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

Steve Albrecht's Research on Fraud Motivation:

Personal factors like "living beyond their means" are commonly cited as a driver of fraudulent behavior.

Organizational factors, such as excessive trust in key employees, create opportunities for fraud by reducing oversight and enabling unethical behavior.

Analysis of Options:

A. High personal debt:This can be a motivator, but it is less common than "living beyond their means."

B. Revenge:Rarely a primary driver of fraud.

D. Desire for recognition:This may motivate some individuals, but it is not as prevalent as financial pressure and opportunity.

Conclusion:Option C reflects the most common personal and organizational factors motivating fraudsters.

 ACFE Code of Professional Ethics:

Article II prohibits all illegal and unethical conduct, with no exceptions for unknowing violations of the law. CFEs are expected to maintain a high standard of professional integrity and responsibility.

 Why B is Correct:

Ignorance of the law is not an acceptable defense under the ACFE Code of Ethics. Professionals must ensure they understand and comply with applicable laws.

 References:

ACFE Code of Professional Ethics​​.

 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​​.

 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​​.