[2026] Practice with these CFE-Fraud-Schemes-and-Financial-Crimes dumps Certification Sample Questions [Q96-Q117]

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[2026] Practice with these CFE-Fraud-Schemes-and-Financial-Crimes dumps Certification Sample Questions

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QUESTION 96
Skimming cases can more likely be detected by:

Internal audits

Accidents

Internal controls

Occupational frauds

Detailed Explanation:
* Rationale for Correct Answer: Skimming is difficult to detect because the stolen cash is never recorded (“off-book”). Therefore, it is often discovered by accident – such as customer complaints, discovery of missing deposits, or unexpected reconciliations – rather than through audits or routine controls.
* Analysis of Incorrect Options:
* A. Internal audits – Effective for many frauds but weak at uncovering skimming because records appear normal.
* C. Internal controls – Preventive controls may deter but cannot detect unrecorded theft.
* D. Occupational frauds – Too broad and not a detection method.
* Key Concept: Detection of Skimming – most often accidental.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Cash Receipts – Skimming Schemes and Detection .

QUESTION 97
Kara owns a business selling rare goods. Some of the goods Kara sells are of high value, but she reports significantly lower values to the taxing authority for those transactions. Which of the following options BEST describes Kara’s scheme?

Wealth tax evasion scheme

Falsified tax deduction scheme

Consumption tax scheme

Tax credit scheme

QUESTION 98
Which of the following is NOT one of the information security goals that should be achieved to secure an e- commerce system for users and account holders?

Confidentiality of data

Availability of data

Penetrability of data

Integrity of data

The ACFE Fraud Examiners Manual (2020 International Edition) , under the section on Information Security in Electronic Commerce Systems , describes the three primary security goals that must be achieved to protect users and account holders:
* Confidentiality
* Integrity
* Availability
These three goals form the cornerstone of information system protection and are often referred to as the CIA triad .
1. Confidentiality
Confidentiality ensures that sensitive information is accessible only to authorized individuals. The Manual highlights that e-commerce systems must protect customers’ personal and financial data from unauthorized access.
2. Integrity
Integrity requires that the information in the system is accurate and has not been improperly altered. This prevents fraudulent manipulation of records, transactions, and account balances.
3. Availability
Availability ensures that systems and data are accessible to authorized users when needed. This includes preventing disruptions caused by system failures, denial-of-service attacks, or internal sabotage.
These three goals are explicitly documented in the ACFE Manual as essential security requirements for safeguarding electronic financial systems.
Why Option C is the Correct Answer
“Penetrability of data” is NOT an information security goal.
In fact, it is the opposite of what an information security framework seeks to achieve. No section of the ACFE Manual identifies “penetrability” as a required or legitimate objective. Instead, systems should be resistant to penetration attempts.
Thus, Option C does not belong to the CIA model or any ACFE-described security framework.
ACFE Manual Reference
These concepts are covered in the Financial Transactions and Fraud Schemes section discussing information security objectives for e-commerce environments, which identifies confidentiality, integrity, and availability as the foundational goals of secure systems.

QUESTION 99
Which of the following is NOT a common way that a procuring employee might engage in a bid manipulation scheme?

Extending bid opening dates without justification

Using low-quality materials

Altering bids

Opening bids prematurely

Detailed Explanation:
* Rationale for Correct Answer: Bid manipulation schemes occur in the procurement process and involve altering the bidding environment (e.g., extending deadlines, prematurely opening competitor bids, or changing submitted bids). Using low-quality materials is a post-award performance fraud , not bid manipulation.
* Analysis of Incorrect Options:
* A, C, D – All are recognized bid manipulation tactics.
* Key Concept: Procurement fraud schemes – bid manipulation vs. contract performance fraud.
Reference: ACFE Manual, Corruption – Procurement Fraud .

QUESTION 100
Which of the following statements is MOST ACCURATE regarding how the challenges in government and public sector fraud prevention differ from those in the private sector?

Fraud prevention initiatives tend to be implemented less quickly in government and public sector organizations due to the need for staffing changes and budget readjustments.

Unlike government and public sector organizations, private sector organizations often have to shift and reallocate fraud prevention resources based on legal requirements.

Government and public sector organizations generally have greater control of their organizational operations and objectives than private sector organizations.

Unlike government and public sector organizations, fraud prevention efforts for private sector organizations are often guided by the prevailing government’s opinions and priorities.

