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

Corporate Governance Principles:

Transparency refers to disclosing material matters, enabling shareholders to make informed decisions.

This includes providing timely and accurate information about the company's financial performance, risks, and governance practices.

Analysis of Other Options:

B. Fairness: Involves equitable treatment of all shareholders.

C. Responsibility: Focuses on fulfilling legal and ethical obligations.

D. Accountability: Pertains to holding the board and management responsible for their actions.

Conclusion:Transparency ensures shareholders have the necessary information for decision-making.

References:Corporate governance best practices and G20/OECD Principles of Corporate Governance​​.

Understanding Fraud Risk Management Responses:

Risk mitigation refers to implementing controls or measures to reduce the likelihood or impact of a risk.

In this case, by implementing additional internal controls, management aims to mitigate the identified fraud risk.

Definition of Other Options:

A. Assuming the risk: This refers to accepting the risk without taking action to mitigate it. This is generally done when the risk is deemed tolerable.

C. Avoiding the risk: This involves changing business practices or ceasing activities to eliminate the risk entirely.

D. Transferring the risk: This occurs when the responsibility for the risk is shifted to another party, such as through insurance.

Conclusion:The described response clearly aligns with risk mitigation, as it focuses on reducing the risk through internal control measures.

References:ACFE study materials on fraud risk assessment and management approaches​​.

Conducting a Fraud Risk Assessment:

Both internal and external parties can effectively conduct fraud risk assessments.

Internal teams provide organizational insight, while external parties bring objectivity and specialized expertise.

Analysis of Other Options:

B. External party only: Independence is important but not mandatory for effectiveness.

C. Belief that fraud cannot happen: This would bias the process and render the assessment ineffective.

D. Limiting management's influence: Management should actively participate to ensure comprehensive insights.

Conclusion:Fraud risk assessments can be effectively conducted by both internal and external parties.

References:ACFE guidance on fraud risk assessments​​.

Best Practices for Protecting Whistleblowers:

Ensuring a safe environment for whistleblowers is critical to fostering an ethical organizational culture.

Establishing formal consequences for retaliation protects whistleblowers and promotes trust.

Analysis of Options:

A. Rules only for lower-level employees: Whistleblower protections must apply to all employees, regardless of rank.

B. Listing every type of misconduct: Comprehensive policies are good, but they do not need to enumerate all past misconduct.

C. Internal communication only: Communicating whistleblower procedures to external stakeholders (e.g., regulators) can be critical.

D. Formal consequences for retaliation: This is essential to discourage retaliatory actions and ensure fairness.

Conclusion:Establishing formal consequences for retaliation is the most accurate and aligned with best practices.

References:ACFE guidelines on whistleblower protections and ethical policies​​.