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

Detailed Explanation:

Rationale for Correct Answer:Accrual basis accounting requires revenues and related expenses to be recorded in the same accounting period. This is known as the matching principle, ensuring accurate measurement of income.

Analysis of Incorrect Options:

A. Equity – Not relevant to matching expenses.

C. Expense – A category of cost, not a principle.

D. Financial record – Too general.

Key Concept:Accrual Accounting & Matching Principle.

Detailed Explanation:

Rationale for Correct Answer: Economic extortion occurs when someone demands payment or benefit under threat of harm (explicit or implicit). A government official demanding money in exchange for awarding a contract is classic extortion.

Analysis of Incorrect Options:

A – This is a billing scheme (fraudulent disbursement), not extortion.

C – This is a kickback scheme (corruption).

D – This is an illegal gratuity scheme (reward after action).

Key Concept: Types of corruption—extortion vs. bribery vs. gratuities.

Detailed Explanation:

Rationale for Correct Answer:One of the most effective ways to protect proprietary information is educating employees about nondisclosure agreements (NDAs) at onboarding and again during exit. This ensures awareness of confidentiality obligations.

Analysis of Incorrect Options:

A. Changing locks/codes every 3–5 years – Reasonable security but insufficient for safeguarding proprietary information.

B. Classifying data by years of service – Not a sound security practice; access should be based on role and need-to-know.

D. Requiring notes/drafts – Increases risk of information leaks, not protection.

Key Concept: Proprietary information protection.

Detailed Explanation:

Rationale for Correct Answer:Kickbacks are undisclosed payments made by vendors to employees of purchasing companies to secure favorable treatment. They are a classic form of bribery under the corruption classification of the Fraud Tree.

Analysis of Incorrect Options:

A. Bid-rigging – Involves collusion among bidders, not secret payments.

C. Presolicitation – A phase in procurement fraud, not the scheme itself.

D. None of the above – Incorrect, as kickbacks are the precise answer.

Key Concept:Kickbacks — secret vendor payments for favorable purchasing treatment.