ACFE CFE-Fraud-Schemes-and-Financial-Crimes Exam With Confidence Using Practice Dumps

Maria and Annie’s actions are a fraudulent death claim scheme. In life insurance fraud, a fraudulent death claim occurs when a person falsely represents that the insured has died to obtain policy proceeds. The scheme can involve a fabricated death, a phony death certificate, staged disappearance, or collusion between the insured and beneficiary. Here, Annie is alive, and Maria submits a false claim supported by a phony death certificate. A tombstone policy claim generally involves policies or claims connected to deceased persons or fraudulent use of death information, but the facts here involve a living insured falsely reported as dead. Premium theft concerns misappropriation of premiums, and beneficiary extortion is not the scheme described.

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The ACFE Fraud Examiners Manual includes a specific subsection titled “Departures from Generally Accepted Accounting Principles” within Accounting Concepts .

Under the Manual’s discussion of GAAP, the focus is on proper financial reporting so that transactions are recorded in their appropriate classifications and reported fairly in the financial statements. The Manual explains that GAAP are the standardized financial reporting practices used to ensure accurate and reliable reporting.

Based on this framework, a departure from GAAP can be justified only in limited circumstances, such as when strict compliance would make the financial statements misleading or when a different treatment is necessary to better reflect the substance of the transaction rather than only its form. Likewise, avoiding the overstatement of assets or income is consistent with fair presentation and conservative reporting principles. These are accounting-based justifications tied to faithful financial reporting.

By contrast, cost is not a valid reason to depart from GAAP. The fact that reporting a transaction in a GAAP-compliant manner would be more expensive does not justify noncompliance. Financial statements must be prepared in accordance with the applicable standards, not according to whichever treatment is cheaper or easier for management. Therefore, this option is the one that is NOT justifiable.

Why the other options are not the correct choice

A. To avoid overstating assets and/or income

This is consistent with fair presentation. The Manual’s discussion of GAAP is aimed at proper classification and reporting of transactions so that financial statements are not distorted.

C. To better reflect the substance of a transaction

This is a recognized accounting rationale. Financial reporting should reflect the economic reality of a transaction, not merely its legal form. This is consistent with the Manual’s discussion of proper reporting under GAAP.

D. Following GAAP would produce misleading results on financial statements

This is one of the classic reasons a departure can be justified, because the objective of financial reporting is fair presentation rather than mechanical compliance that misleads users.

References

ACFE Fraud Examiners Manual, 2020 International Edition

Accounting Concepts — Generally Accepted Accounting Principles

Accounting Concepts — Departures from Generally Accepted Accounting Principles (1.122)

Detailed Explanation:

Rationale for Correct Answer: Fraudulent financial statements (or “fraudulent statement”) refer to the intentional misrepresentation of financial condition, typically through overstating revenues, understating expenses, inflating assets, or concealing liabilities. The intent is to mislead stakeholders such as investors, creditors, or regulators.

Analysis of Incorrect Options:

B. Corruption – Refers to abuses of influence and conflicts of interest, not misreporting financial information.

C. Asset misappropriations – Involve theft of assets, not misrepresentation of reports.

D. None of the above – Incorrect since option A is correct.

Key Concept: Financial Statement Fraud — misrepresentation of organizational performance and position.