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

Internal Auditor's Role in Fraud Risk Management:

Internal auditors are not directly responsible for establishing or maintaining anti-fraud controls (Option D). This responsibility lies with management.

They are also not responsible for obtaining reasonable assurance that financial statements are free of fraud (Option A). This is the role of external auditors.

Oversight of management's fraud risk actions (Option B) is primarily a governance role, not the auditor's direct responsibility.

Internal auditors focus on identifying and assessing fraud risks, evaluating controls, and recommending further action when necessary.

Conclusion:Option C aligns with the internal auditor's responsibilities as per the standards outlined in the ACFE's fraud risk management framework.

ACFE research highlights that an unwillingness to share duties is one of the most common red flags exhibited by fraud perpetrators. This behavior often indicates a desire to conceal fraudulent activities.Most fraudsters do not have prior convictions, and frauds committed by executives tend to cause higher losses compared to those committed by staff-level employees.

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Rational Choice Theory Overview:

This theory posits that individuals consciously weigh the benefits and risks of committing a crime and make calculated decisions to engage in criminal behavior if the perceived benefits outweigh the risks.

Deterrence Mechanism:

Crime can be deterred by reducing opportunities (e.g., strong internal controls) and increasing the likelihood of detection and punishment (e.g., effective monitoring systems).

Why Other Options are Incorrect:

A. Routine activities theory:Focuses on the convergence of motivated offenders, suitable targets, and lack of guardianship.

B. Differential association theory:Explains crime as learned behavior through interaction with others.

D. Social conflict theory:Suggests crime results from societal inequalities and power struggles.

Why C is Correct:

Rational choice theory explicitly addresses crime prevention through increased risks and reduced opportunities​​.

References for All Questions:

ACFE Fraud Examination Guide​​.

Criminological theories as applied to fraud prevention and deterrence​​.

Corporate governance frameworks and corruption-related risks​​.