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

Detailed Explanation:

Rationale for Correct Answer:Supplies are recorded as expenses because they are expected to be consumed within one year. Unlike long-lived assets, supplies do not provide benefits beyond the short term and therefore are expensed rather than capitalized.

Analysis of Incorrect Options:

B. Expenses – The accounting treatment, not the category of item.

C. Assets – Supplies are assets when purchased, but they become expenses upon consumption.

D. Equity – Represents ownership interest, unrelated here.

Key Concept:Short-term asset consumption and expense recognition.

Detailed Explanation:

Rationale for Correct Answer: Otto’s act combines misappropriation of customer funds with concealment via false accounting entries. Per the Fraud Examiners Manual, concealment through altering records is a hallmark of accounting fraud schemes tied to asset misappropriation.

Analysis of Incorrect Options:

A – Unauthorized disbursement typically refers to fraudulent payments like check tampering, not customer withdrawals.

B – Dormant account fraud targets unused/inactive accounts; the victim here is an active but inattentive customer.

D – Unauthorized withdrawal is part of the theft, but the defining element is the falsified ledger concealment, making C more precise.

Key Concept: Asset misappropriation with concealment through false accounting.

Detailed Explanation:

Rationale for Correct Answer:This is False. Placing restrictions in solicitation documents that limit competition is a solicitation phase corruption scheme, not “prebid solicitation.” The correct terminology is restrictive specifications or fraudulent solicitation practices.

Analysis of Incorrect Options:

A. True – Incorrect, as “prebid solicitation” is not the proper term.

Key Concept:Restrictive solicitation practices limit competition unfairly.

Detailed Explanation:

Rationale for Correct Answer:Employees authorized to grant discounts may exploit this by issuing false discounts. They pocket part of the customer’s payment while recording a reduced sale amount, making the books appear balanced.

Analysis of Incorrect Options:

B. Recording a discount on sale procedure – A legitimate process, not fraud.

C. Internal discount sales audits – A control, not a scheme.

D. None of the above – Incorrect since false discounts are a recognized method.

Key Concept:False discount schemes as a skimming method.