ACFE CFE - Investigation Practice Test Questions, Exam Dumps

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CFE - Investigation ACFE Practice Test Questions and Exam Dumps

Question 1:

Jackson, a Certified Fraud Examiner (CFE), is reviewing the accounts payable records of Elm Company to identify any irregularities that could suggest fraudulent activities.

Which of the following data analysis techniques would be the MOST EFFECTIVE for identifying potential fraud in the accounts payable department?

A. Compare the depreciation values recorded in the financial books with those used for tax purposes and highlight any discrepancies.
B. Detect paycheck amounts that exceed a specific threshold.
C. Group large invoices by amount and vendor to identify any unusual patterns.
D. All of the above

Answer: C. Group large invoices by amount and vendor to identify any unusual patterns.

Explanation:
As a Certified Fraud Examiner (CFE), Jackson is tasked with uncovering potential fraudulent activities within the accounts payable records. The most effective approach involves analyzing invoices—specifically large invoices by amount and vendor—as this can help identify inflated or unauthorized payments, which are often indicative of fraudulent transactions. By summarizing and analyzing the details of large transactions, Jackson can detect any patterns that might suggest improper payments or vendor collusion.

Option A: While comparing book and tax depreciation could highlight some financial inconsistencies, it is not a typical method for detecting fraud in accounts payable. Depreciation discrepancies are generally more relevant to financial statement fraud, not day-to-day accounts payable issues.
Option B: Identifying paycheck amounts over a certain limit is useful for detecting payroll fraud, not for accounts payable. Payroll fraud involves manipulating employee compensation, not the payment to external vendors.
Option C: Summarizing large invoices by amount and vendor can reveal suspicious transactions, such as excessive billing, repeated invoices, or payments to shell companies, making it the most effective option for identifying fraud in accounts payable.
Option D: "All of the above" would not be correct since the other options are less relevant for detecting fraud in accounts payable compared to the analysis of large invoices.

In conclusion, the most direct and effective technique for Jackson to identify potential fraud in accounts payable is to summarize and analyze large invoices by amount and vendor to detect any unusual activity, overpayments, or patterns of fraud.

Question 2:

Which of the following BEST defines the data analytics method known as predictive analytics?

A. Configuring a business system to imitate and integrate human actions in order to automate repetitive tasks and improve efficiency.
B. Using historical data, statistical methods, and machine learning techniques to build a mathematical model that recognizes trends and generates a forecast based on quantitative analysis.
C. Applying advanced artificial neural networks to manage larger datasets and more complex algorithms to uncover intricate patterns in the data.
D. Implementing a learning algorithm that automatically detects similarities, patterns, or anomalies in a dataset without human supervision.

Answer: B. Using historical data, statistical methods, and machine learning techniques to build a mathematical model that recognizes trends and generates a forecast based on quantitative analysis.

Explanation:
Predictive analytics involves using historical data, statistical models, and machine learning techniques to analyze past data in order to make predictions about future events or trends. This approach helps businesses forecast potential outcomes based on data-driven insights, thereby allowing for better decision-making and risk management.

Option A: This refers to robotic process automation (RPA), which is focused on automating manual processes through predefined actions and does not involve forecasting or predicting future outcomes based on data.
Option B: This is the correct description of predictive analytics, as it involves using historical data and advanced analytics methods (including machine learning) to build models that predict future events or behaviors based on trends identified in the data.
Option C: This describes deep learning, a subset of machine learning that uses artificial neural networks for complex pattern recognition. While deep learning is related to predictive analytics, it is more focused on handling large and intricate datasets rather than directly forecasting outcomes based on past data.
Option D: This describes unsupervised learning, where algorithms detect patterns in data without predefined labels or human input. Although this can be part of predictive analytics, it doesn't specifically describe the process of using historical data and statistical modeling to forecast future events.

In summary, predictive analytics is primarily concerned with leveraging historical data and statistical methods to build models that predict future outcomes, making Option B the best description.

Question 3:

Jade, a Certified Fraud Examiner (CFE), is investigating a suspected fraud case where an employee is allegedly stealing inventory and selling it through a shell company named Hidden Finds, LLC. When Jade attempts to visit Hidden Finds' website, she is redirected to a web address ending in ".onion." To access the website,

Jade will need to use a special browser that enables access to which of the following?

A. The internet archives
B. The dark web
C. The free web
D. The deep archives

Answer: B. The dark web

Explanation:
Websites with a ".onion" domain are part of the dark web, a segment of the internet that is not indexed by traditional search engines and is intentionally hidden from the general public. Accessing .onion sites typically requires a special browser, such as the Tor browser, which provides anonymity and allows users to visit sites within the dark web.

