CFE-Fraud-Schemes-and-Financial-Crimes Exam Dumps and Practice Questions

Rationale for Correct Answer: Biometric authentication (e.g., fingerprint, facial

Analysis of Incorrect Options:

A -- Using the same credentials increases exposure to credential-stuffing attacks.

C -- Disabling biometrics weakens, not strengthens, security.

D -- Incorrect since B is valid.

Key Concept: Cyberfraud prevention -- authentication and mobile payment controls.

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.

ACFE Fraud Examiners Manual (2020 International Edition), Corruption --- Solicitation Phase Schemes.

The correct answer is D. The balance sheet is based on the fundamental accounting equation: Assets = Liabilities + Owners' Equity. Assets represent resources owned or controlled by the entity. Liabilities represent obligations owed to creditors, while owners' equity represents the owners' residual interest after liabilities are deducted from assets. Because every accounting transaction affects at least two accounts, the equation must remain in balance. Revenues, expenses, cost of goods sold, and gross profit are primarily income statement elements, not the two main components that balance against assets on the statement of financial position. Understanding this equation is essential for fraud examiners because improper entries, concealed liabilities, overstated assets, and equity manipulation can distort financial statements.

Rationale for Correct Answer:

Fair value is defined as the price an asset would fetch in an orderly transaction between willing market participants. It reflects current market conditions, not historical cost.

Analysis of Incorrect Options:

A . Absolute value -- Mathematical concept, not accounting.

C . Cost value -- Historical cost, not current market.

D . Material value -- Not a recognized accounting term.

Key Concept:

Fair Value Measurement under GAAP/IFRS.

ACFE Fraud Examiners Manual (2020 International Edition), Accounting Concepts --- Fair Value.

The correct answer is B. Horizontal analysis compares financial statement amounts across accounting periods and focuses on changes over time. Fraud examiners use it to identify unusual increases, decreases, or trends in individual line items, such as revenue, expenses, inventory, accounts receivable, or liabilities. Option C describes ratio analysis, which measures relationships between different financial statement amounts. Option D describes vertical analysis, which expresses financial statement items as percentages of a base amount, such as total assets or net sales. Option A is unrelated. In financial statement fraud detection, horizontal analysis helps reveal abnormal trends that might indicate improper revenue recognition, concealed liabilities, manipulated expenses, or other misstatements requiring further investigation.