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

Collusion between contractors is an example of external fraud risk because it involves external parties conspiring to defraud the organization. The other options describe internal fraud risks, such as actions committed by employees within the organization.

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Internal Auditor's Role in Fraud Risk Management:

Internal auditors are not directly responsible for establishing or maintaining anti-fraud controls (Option D). This responsibility lies with management.

They are also not responsible for obtaining reasonable assurance that financial statements are free of fraud (Option A). This is the role of external auditors.

Oversight of management's fraud risk actions (Option B) is primarily a governance role, not the auditor's direct responsibility.

Internal auditors focus on identifying and assessing fraud risks, evaluating controls, and recommending further action when necessary.

Conclusion:Option C aligns with the internal auditor's responsibilities as per the standards outlined in the ACFE's fraud risk management framework.

Comprehensive and Detailed in Depth Explanation:

ISA 240 (The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements) outlines the auditor's responsibility to assess and respond to the risk of material misstatement due to fraud. It does not impose a primary responsibility for fraud prevention and detection upon auditors—that responsibility lies with management (eliminating C). The standard also does not require auditors to actively raise fraud awareness within the organization (eliminating A), nor does it establish requirements for fraud risk management programs for management (eliminating D).

 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​​.