ACFE Updated CFE-Financial-Transactions-and-Fraud-Schemes Exam Questions and Answers by alicia

Detailed Explanation:

Rationale for Correct Answer:While asset misappropriation schemes are usually committed by lower-level employees, financial statement fraud is most often committed by senior management. This is because executives have the authority to override controls, direct accounting policies, and influence financial reporting for personal gain (bonuses, stock prices, or to conceal poor performance).

Analysis of Incorrect Options:

A. Organized criminals – May commit fraud, but financial statement fraud specifically requires authority over reporting.

B. Mid and lower-level employees – Lack sufficient authority to materially alter financial statements.

D. All of the above – Incorrect, as financial statement fraud is overwhelmingly associated with senior management.

Key Concept:Management override — financial statement fraud perpetrated by those with the authority to manipulate reports.

Detailed Explanation:

Rationale for Correct Answer:Insider cyberfraud thrives in environments where monitoring is weak. If access logs are not reviewed, malicious activity can go undetected, enabling fraud.

Analysis of Incorrect Options:

B. Programs run during business day – Normal IT operations, not a fraud risk.

C. Restricted access – This is a preventive control, not a facilitator.

D. Separation of duties – Strong control, prevents insider fraud.

Key Concept: Conditions facilitating insider cyberfraud.

Detailed Explanation:

Rationale for Correct Answer:A ghost employee scheme occurs when fictitious or former employees remain on payroll. Detecting duplicate addresses, Social Security/Government ID numbers, or other anomalies between HR and payroll records is a classic detection method for ghost employees.

Analysis of Incorrect Options:

A. Fraudulent commissions scheme – Relates to sales manipulation, not duplicate personnel records.

B. Falsified hours and salary scheme – Involves timekeeping, not fictitious employees.

C. Expense reimbursement scheme – Concerns fraudulent expense claims, unrelated to payroll records.

Key Concept: Payroll fraud — Ghost Employee scheme.

Detailed Explanation:

Rationale for Correct Answer: Fraudsters conceal inventory shrinkage through multiple methods, including unrecorded sales, false write-offs, or manipulating perpetual records. The ACFE manual notes that concealment is a common theme in inventory fraud. Hence, all of the above are valid.

Analysis of Incorrect Options:

A, B, C – Each is correct individually, but the most comprehensive answer is D.

Key Concept: Concealment methods for inventory theft.