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| Section | Objectives |
|---|---|
| Topic 1: Financial Crimes | - Financial Statement Fraud
|
| Topic 2: Fraud Schemes | - Fraudulent Disbursements
|
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NEW QUESTION # 75
Organizations that had external audits actually had higher median losses and longer-lasting fraud schemes than those organizations that were not audited.
Answer: B
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: This statement is True . ACFE research shows that external audits, while valuable, are generally not effective at detecting fraud quickly . Organizations with only external audits often experience higher median losses and longer-lasting schemes compared to those with stronger internal controls and fraud-specific detection mechanisms. External audits are not designed to catch fraud; their focus is on financial statement accuracy.
* Key Concept: Effectiveness of External Audits in fraud detection versus prevention and internal controls.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Fraud Prevention and Detection
- Effectiveness of External Audits .
NEW QUESTION # 76
Ron's vehicle is damaged by hail after a thunderstorm. Ron does not have full insurance coverage on his vehicle, so he contacts his agent to increase his coverage. Three weeks after his new coverage is in effect, Ron's city experiences another thunderstorm. Ron then files a claim for the hail damage that occurred during the first storm, but he claims that the damage occurred during the second storm. Ron has committed a fraudulent act known as:
Answer: A
Explanation:
The ACFE Fraud Examiners Manual classifies this type of conduct under Insurance Fraud # Vehicle Insurance Schemes , and it specifically lists Past Posting as a recognized vehicle insurance fraud scheme.
In this question, Ron's vehicle was damaged before he obtained the additional coverage, but he later submitted the claim as though the damage happened after the new coverage became effective. That is the essence of past posting : attempting to obtain insurance benefits for a loss that occurred before coverage applied , while misrepresenting the time of the loss. This matches the scenario exactly.
Why the other options are incorrect
A). Ditching
The Manual lists Ditching as a separate vehicle insurance scheme. It does not describe the act of misrepresenting the timing of a preexisting loss after increasing coverage.
B). Bait and wait
This is not the insurance-fraud classification that fits the facts given. The fraud here depends on claiming an earlier loss as a later covered loss , which is the Manual's past posting category.
D). Double dipping
Double dipping generally refers to obtaining duplicate recovery for the same loss from multiple sources, which is not what Ron is doing here. The issue is the false date of loss , not duplicate reimbursement.
References
* ACFE Fraud Examiners Manual, 2020 International Edition
* Insurance Fraud - Vehicle Insurance Schemes - Past Posting
NEW QUESTION # 77
Over two weeks, Samuel visits his financial institution multiple times and purchases bearer instruments with cash for amounts that are just under the mandatory reporting requirements for his jurisdiction. The financial institution's employees suspect that Samuel might be engaging in money laundering activity. Which of the following statements is TRUE if the jurisdiction's anti-money laundering regulations follow the Financial Action Task Force (FATF) Recommendations?
Answer: B
Explanation:
The correct answer is B because the FATF Recommendations require suspicious transaction reporting when a financial institution suspects that funds are connected to criminal activity or money laundering. Samuel's repeated purchases of bearer instruments in amounts just below the reporting threshold are classic structuring or smurfing indicators. The fact that each transaction falls below the mandatory cash reporting threshold does not eliminate the suspicious transaction reporting duty. Option A is incorrect because a cash transaction report is generally threshold-based, not merely based on suspicion. Options C and D are incorrect because bearer instruments and sub-threshold amounts are often used to avoid detection, making the activity more suspicious, not less. The ACFE material identifies this conduct as a key money laundering red flag.
NEW QUESTION # 78
By what accountant means that the financial figures presented by the company are at least as much as reflected in the statements, if not more.
Answer: D
Explanation:
Detailed Explanation:
* Rationale for Correct Answer: The conservatism principle in accounting means that financial statements should not overstate assets or income and should anticipate possible losses. Thus, the amounts shown should be at least as much as reflected, if not more. This ensures users are not misled by overly optimistic figures.
* Analysis of Incorrect Options:
* A. Fraudulent statement - Involves intentional misrepresentation, not a principle of accounting.
* B. Misappropriations - Theft of assets, unrelated to valuation principles.
* D. Matching - Refers to aligning expenses with related revenues, not conservatism.
* Key Concept: Conservatism principle - caution in financial reporting.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts - Conservatism in GAAP .
NEW QUESTION # 79
Which of the following measures is a best practice for preventing expense reimbursement schemes?
Answer: C
Explanation:
The correct answer is C because periodic audits of expense reports help deter and detect reimbursement fraud.
Expense reimbursement schemes can involve mischaracterized expenses, overstated expenses, fictitious expenses, altered receipts, multiple reimbursements, or claims for another employee's expenses. Telling employees that expense reports are subject to audit reinforces accountability and increases the perceived risk of detection. Option A weakens controls because all reimbursement claims should require adequate support, not only selected categories. Option B can increase risk because cash advances create another source of funds requiring control and reconciliation. Option D removes supervisory review, which is a key preventive control.
The ACFE material identifies detailed expense reports, supporting documentation, review, and audit procedures as important controls.
NEW QUESTION # 80
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