ACFE Updated CFE-Fraud-Prevention-and-Deterrence Exam Questions and Answers by ryder

Laura’s conduct is best explained by pressure and strain. Strain theory focuses on the stress individuals experience when they desire success, status, or financial achievement but believe they lack legitimate means to obtain it. Laura compares herself with friends who display professional and financial success, then feels frustrated and inadequate. Her fraud is not primarily caused by learning criminal behavior from others, because the facts do not show that her friends taught or encouraged fraud. It is also not simply lack of advancement, because the scenario centers on social comparison and emotional pressure. Environmental stressors is too broad. Laura’s desire to reduce negative feelings and gain social status through misuse of the company credit card fits the pressure-and-strain explanation. Therefore, option D is correct.

International Standards on Auditing (ISAs) Requirements:

ISAs require auditors to communicate suspected or confirmed fraud to " those charged with governance " of the organization, as they have the responsibility for oversight.

ISA 240, “The Auditor ' s Responsibilities Relating to Fraud in an Audit of Financial Statements,” mandates that findings be reported to appropriate governance bodies before considering further actions.

Confidentiality and Legal Obligations:

Auditors must maintain confidentiality unless legal or regulatory frameworks require disclosure to authorities. Immediate reporting to law enforcement (option B) may breach confidentiality without proper internal escalation.

Why Option D is Correct:

Reporting to governance ensures proper internal actions are taken and protects the integrity of the audit process. It allows the organization to address the issue before external involvement if required.

 Key Elements of Routine Activities Theory:

This criminological theory asserts that crime is likely when three conditions converge:

Availability of suitable targets.

Absence of capable guardians (e.g., security or oversight).

Presence of motivated offenders.

 Why C is Correct:

Routine activities theory focuses on the environmental and situational factors that facilitate crime, making it distinct from other criminological theories.

 Why Other Options are Incorrect:

A (Rational choice theory):Focuses on individual decision-making.

B (Differential association theory):Emphasizes learning criminal behavior through interaction.

D (Social control theory):Focuses on societal bonds preventing crime​​.

ISO 31000:2018 emphasizes that effective risk management must be integrated into all activities across the organization—not just high-risk ones.

“An effective and efficient risk management program... is integrated into all organizational activities, is structured and comprehensive, and is customized and proportionate to the organization’s operations and objectives.”