Option A is the most accurate because government and public sector entities commonly face slower implementation of fraud prevention initiatives due to budget cycles, staffing rules, public accountability requirements, and formal approval structures. Public sector fraud prevention is often affected by legal mandates, appropriations, political priorities, and administrative constraints. Option B reverses the distinction; government entities are generally more directly constrained by legal and budgetary requirements. Option C is inaccurate because public sector organizations often have less flexibility over operations and objectives than private entities. Option D is also reversed because government and public sector fraud prevention is more likely to be influenced by public policy and prevailing government priorities. The ACFE material recognizes public-sector accountability and auditing standards as distinct from private sector governance.

QUESTION 101
Which of the following is NOT a method for stealing inventory and other assets?

Larceny schemes

Asset requisition and transfer

Purchasing and receiving schemes

Sales & Equipment handling

Detailed Explanation:
* Rationale for Correct Answer: Recognized schemes for stealing inventory include:
* Larceny schemes (direct theft)
* Asset requisition and transfer schemes (false requisitions to divert assets)
* Purchasing and receiving schemes (over-ordering or falsifying deliveries).
” Sales & Equipment handling ” is not a defined fraud scheme, making D correct.
* Analysis of Incorrect Options:
* A. Larceny schemes – Valid theft method.
* B. Asset requisition and transfer – Document manipulation method.
* C. Purchasing and receiving schemes – Valid misappropriation scheme.
* Key Concept: Inventory theft schemes under the Fraud Tree.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Inventory and Other Assets – Theft Schemes .

QUESTION 102
__________ means that traditional bribery statutes proscribe only payments made to influence the decisions of government agents or employees.

Commercial bribery
* Rationale for Correct Answer: Traditional bribery laws historically applied only to government officials . When bribery occurs in the private sector (commercial setting), it is known as commercial bribery . Modern laws and internal company codes address this as well.
* Key Concept: Commercial bribery vs. government bribery.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Corruption – Commercial Bribery .

QUESTION 103
The more power a person has over the bidding process, the more likely the person can influence the selection of a supplier.

True

False

Detailed Explanation:
* Rationale for Correct Answer: This is True . When an employee has significant authority or discretion in the procurement process (e.g., drafting specifications, approving vendors, or evaluating bids), they are more capable of steering contracts toward favored suppliers. This increases the risk of corruption schemes like kickbacks or bid-rigging .
* Analysis of Incorrect Options:
* B. False – Incorrect; influence grows with authority over procurement.
* Key Concept: Procurement authority is a key risk factor for corruption.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Corruption – Procurement Schemes .

QUESTION 104
___________ is to allow the owner, investors, creditors, and others with an interest to know the appropriate book worth of the business at a particular date.

Equity

Balance sheet

Income statement

Financial record

Detailed Explanation:
* Rationale for Correct Answer: The balance sheet provides a snapshot of a company’s financial position at a specific date. It shows assets, liabilities, and equity, allowing stakeholders to assess book value and solvency.
* Analysis of Incorrect Options:
* A. Equity – A component of the balance sheet, not the full report.
* C. Income statement – Shows performance over a period, not book worth at a date.
* D. Financial record – Too general.
* Key Concept: Balance Sheet as a tool for determining book worth at a point in time.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts – Financial Statements Overview .

QUESTION 105
An analytical review reveals that XYZ Company’s cost of goods sold has increased by 75% in the last year.
However, its sales revenues only increased by 25% during the same period. This situation MOST LIKELY indicates which of the following?

The company started recording warranty liabilities.

There were fewer sales this year compared to last year.

There were more sales returns this year than in the prior year.

Inventory has been depleted by theft.

Detailed Explanation:
* Rationale for Correct Answer: A disproportionate increase in COGS without a corresponding increase in sales is a red flag for inventory theft or misappropriation . Theft reduces ending inventory, which artificially inflates COGS, while sales remain unchanged or grow modestly.
* Analysis of Incorrect Options:
* A – Warranty liabilities affect expenses, not COGS.
* B – Fewer sales would reduce both revenue and COGS proportionally, not cause a large disparity.
* C – Sales returns reduce revenue, not inflate COGS.
* Key Concept: Using analytical review to detect inventory theft via COGS anomalies.
Reference: ACFE Manual, Financial Statement Fraud – Red Flags and Analytical Procedures .

QUESTION 106
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:

Ditching

Bait and wait

Past posting

Double dipping

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

QUESTION 107
The excess credits (or debits) on the income statement are used to decrease (or increase) the equity account.