Option A, The internet archives: This refers to archive.org, a public website that stores historical snapshots of websites. It is not related to accessing sites with a ".onion" domain, which are hidden on the dark web.
Option B, The dark web: Correct. The dark web is a portion of the internet that is not accessible via traditional browsers and requires specialized software, like the Tor browser, to access ".onion" websites.
Option C, The free web: This refers to the traditional internet, which is accessible to anyone without the need for special tools. Websites on the free web are not hidden or encrypted like those on the dark web.
Option D, The deep archives: This is not a standard term and may confuse individuals with the concept of the deep web—another part of the internet not indexed by search engines. However, the deep web is different from the dark web and does not require a specialized browser like Tor to access.

To summarize, the .onion domain is associated with the dark web, and Jade would need the Tor browser to access Hidden Finds' website. Therefore, the correct answer is Option B.

Question 4:

Which of the following is NOT a typical use of publicly available information sources?

A. Verifying or disproving statements made by witnesses
B. Gathering background information about individuals
C. Locating individuals and their assets
D. Reviewing an individual’s income tax filings

Answer: D. Reviewing an individual’s income tax filings

Explanation:
Public sources of information are a valuable resource in many areas of investigation, including fraud detection, due diligence, and legal investigations. These sources are generally accessible by anyone and may include government databases, social media profiles, public records, and company filings. However, there are limitations on the type of information that can be obtained from public sources, particularly when it comes to personal financial details such as income tax filings.

Option A: Public records can be used to corroborate or contradict witness statements. For instance, a public database may contain criminal records, property ownership details, or court rulings that can either support or challenge a witness's testimony.
Option B: Gathering background information about individuals is a common use of publicly available information. Sources such as social media profiles, professional networks (like LinkedIn), or court records are typically searched to learn more about someone's history, associations, or reputation.
Option C: Locating individuals and their assets is another frequent use of public sources. For example, property records, marriage licenses, and professional registration databases can help track a person's whereabouts or uncover assets they may own.
Option D: Income tax filings are generally not considered public information. In most jurisdictions, tax filings are confidential and protected by law. Accessing such records without proper authorization would be illegal or require a formal request via legal procedures, such as a subpoena.

Thus, the correct answer is D, as income tax filings are private and not typically available through public sources of information.

Question 5:

Anne used Will as a confidential informant in her investigation. Anne included the information provided by Will in her final report, referring to him by his initials. She also paid Will in cash and received a receipt for the payment.

Which of Anne's actions does NOT align with best practices when using an informant?

A. Using the information provided by Will in her final report
B. Paying Will in cash
C. Obtaining a receipt from Will for the payment
D. Referring to Will using his initials in the report

Answer: B. Paying Will in cash

Explanation:
When handling confidential informants, it is crucial to adhere to best practices to ensure both the integrity of the investigation and the safety and anonymity of the informant. Several practices are designed to protect the informant’s identity and prevent conflicts of interest or legal issues. Let’s break down each of the options to understand why one of these is not considered a best practice:

Option A: Using the information provided by Will in her final report is entirely acceptable, as long as the information is credible and relevant to the investigation. It is standard practice to include informant-supplied information in reports, provided that the informant’s identity is protected (e.g., by using initials or other anonymous identifiers).
Option B: Paying Will in cash is NOT considered a best practice when using an informant. Paying an informant in cash can raise serious ethical and legal concerns. Cash transactions are hard to trace and could be seen as an attempt to conceal the payment. Best practices typically involve documenting all payments made to informants through formal, traceable methods like checks, wire transfers, or other forms of payment that leave a clear record.
Option C: Obtaining a receipt from Will for the payment is a best practice. Receipts serve as important documentation for transparency and accountability. They ensure that both the investigator and the informant have a record of the transaction, which is essential for maintaining the integrity of the process and preventing any future disputes or questions regarding payments.
Option D: Referring to Will by his initials in the report is another best practice. Anonymizing the informant’s identity in the final report (e.g., using initials or pseudonyms) is crucial for protecting the informant’s safety and confidentiality. This also helps prevent any possible retaliation or harm from being inflicted on the informant.

In summary, paying an informant in cash (Option B) is a risky practice that could lead to issues of accountability and transparency. Best practices call for clear and traceable payment methods to ensure the integrity of the investigation and to avoid potential legal ramifications. Therefore, Option B is the correct answer, as it violates best practices for handling informants.

Question 6:

Which of the following is NOT accurate when it comes to tracking the use of loan funds?

A. Tracking loan funds can help identify if undisclosed accounts were used to repay the loan.
B. Tracking loan funds can expose previous civil violations committed by the individual.
C. Tracking loan funds can uncover new witnesses who were previously unknown.
D. Tracking loan funds can determine if the loan proceeds were deposited into secret accounts.

Answer: B. Tracking loan funds can expose previous civil violations committed by the individual.

