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ACFE Certification
CFE-Financial-Transactions-and-Fraud-Schemes Exam
ACFE.CFE-Financial-Transactions-and-Fraud-Schemes.v2026-10-26.q105 Dumps

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Question 101

Which of the following actions could management take to make a company appear more profitable than it actually is?

A.Expensing costs instead of capitalizing them
B.Recording warranty liabilities
C.Understanding liabilities
D.Understating assets

Correct Answer: C

Explanation/Reference: https://www.acfe.com/uploadedFiles/ACFE_Website/Content/documents/tone-at-the-top-research.pdf

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Question 102

Which of the following measures will MOST LIKELY prevent cash larceny schemes from occurring?

A.Restricting other employees from performing the duties of an absent employee
B.Assigning the duties of depositing cash receipts and performing bank reconciliations to different employees
C.Having all employees use the same cash register for their transactions
D.Keeping employees unaware that the company performs surprise cash counts

Correct Answer: B

Detailed Explanation:
* Rationale for Correct Answer:Cash larceny involves the theft of incoming cash after it has been recorded. Strong segregation of duties is critical to prevent concealment. By separating cash deposit responsibilities from bank reconciliation duties, one employee cannot both steal funds and cover their tracks.
* Analysis of Incorrect Options:
* A. Restricting substitution - Weakens controls; job rotation and cross-training help prevent fraud.
* C. Same register use - Reduces accountability, making theft harder to trace.
* D. Surprise cash counts - Strong detective control, but not as preventive as segregation of duties.
* Key Concept: Preventing cash larceny through segregation of duties.
Reference: ACFE Fraud Examiners Manual (2020), Cash Receipts: Cash Larceny Controls.

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Question 103

Which of the following is a method that might be used to fraudulently overstate the inventory balance?

A.Recording an allowance for sales returns
B.Failing to record bad debt expense
C.Applying the lower of cost or net realizable value
D.Failing to write off obsolete inventory

Correct Answer: D

Detailed Explanation:
* Rationale for Correct Answer: Failing to write off obsolete inventory inflates reported inventory, overstating assets and potentially net income. Fraudsters may leave unusable goods on the books to make financial statements appear stronger.
* Analysis of Incorrect Options:
* A - An allowance for sales returns relates to revenue recognition, not inventory overstatement.
* B - Relates to accounts receivable, not inventory.
* C - Applying lower of cost or NRV reduces inventory to fair value, not overstates it.
* Key Concept: Overstating assets through improper inventory valuation.
Reference: ACFE Manual, Financial Statement Fraud - Inventory Manipulation.

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Question 104

Conflict of interest cases are more easily prevented than detected.

A.False
B.True

Correct Answer: B

Detailed Explanation:
* Rationale for Correct Answer:Conflict of interest cases are difficult to detect because the transactions often appear legitimate on their face. However, they can be prevented more effectively through proactive controls such as disclosure requirements, vendor vetting, and employee training. The Fraud Examiners Manual (2020) emphasizes that prevention mechanisms are more effective than detection when it comes to conflicts of interest.
* Analysis of Incorrect Options:
* B. False - Incorrect because detection is challenging; prevention is comparatively easier.
* Key Concept: Prevention vs. detection in Conflict of Interest schemes.
Reference: ACFE Fraud Examiners Manual (2020), Corruption: Conflict of Interest.

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Question 105

A __________ is a day-by-day, or chronological, record of transactions

A.Checkbook
B.Journal
C.Ledger
D.Asset

Correct Answer: B

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