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

Detailed Explanation:

Rationale for Correct Answer:The SEC’s Staff Accounting Bulletin (SAB) 104 outlines four criteria for revenue recognition:

Persuasive evidence of an arrangement exists.

Delivery has occurred or services have been rendered.

The seller’s price is fixed or determinable.

Collectability is reasonably assured.

“Timings have been met” is not one of the recognized criteria, making C the correct answer.

Analysis of Incorrect Options:

A, B, D – All are required conditions.

C – Not part of SAB 104.

Key Concept:Revenue recognition criteria under SAB 104.

Detailed Explanation:

Rationale for Correct Answer: A high percentage of coding outliers (e.g., using higher-paying diagnosis or procedure codes more often than peers) is a red flag of upcoding or fraudulent billing. This signals possible abuse of reimbursement systems.

Analysis of Incorrect Options:

A – Fewer claims would not suggest fraud.

C – Matching documentation is expected, not suspicious.

D – Low profits may indicate inefficiency, not fraud.

Key Concept: Health care fraud detection through data analytics and coding anomalies.

Detailed Explanation:

Rationale for Correct Answer:By double-entry accounting rules, every accounting entry affects at least two accounts (debit and credit). Fraudulent entries must also follow this rule, meaning manipulation will show up in at least two categories on the financial statements.

Analysis of Incorrect Options:

A. One – Impossible in double-entry accounting.

C. More than two – Possible, but not always; the minimum is two.

D. None of above – Incorrect since “at least two” is correct.

Key Concept:Double-entry accounting ensures at least two accounts are affected in every transaction, including fraudulent ones.

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.