CFE-Fraud-Prevention-and-Deterrence Exam Dumps - ACFE Certified Fraud Examiner Questions and Answers

Responsibility for Anti-Fraud Program Effectiveness:

Management holds ultimate responsibility for designing, implementing, and maintaining an effective anti-fraud program.

Internal and external auditors, as well as compliance functions, provide oversight and recommendations but are not directly responsible for the program's effectiveness.

Conclusion:Management is ultimately accountable for ensuring the success of the anti-fraud program.

 ISSAI Standards:

The International Standards of Supreme Audit Institutions (ISSAI) require government auditors to consider fraud and abuse during financial audits. Abuse includes improper use of authority or resources, which may not always meet the legal threshold of fraud but still warrants attention.

 Expanded Audit Scope:

Unlike private-sector audits, public-sector audits often have broader objectives, requiring vigilance for misuse of public funds and resources.

 Why A is Correct:

Staying alert to abuse ensures comprehensive accountability, aligning with ISSAI's objectives​​.

Defining Fraud Risk Management Objectives:

Management should focus on tailoring objectives to the organization's needs, examining past fraud incidents, and balancing costs with benefits. Assigning a quantitative measure to risk appetite, while potentially useful, is not a requirement for effective fraud risk management.

Analysis of Options:

A. Examining previous frauds:This helps identify vulnerabilities and design controls.

B. Balancing costs and benefits:Essential to ensure the program's efficiency and feasibility.

D. Tailoring objectives:Necessary for aligning the program with organizational goals.

Conclusion:Option C is false because assigning a quantitative measure to risk appetite is not mandatory in defining fraud risk management objectives.

Comprehensive and Detailed in Depth Explanation:

A key element of vendor due diligence is ensuring that third-party vendors have robust ethics and compliance programs. This helps align values, mitigate fraud risks, and establish clear expectations. While audits and questionnaires are good practices, they are not always mandatory or feasible before engagement. Moreover, transparency in seeking vendor information (unlike in A) is a norm in legitimate vetting practices.

 Responsibility of Auditors:

Under International Standards on Auditing (ISA) 240, auditors are required to investigate any indications of fraud, regardless of the materiality of the misstatement.

Evidence of intentional misstatements indicates the potential for broader fraudulent activity, necessitating a reassessment of audit procedures.

 Importance of Fraud Indicators:

Even if the misstatement does not exceed the materiality threshold, it represents a significant risk factor that could compromise the reliability of the financial statements.

 Why B is Correct:

Adjusting audit procedures ensures that the audit team addresses the broader implications of the fraud risk while maintaining professional skepticism and compliance with auditing standards​​.

Behaviorist Theories in Conditioning:

Positive reinforcement, such as offering bonuses, is more effective than punishment in encouraging adherence to policies and reducing deviations.

Employees are more likely to repeat behaviors that are rewarded.

Why C is Correct:

This approach aligns with behaviorist principles, fostering compliance through incentives rather than fear or criticism, which could negatively impact morale.

Why Other Options are Incorrect:

A and D:Punishments may lead to resentment and reduced motivation.

B:Public criticism can create a toxic work environment, discouraging open communication​​.

References for All Questions:

ACFE Code of Professional Ethics and Fraud Examination Guide​​.

ISA and GAAS requirements on unpredictability in audit procedures​​.

Behaviorist theories on employee motivation and conditioning​​.

According to ISA 240, the auditor is required to communicate identified fraud involving management to those charged with governance.

“When fraud involving senior management is identified or suspected, the auditor shall communicate these findings directly to those charged with governance.”

Understanding Behavioral Responses:

Punishment:Involves removing a privilege or applying a negative consequence to decrease undesired behavior.

Removing the ability to work from home penalizes the employee for failing to meet deadlines.

Analysis of Other Options:

A. Positive reinforcement:Adds a reward for desired behavior.

B. Negative reinforcement:Removes an unfavorable condition to encourage behavior.

D. None of the above:Incorrect, as this is clearly punishment.

Conclusion:The manager's action is an example of punishment.

Understanding Conflicts of Interest:

The ACFE Code of Professional Ethics prohibits any engagements that impair the fraud examiner's objectivity, even with disclosure.

Ownership interests in a client organization create significant potential for bias, compromising the integrity of the evaluation.

Analysis of Other Options:

A. Secret infiltration:This is a clear ethical violation.

B. Engagements reducing employer duties:This constitutes a conflict of interest.

D. Representing both sides:Prohibited under the ACFE Code due to conflicting responsibilities.

Conclusion:Option C is a prohibited conflict of interest under the ACFE Code.