True

False

Detailed Explanation:
* Rationale for Correct Answer: This is True . The net result of revenues and expenses (credits and debits) on the income statement flows into retained earnings, which is part of equity on the balance sheet. Therefore, excess credits (profits) increase equity, while excess debits (losses) decrease equity.
* Analysis of Incorrect Options:
* B. False – Incorrect, as the closing process of the accounting cycle directly affects equity.
* Key Concept: Closing process and impact of net income on equity.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Accounting Concepts – Income Statement Flow to Equity .

QUESTION 108
Which of the following recommendations for individuals is likely to be MOST EFFECTIVE in preventing identity theft?

Create answers to security questions using unique details that cannot be verified easily through public sources of information.

Limit the reuse of passwords or passphrases to no more than two accounts, websites, or devices.

Refrain from using email to send personal information unless contacting reputable organizations.

Move all files containing personal information to the recycle bin for deletion before disposing of a laptop or computer.

The correct answer is A. Creating answers to security questions using unique, nonpublic details helps prevent identity thieves from bypassing account protections. Many security-question answers, such as a mother’s maiden name, school name, pet name, or birthplace, can be discovered through social media, public records, or data breaches. Using answers that cannot be easily verified through public sources makes account recovery processes harder to exploit. Option B is weak because passwords and passphrases should not be reused across accounts at all. Option C is unsafe because email can be intercepted or misdirected, even when contacting reputable organizations. Option D is inadequate because moving files to the recycle bin does not securely erase data from a device before disposal.

QUESTION 109
To reduce his tax bill, John adds fake deductions to his personal tax return. John is MOST LIKELY engaging in:

Tax sheltering

Tax evasion

Tax misappropriation

Tax avoidance

John is engaging in tax evasion because he intentionally adds false deductions to reduce the amount of tax he owes. The ACFE material distinguishes tax evasion from tax avoidance. Tax avoidance involves legal planning, such as legitimate deductions, credits, or shelters. Tax evasion involves fraudulent actions taken to avoid reporting or paying taxes. Fake deductions are not legitimate tax planning because they misrepresent facts on the return. This conduct can also be described as falsifying tax deductions, a specific type of tax evasion scheme. Tax sheltering is not the best answer because the facts do not describe a lawful or abusive shelter arrangement. Tax misappropriation is not the correct classification. Because John knowingly uses false deductions, option B is correct.

QUESTION 110
______________ is required not only for theft, but for procedures to detect errors, avoid waste, and ensure a proper amount of inventory is maintained.

Internal control (Inventory Control)
* Rationale for Correct Answer: Strong internal controls – particularly inventory controls – are essential not just to prevent theft, but also to detect errors, reduce waste, and ensure that inventory levels are appropriate. Controls such as physical counts, reconciliations, and segregation of duties protect against misappropriation and inefficiencies.
* Key Concept: Internal Controls as a preventive and detective mechanism in asset safeguarding.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Inventory and Other Assets – Inventory Control procedures.

QUESTION 111
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?

The financial institution is required to file a cash transaction report for possible criminal activity with the appropriate authorities because cash was involved.

The financial institution is required to file a report of suspicious transactions with the appropriate authorities because the employees suspect money laundering violations.

The financial institution is not required to file a report of suspicious transactions with the appropriate authorities because bearer instruments were involved.

The financial institution is not required to file a report of suspicious transactions related to potential criminal activity because the amounts were below reporting requirements.

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.

QUESTION 112
Which of the following measures would be MOST EFFECTIVE for preventing cash register disbursement schemes?

Informing employees in advance that cash counts will be performed on a specific date

Keeping register access codes secure and training employees not to share them

Encouraging at least one non-supervising employee to be physically present in the cash register area at all times

Requiring each register worker to prepare the register count sheet and reconcile it with the register total for their own register

The correct answer is B. Cash register disbursement schemes commonly involve false voids, false refunds, or unauthorized register activity. Secure access codes help establish individual accountability and prevent one employee from processing fraudulent transactions under another employee’s credentials. Training employees not to share access codes strengthens this control. Option A is weak because announced cash counts reduce deterrence; surprise counts are more effective. Option C does not provide meaningful control because another non-supervising employee might not detect or challenge improper activity. Option D is inappropriate because employees should not independently reconcile their own register activity; independent review is necessary.
The professional control principle is to restrict access, preserve accountability, and require supervisory or independent review of register disbursements.

QUESTION 113
Which of the following is NOT a red flag of register disbursement schemes?

