CFE-Financial-Transactions-and-Fraud-Schemes Premium Exam Questions

Detailed Explanation:

Rationale for Correct Answer:One of the most effective ways to protect proprietary information is educating employees about nondisclosure agreements (NDAs) at onboarding and again during exit. This ensures awareness of confidentiality obligations.

Analysis of Incorrect Options:

A. Changing locks/codes every 3–5 years – Reasonable security but insufficient for safeguarding proprietary information.

B. Classifying data by years of service – Not a sound security practice; access should be based on role and need-to-know.

D. Requiring notes/drafts – Increases risk of information leaks, not protection.

Key Concept: Proprietary information protection.

Detailed Explanation:

Rationale for Correct Answer:Fraudulent schemes involving returns and allowances can be detected by analyzing accounts for unusually high transactions in these categories. This is a common red flag for concealment of theft or manipulation of sales.

Analysis of Incorrect Options:

A. Allowances by vendors – Too narrow, not a standard analytic test.

B. Disposals of allowances than reorders – Not a recognized search method.

D. None of the above – Incorrect, since option C is valid.

Key Concept:Returns and allowances analysis for fraud detection.

Detailed Explanation:

Rationale for Correct Answer:The correct answer is A. Larceny. As defined in the Fraud Examiners Manual (2020 International Edition), larceny is the unlawful taking of another’s property with intent to permanently deprive the owner of its use or possession. Essential elements include: (1) the wrongful taking or carrying away of property, (2) without the consent of the owner, and (3) with felonious intent (i.e., intent to steal). This aligns directly with the definition provided in the question.

Analysis of Incorrect Options (Distractors):

B. Abuse – Abuse typically refers to the improper use of authority or resources (e.g., excessive expense claims, misuse of assets), but it is not a legal term describing theft by taking.

C. Fiduciary – Fiduciary describes a relationship of trust or duty to act for another’s benefit, not the act of theft.

D. None of the above – Incorrect because “larceny” precisely matches the elements described.

Key Concept:The definition and elements of larceny, which is a foundational legal concept for distinguishing among asset misappropriation schemes such as larceny vs. skimming.

Detailed Explanation:

Rationale for Correct Answer: A draw request is used by construction developers to obtain loan funds for work completed. If lien releases are missing, it suggests subcontractors may not have been paid, and the developer might be misrepresenting completed work—an indicator of loan fraud.

Analysis of Incorrect Options:

A – Omission of personal account statements isn’t unusual for a draw request.

B – Change orders are common in construction projects.

D – Multiple inspection reports support validity, not fraud.

Key Concept: Loan fraud detection through supporting documentation review.