ACFE CFE-Fraud-Prevention-and-Deterrence Questions: Fosters Your Exam Passing Skills [2026]

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| Section | Objectives |
|---|
| Topic 1: Fraud Prevention and Deterrence | - Fraud Risk Management
- 1. Fraud risk mitigation strategies
- 2. Fraud risk identification and analysis
- 3. Fraud risk assessment process
- Fraud Prevention Fundamentals
- 1. Objectives of anti-fraud programs
- 2. Principles of fraud prevention and deterrence
- Fraud Culture and Ethics
- 1. Ethical frameworks and professional standards
- 2. Anti-fraud organizational culture
- 3. Whistleblowing mechanisms and reporting channels
- Anti-Fraud Controls and Governance
- 1. Fraud prevention policies and procedures
- 2. Internal controls to deter fraud
- 3. Corporate governance and oversight
- Fraud Risk Monitoring and Evaluation
- 1. Evaluation of fraud prevention programs
- 2. Ongoing monitoring of fraud risks
- Fraud Schemes and Red Flags
- 1. Occupational fraud schemes
- 2. Financial statement fraud indicators
- 3. Fraud warning signs and red flags
|
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ACFE Certified Fraud Examiner - Fraud Prevention and Deterrence Exam Sample Questions (Q175-Q180):
NEW QUESTION # 175
The objective of anti-fraud controls is to:
- A. Reduce the inherent fraud risk to a level that is significantly smaller than the residual fraud risk.
- B. Completely eliminate inherent fraud risk.
- C. Reduce the residual fraud risk to a level that is significantly smaller than the inherent fraud risk
- D. Completely eliminate residual fraud risk
Answer: C
Explanation:
Fraud Risk Reduction Objectives:
* Inherent fraud risk: The risk present before any controls are applied.
* Residual fraud risk: The remaining risk after controls have been implemented.
Why D is Correct:
* The goal of anti-fraud controls is to minimize residual risk to acceptable levels, recognizing that complete elimination of risk is unattainable.
Why Other Options are Incorrect:
* A and C: It is impractical to completely eliminate inherent or residual fraud risks.
* B: Residual risk should be lower than inherent risk, but controls aim for significant reduction
NEW QUESTION # 176
(Which of the following statements regarding monitoring employees for warning signs of fraud is MOST ACCURATE?)
- A. An increase in employee wealth is always a sign of fraud that should be investigated.
- B. Managers should observe employees for signs of suspicious behavioral or lifestyle changes only if they can do so without the employees' knowledge.
- C. Employees who steal do not commonly display lifestyle or behavioral warning signs of their misdeeds.
- D. Managers should be instructed to observe employees for any unusual lifestyle improvements, such as an unexplained increase in luxury purchases.
Answer: D
Explanation:
The Fraud Prevention Programs chapter explains that effective management oversight includes watching for warning signs associated with fraud. The manual states that employees who steal commonly use the proceeds for lifestyle improvements, such as more expensive cars, extravagant vacations, expensive clothing, new or remodeled homes, recreational property, and outside investments. It specifically says managers should be educated to be observant of these signs. The manual also lists behavioral red flags such as living beyond means and financial difficulties, showing that warning signs do commonly appear. Therefore, an increase in wealth is not always proof of fraud, but unusual lifestyle improvements can be meaningful indicators that deserve attention. For that reason, the most accurate statement is that managers should be instructed to observe employees for unusual lifestyle improvements, including unexplained luxury purchases.
NEW QUESTION # 177
For its compliance program to be effective, an organization must promote the program through appropriate incentives for compliance.
Answer: B
NEW QUESTION # 178
Which of the following statements regarding white-collar defendants is TRUE?
- A. They are more likely to be fined than to face prison terms as punishment
- B. The lower the offenders' social status, the more likely they are to be imprisoned
- C. All of the above
- D. They are less likely to insist on a trial than other offenders
Answer: A
NEW QUESTION # 179
Which of the following statements is MOST ACCURATE regarding the internal audit function?
- A. Internal auditing helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.
- B. The most common type of internal audit engagement involves performing an audit of the financial statements to provide assurance regarding their accuracy and reliability to the organization's external stakeholders.
- C. Internal auditors are auditors who are not employed by, and thus are fully independent of, the organization being audited.
- D. The primary objective of the internal audit function is to ensure that public resources are used efficiently, legally, and for their intended purposes.
Answer: A
Explanation:
Internal auditing is an independent and objective assurance and consulting activity designed to add value and improve an organization's operations. Its role is to help the organization accomplish its objectives by using a systematic, disciplined approach to evaluate and improve governance, risk management, and control processes. Option C accurately reflects this role. Option A describes a public-sector audit objective more closely associated with government auditing, not internal auditing generally. Option B describes external financial statement auditing, which provides assurance to outside stakeholders. Option D is incorrect because internal auditors are commonly employees of the organization, although they must maintain organizational independence and objectivity. In fraud prevention and deterrence, internal auditors are especially important because they understand internal processes and can evaluate fraud risks and controls.
NEW QUESTION # 180
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