There are gaps in the transaction numbers on the register log.

Personal checks from cashiers are found in the cash register.

Voids just over the review limit have been approved by a supervisor.

Cashiers are authorized to void their own transactions.

Detailed Explanation:
* Rationale for Correct Answer: Finding personal checks in the cash register is unusual, but it does not specifically indicate a register disbursement scheme (such as false refunds or voids). The other options are classic red flags for such schemes.
* Analysis of Incorrect Options:
* A – Missing transaction numbers suggest manipulation.
* C – Excessive voids near approval limits indicate fraud concealment.
* D – Allowing cashiers to void their own sales creates opportunity for abuse.
* Key Concept: Register disbursement schemes and their red flags.
Reference: ACFE Manual, Fraudulent Disbursements – Register Disbursement Schemes .

QUESTION 114
Bob, a purchasing agent for Gallenkamp, directed a portion of Gallenkamp’s business to Oak Company. In exchange for receiving additional business, Oak Company’s sales manager agreed to pay Bob a percentage of the extra profits. Which of the following BEST describes the type of corruption scheme in which Bob engaged?

Kickback scheme

Illegal gratuity scheme

Diversion scheme

Economic extortion scheme

Detailed Explanation:
* Rationale for Correct Answer: A kickback scheme occurs when vendors make payments to employees of a purchasing organization in exchange for steering business their way. Here, Bob steered contracts to Oak Company and received a percentage of profits, a textbook kickback arrangement.
* Analysis of Incorrect Options:
* B. Illegal gratuity scheme – Involves rewards after a decision, without a prior agreement. Here, the agreement was prearranged.
* C. Diversion scheme – Refers to diversion of assets, not procurement favoritism.
* D. Economic extortion scheme – Involves coercion of the vendor; this was voluntary bribery.
* Key Concept: Bribery and kickbacks as forms of corruption.
Reference: ACFE Manual, Corruption – Kickback Schemes .

QUESTION 115
Which of the following is NOT a phase of the bidding process?

Presolicitation

Postsolicitation

Solicitation

Submission

Detailed Explanation:
* Rationale for Correct Answer: The phases of the bidding process include:
* Presolicitation (need recognition/specification stage),
* Solicitation (inviting bids),
* Submission (vendors submit bids). There is no standard phase called Postsolicitation .
* Analysis of Incorrect Options:
* A. Presolicitation – Valid phase.
* C. Solicitation – Valid phase.
* D. Submission – Valid phase.
* B. Postsolicitation – Not recognized as a formal bidding stage.
* Key Concept: Bidding process phases – presolicitation, solicitation, submission.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Corruption – Bid-Rigging and Procurement Phases .

QUESTION 116
Another way to eliminate competition in the solicitation phase of the selection process is to:

Solicit bids from fictitious suppliers

Solicit transactions from fictitious vendors

Solicit bid-splitting from fictitious vendors

None of the above

Detailed Explanation:
* Rationale for Correct Answer: Fraudsters may solicit bids from fictitious suppliers (phony vendors) to create the illusion of competition. This ensures that the favored vendor wins while maintaining the appearance of a legitimate competitive bidding process.
* Analysis of Incorrect Options:
* B. Solicit transactions from fictitious vendors – Incorrect phrasing; bids, not transactions, are solicited.
* C. Solicit bid-splitting… – Bid-splitting is a different fraud scheme, not part of solicitation.
* D. None of the above – Incorrect, since A is accurate.
* Key Concept: Phony bid solicitation as a corruption tactic in procurement.
Reference: ACFE Fraud Examiners Manual (2020 International Edition) , Corruption – Solicitation Phase Schemes .

QUESTION 117
Which of the following terms BEST describes a property and casualty insurance scheme that involves filing an insurance claim for destroyed items, such as a boat or expensive equipment, that never actually existed?

Staged theft scheme

Paper property scheme

Inflated theft scheme

Inflated inventory scheme

The correct answer is B. A paper property scheme involves an insurance claim for property that exists only
“on paper,” meaning the claimed property never actually existed or was never owned by the claimant. The question describes a claim for destroyed items, such as a boat or expensive equipment, that did not exist. This differs from a staged theft, where an actual event is falsely created or arranged to appear like a theft. It also differs from an inflated theft or inflated inventory scheme, where property might exist but the claimant exaggerates the quantity, quality, or value of the loss. The ACFE insurance fraud material identifies property schemes, including phony or inflated thefts and paper boats, as property and casualty insurance fraud methods.

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