solicit bid from fictitious suppliers
B. Solicit transactions from fictitious vendors
C. Solicit bid-splitting from fictitious vendors
D. None of the above

Correct Answer: A

Question 5. A scheme is called a Conflict of interest:

A. An employee must have some sort of ownership interest or employment relationship with the vendor.
B. A salesman must have ownership or employment rights in the vendor who submits the sales request.
C. A purchase must be made by a purchaser who has at least an ownership or employment interest in the vendor who is submitting the offer.
D. The vendor supplying stock must have some kind of dealership interest in the dealer.

Correct Answer: A

Question 6. A check tempering fraud is committed when an employee prepares a fake check and submits it alongside legitimate checks to an authorized maker, who signs it without properly reviewing it?

A. Endorse check scheme
B. Legitimate check scheme
C. Payable check scheme
D. Concealed check scheme

Correct Answer: D

Question 7. What does Larceny by Fraud or deception mean?

A. Creates or reinforces a false impression
B. Fails to correct a false impression
C. Omits to disclose a lien, adverse claim, or another legal obstacle that may be in the way of completing the transaction
D. All of the above

Correct Answer: D

Question 8. Misappropriation of assets was the middle child of the study; it was more common than fraudulent statements and more costly than corruption.

A. True
B. False

Correct Answer: B

Question 9. Expenses that are incurred but not paid by the end of the year are recorded in profit and loss records, and are referred to as:

A. Accruals
B. Depreciations
C. Expenses
D. Financial record

Correct Answer: A

Question 10. Whenever a total is carried from the journal to the ledger or from the ledger to the financial statements, it is known as:

A. Forced Balance
B. Out-of-balance
C. False balance
D. None of all

Correct Answer: A

Question 11. When comparing the cash on hand in a register with the cash shown in the register tape, it is possible to detect _______.

A. Employee theft
B. Recorded sales
C. Internal audits
D. Occupational frauds

Correct Answer: A

Question 12. Late fees and parking fees are the most popular targets for skimming schemes because they are difficult to monitor and predict:

A. Revenue sources
B. Recorded sales
C. Internal audits
D. Register manipulations

Correct Answer: A

Question 13. Across all industry sectors, respondents’ perception of the likelihood of theft being detected is directly correlated with employee theft, meaning the more likely they were to engage in misconduct, the greater the likelihood the employee would be caught.

A. True
B. False

Correct Answer: B

Question 14. Financial statement fraud is committed to:

A. Hide false business performances
B. Protect personal status/control
C. Maintain personal income
D. Stay outside the accounting system

Correct Answer: B

Question 15. When properly installed and implemented, which of the following four basic measures may prevent inventory fraud?

A. Independent checks, proper documentation, segregation of duties, and physical safeguards
B. Independent checks, proper documentation, inventory control, segregation of duties, independent checks
C. Independent checks, proper documentation, physical safeguards, physical padding,
D. Physical safeguards, pre-numbered affiliations, segregation of duties, independent checks

Correct Answer: A

Question 16. An undisclosed payment made by a vendor to an employee of a purchasing company is referred to as:

A. Bid-rigging
B. Kickbacks
C. Presolicitation
D. None of the above

Correct Answer: B

Question 17. What is the phase of the competitive bidding process where fraudsters try to affect the selection of a contractor by restricting the pool of bidders?

A. Need recognition
B. Solicitation
C. False specification
D. Submission

Correct Answer: B

Question 18. Which of the following might be included in the behavior profile of employees who are involved in bribery schemes:

A. Gambling habit
B. Extravagant lifestyle
C. Drug and/or alcohol addiction
D. All of the above

Correct Answer: D

Question 19. What is the special scheme in which employees are aware that their employer is intending to buy a certain asset and benefit from the situation by buying the asset themselves is:

A. Conflict of interest in the sale
B. Turnaround sale or flip
C. Unauthorized sale
D. Written sale of unique assets

Correct Answer: B

Question 20. What is the term used for fake names and the post office box that an employee uses to collect disbursements from false billings is called:

A. Accomplice residence
B. Shell company
C. Perpetrator check
D. Cash generator

Correct Answer: B

Certified Fraud Examiner (CFE) practice tests

Certified Fraud Examiner (CFE) Sample Questions

What is the primary goal of a fraud risk assessment?

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

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

Which of the following is an example of a preventive control?

What is the primary purpose of a fraud investigation?

Which of the following is not a typical step in a fraud investigation?

Which of the following is a common technique used in data analysis during a fraud investigation?

Which of the following is an example of a control designed to detect fraud?

Which of the following is a red flag for vendor fraud?

What is the purpose of the fraud risk mitigation phase of a fraud risk management program?

Question 1. As per the findings of a survey, in the main culprits, males are found in the majority of cases, accounting for ___ percent of frauds as against___ percent in which a female was found to be the main culprit.

Question 2. Which of the following is NOT the cause of senior management overstating business statements?

Question 3. __________ is the practice of offering, giving, receiving, or soliciting anything of value with the goal of influencing an official.

Question 4. You may also eliminate competition in the solicitation phase of the selection process by:

Question 5. A scheme is called a Conflict of interest:

Question 6. A check tempering fraud is committed when an employee prepares a fake check and submits it alongside legitimate checks to an authorized maker, who signs it without properly reviewing it?

Question 7. What does Larceny by Fraud or deception mean?

Question 8. Misappropriation of assets was the middle child of the study; it was more common than fraudulent statements and more costly than corruption.

Question 9. Expenses that are incurred but not paid by the end of the year are recorded in profit and loss records, and are referred to as:

Question 10. Whenever a total is carried from the journal to the ledger or from the ledger to the financial statements, it is known as:

Question 11. When comparing the cash on hand in a register with the cash shown in the register tape, it is possible to detect _______.

Question 12. Late fees and parking fees are the most popular targets for skimming schemes because they are difficult to monitor and predict:

Question 13. Across all industry sectors, respondents’ perception of the likelihood of theft being detected is directly correlated with employee theft, meaning the more likely they were to engage in misconduct, the greater the likelihood the employee would be caught.

Question 14. Financial statement fraud is committed to:

Question 15. When properly installed and implemented, which of the following four basic measures may prevent inventory fraud?

Question 16. An undisclosed payment made by a vendor to an employee of a purchasing company is referred to as:

Question 17. What is the phase of the competitive bidding process where fraudsters try to affect the selection of a contractor by restricting the pool of bidders?

Question 18. Which of the following might be included in the behavior profile of employees who are involved in bribery schemes:

Question 19. What is the special scheme in which employees are aware that their employer is intending to buy a certain asset and benefit from the situation by buying the asset themselves is:

Question 20. What is the term used for fake names and the post office box that an employee uses to collect disbursements from false billings is called:

Prepare for Assured Success

Question 1. As per the findings of a survey, in the main culprits, males are found in the majority of cases, accounting for _ percent of frauds as against_ percent in which a female was found to be the main culprit.