Together, Reducing Fraud Worldwide
CFE Coach Fraud IQ Tests
Computer forensic examiners generally agree that investigations typically involve four phases: the seizure phase, the image-acquisition phase, the analysis phase, and the reporting and testifying phase.
Correct Answer: (D)
User-created files are files created under the user’s direction, and include text-based documents, spreadsheets, databases, email, address books, presentation slides, audio/video files, image files, Internet bookmarks, and so on.
Correct Answer: (A)
An issue faced in most examinations is that multiple copies of various files will be collected as part of the investigative process. Because reviewing such duplicative materials is expensive and time consuming, the fraud examiner should identify and eliminate duplicates in the collected data. This process is referred to as deduplication filtering, and it is critical in helping to reduce the vast amounts of information collected during a fraud examination. That is, deduplication filtering is a data-processing technique that fraud examiners can use to identify and eliminate identical materials in digital data.
Correct Answer: (B)
Accounting is based on the model or accounting equation: Assets = Liabilities + Owners' Equity.
One type of bank employee fraud is referred to as unauthorized disbursement of funds to outsiders. This type of scheme involves employees cashing stolen/counterfeit items for outside accomplices.
Correct Answer: (B)
Fraud in financial statements takes the form of overstated assets or revenue and understated liabilities and expenses. Overstating assets and revenues falsely reflects a financially stronger company by inclusion of fictitious asset costs or artificial revenues. Understated liabilities and expenses are shown through exclusion of costs or financial obligations. Both methods result in increased equity and net worth for the company. This overstatement and/or understatement results in increased earnings per share or partnership profit interests or a more stable picture of the company's true situation.
Correct Answer: (A)
Per IRS Code Section 6663: A penalty of 75 percent of the underpayment is imposed if any part of the underpayment is due to fraud. If the taxpayer is successful in proving that a portion of the underpayment is not the result of fraud, then that portion of the underpayment may be subject to the negligence penalty.
There are three basic ways to prove illegal payments: identify and trace them by audit steps, turn an inside witness, or secretly infiltrate or record ongoing transactions. When identifying and tracing illegal funds through audit steps, the examiner might focus on the point of suspected payment (i.e., from where the funds are generated, earned, stolen, or otherwise begin their journey), point of receipt (i.e., from where the illicit funds are deposited, spent, or invested), or both.
Correct Answer: (C)
The U.S. courts have determined evasion to be unlawful, while avoidance has been deemed lawful.
Testifying expert witnesses give opinion testimony when specialized knowledge is needed to help the jury understand evidence or determine a fact in issue. Unlike fact (or lay) witnesses, expert witnesses may express opinions or draw conclusions in their testimony.
Suits involving parties from different states and involving more than $75,000 in controversy can be brought in federal court. These suits are known as "diversity cases."
Correct Answer: (D)
Under Rule 702 of the Federal Rules of Evidence, a witness qualified as an expert by “knowledge, skill, experience, training or education” may testify in the form of an opinion or otherwise to “scientific, technical or other specialized knowledge” if such testimony will “assist the trier of fact to understand the evidence or to determine the fact in issue.” The determination of whether a witness is qualified as an expert or whether expert testimony is needed is left to the discretion of the trial judge. There is no particular educational requirement for expert testimony; a witness with no formal education may be qualified based on training or experience.
Correct Answer: (C)
Many organizations rely heavily on their internal control system to prevent and detect fraud. Although internal control plays a critical role in fraud prevention and detection, it is a dynamic system that requires constant reevaluation of its weaknesses. Performing a fraud risk assessment provides management with the opportunity to review the company's internal control system for effectiveness, taking into account the following considerations.
The information and communication component of the COSO Internal Control model relates to the exchange of information in a way that allows employees to carry out their responsibilities. Organizations should work to identify pertinent information and see that it is delivered to those who need it most. A proper information system will provide for upstream communication. Employees should be provided with clear channels for reporting suspected control violations. Provisions should be made for employees to make anonymous reports in order to avoid fears of retaliation, which can have a chilling effect on upstream communication. A similar reporting mechanism for customers and other external parties should be in place. Serious efforts should be made to follow up on these communications.
Risk assessment involves an entity's identification and assessment of the risks involved in achieving organizational objectives. This component involves tailoring ethics policies or compliance programs to the nature of the organization's business. According to COSO, risk assessment is a three-step process:
Monitoring of the risk management strategy falls under the monitoring component of the COSO framework, not the risk assessment component.
Many printers have internal hard drives that may contain information relevant to a fraud examination. In general, any information sent to and stored by a printer is recoverable unless the printer has overwritten the data.
An "action constituting fraud" section in a fraud prevention policy sets forth in detail what actions constitute fraudulent conduct. This is important as it gives management the legal grounds to investigate and punish violators. The actions listed can include.
The National Commission on Fraudulent Financial Reporting (commonly known as the Treadway Commission) was established in 1987 with the purpose of defining the responsibility of the auditor in preventing and detecting fraud. The commission was formed by the major professional auditing organizations: the American Institute of CPAs, the Institute of Internal Auditors, and the National Association of Accountants.
Substantive law is comprised of the basic laws of rights and duties (contract law, tort law, criminal law, etc.) as opposed to procedural law which involves rules governing pleadings, evidence, jurisdiction, etc. If someone says an act is “against the law,” he means substantive law. This includes statutes and ordinances at every level; common law, or case law, from all the various courts; and state and federal constitutions.
To the ordinary layman, the words theft, fraud, embezzlement and larceny are used interchangeably. Theft and stealing have become so generically understood and so commonly used that they are considered generic terms for a range of different crimes. The words themselves are rarely used in criminal statutes. The technical charge for the kind of behavior most of us think of as theft or stealing is called "larceny." Larceny can be defined as the wrongful taking and carrying away of the personal property of another with the intent to convert it or deprive the owner of its use and possession. If the taking is by stealth, the crime is larceny. If taken by false representation, the crime is fraud.
Certain standards for Certified Fraud Examiners are found in the Code of Professional Ethics. Specifically, Certified Fraud Examiners are prohibited from expressing opinions as to guilt or innocence of any person or party. This is not to say that the expert witness cannot testify to the badges or hallmarks or characteristics of fraud found in the case. It also does not mean that the Certified Fraud Examiner cannot testify that, based on the evidence, he believes that the accused may have committed the offense. But the ultimate guilt or innocence of any person or party is the sole responsibility of the judge and jury. The Certified Fraud Examiner typically will not be permitted to testify to the ultimate fact questions.
Become a CFE
How to Become a CFE
Details of the Exam
Apply for the Exam
CFE Exam Application
Prepare for the Exam
About the CFE Exam Prep Course
Take the Exam
Submit the Exam
Money-Back Pass Guarantee
CFE Certification Framing Service
© 2013 Association of Certified Fraud Examiners, Inc. All rights reserved.