CFE- Fraud-Schemes-and-Financial-Crimes ACFE Exam Lab Questions

Detailed Explanation:

Rationale for Correct Answer: Expense reimbursement schemes are a common type of fraudulent disbursement. Requiring employees to submit receipts electronically improves controls by ensuring legibility, reducing the chance of altered or duplicate submissions, and creating a digital audit trail. This measure is recommended in the Fraud Examiners Manual as part of strengthening internal controls over reimbursement processes.

Analysis of Incorrect Option:

B. False – Incorrect because electronic receipt submission is indeed a recognized anti-fraud measure.

Key Concept: Fraudulent disbursements prevention through documentation controls.

The correct answer is C. A code of business ethics and conduct is most effective when it clearly communicates the organization’s values, expected behavior, and major compliance risks, including bribery, conflicts of interest, gifts, hospitality, facilitation payments, and dealings with third parties. Its purpose is not merely to impose management’s expectations, but to guide ethical decision-making across the organization. Option A is too one-sided and does not reflect tone at the top or mutual accountability. Option B is too narrow because anti-corruption obligations extend beyond shareholders to regulators, customers, employees, business partners, and the public. Option D is unrealistic because no code can address every possible ethical situation; it should provide principles, reporting channels, and escalation guidance.

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The correct answer is C because the World Bank Principles recommend that a bankruptcy administrator have broad powers, including the right to cancel fraudulent contracts or transactions entered into by the debtor. The ACFE material states that administrators, trustees, receivers, examiners, or similar insolvency representatives may be granted powers to collect, preserve, and dispose of debtor property, interfere with contracts when necessary to meet insolvency objectives, and compel relevant information from the debtor or other knowledgeable parties. Therefore, options A, B, and D incorrectly restrict the administrator’s recommended authority. Madison’s power is not limited to collection only, and she may compel information or intervene in contracts where the insolvency process requires it.

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Detailed Explanation:

Rationale for Correct Answer: The ACFE emphasizes four cornerstone internal controls to prevent inventory fraud:

Proper documentation (accurate, prenumbered records),

Segregation of duties (custody, recordkeeping, and authorization separated),

Independent checks (reconciliations and audits), and

Physical safeguards (locks, cameras, restricted access).

Analysis of Incorrect Options:

B. Inventory control – Too general; physical safeguards are the key preventive measure.

C. Physical padding – Not a recognized control.

D. Prenumbered affiliations – Misworded; prenumbered documents are part of proper documentation.

Key Concept: Internal control framework for preventing inventory fraud.