Explanation:

The tracing of loan proceeds is a crucial process in fraud investigations and forensic accounting. It allows examiners to track the movement and final use of loan money, ensuring that funds were used as intended. However, tracing loan proceeds does not typically involve uncovering previous civil violations committed by the subject, as this is not directly related to the movement or use of the loan itself. Let’s break down the options:

Option A: Tracking loan proceeds can help identify if undisclosed accounts were used for loan payments.
This is true. If an individual is using hidden or undisclosed accounts to repay a loan, it could be a sign of fraudulent activity or money laundering. Tracing the loan proceeds can expose this activity.
Option B: Tracking loan proceeds can expose previous civil violations committed by the individual.
This statement is not accurate in the context of tracing loan proceeds. While loan funds may be misused, tracking them typically does not uncover civil offenses that occurred prior to the loan transaction. Civil violations are legal issues that are unrelated to how loan funds are used or traced.
Option C: Tracking loan proceeds can uncover new witnesses who were previously unknown.
This is true. During the investigation of how loan funds were used, new parties, including potential witnesses or individuals involved in the misuse of funds, may be identified. These witnesses can be essential in uncovering the full scope of the fraud.
Option D: Tracking loan proceeds can determine if the loan proceeds were deposited into secret accounts.
This is also accurate. One of the key objectives in tracing loan proceeds is to verify whether the funds were deposited into accounts that are not disclosed or are hidden from authorities, which could be indicative of fraudulent activities.

Thus, Option B is the correct answer, as tracking loan proceeds is not typically used to identify civil violations. Instead, its focus is on the flow and ultimate use of the loan funds, which may indicate financial crimes or other misconduct.

Question 7:

Which of the following statements is the most accurate about the analysis phase in digital forensic investigations?

A. When reviewing digital evidence, fraud examiners should focus only on finding evidence that proves the suspect's innocence, not on evidence that supports guilt.
B. It is best to use only one forensic tool during the analysis phase to identify, extract, and collect digital evidence.
C. The main concern during the analysis phase is to maintain the integrity of the data at all times.
D. The analysis phase of digital forensic investigations should not begin until it is verified that the suspect's devices do not contain any relevant data.

Answer: C. The main concern during the analysis phase is to maintain the integrity of the data at all times.

Explanation:

The analysis phase is a critical component of digital forensic investigations, where evidence is examined, interpreted, and used to support findings. Here’s why each option stands:

Option A: When reviewing digital evidence, fraud examiners should focus only on finding evidence that proves the suspect's innocence, not on evidence that supports guilt.
This is not true. In a forensic investigation, examiners must remain neutral and objective. They should look for both inculpatory (guilt-supporting) and exculpatory (innocence-supporting) evidence to build a comprehensive case. Focusing exclusively on exculpatory evidence could result in an incomplete investigation and potential bias.
Option B: It is best to use only one forensic tool during the analysis phase to identify, extract, and collect digital evidence.
This is inaccurate. Relying on just one forensic tool can limit the effectiveness of an investigation, as no single tool is capable of identifying all types of digital evidence. Forensic professionals often use multiple tools to cross-check findings and ensure the accuracy and completeness of the analysis.
Option C: The main concern during the analysis phase is to maintain the integrity of the data at all times.
This is the most accurate statement. In digital forensics, maintaining the integrity of the data is paramount. This includes ensuring that the original data is not altered during the analysis process. The integrity of evidence must be preserved to ensure its validity in court and avoid challenges based on claims of evidence tampering.
Option D: The analysis phase of digital forensic investigations should not begin until it is verified that the suspect's devices do not contain any relevant data.
This is not correct. The analysis phase should begin after evidence collection, not based on the assumption that no relevant data exists. It is during the analysis phase that forensic examiners determine whether relevant data is present, and the absence of relevant data is part of the findings of the analysis, not something that needs to be verified in advance.

The correct answer is C, as maintaining data integrity is the most important aspect of the analysis phase. Any mishandling or alteration of the data could compromise the investigation and lead to legal challenges.

Question 8:

Eugene is conducting an interview to obtain an admission from a suspect. During the interview, the suspect constantly avoids eye contact while answering questions.

Can Eugene conclusively determine that the suspect is lying based solely on the lack of eye contact?

A. True
B. False

Answer: B. False

Explanation:

Body language, including eye contact, can offer clues during an interview, but it is not reliable on its own for determining deception. Eye contact is often associated with truthfulness, but many other factors can influence an individual’s behavior during questioning, including cultural norms, personal anxiety, or even the individual’s personality traits. Thus, a lack of eye contact cannot be used as definitive proof of dishonesty.

Option A (True): This would imply that avoiding eye contact automatically indicates lying.
While some people might avoid eye contact when lying, others may do so because they are shy, nervous, or uncomfortable, regardless of whether they are telling the truth. Therefore, this assumption is too simplistic and unreliable.
Option B (False): This statement is correct.
The absence of eye contact is not a reliable indicator of deception on its own. Fraud examiners and investigators rely on a combination of verbal and non-verbal cues, as well as the context of the conversation, to assess truthfulness. It is important to use a comprehensive approach when evaluating a subject's behavior and not rely solely on eye contact.

Thus, the correct answer is B. A more thorough analysis of verbal responses, body language, and other behavioral cues is needed to assess honesty or deception accurately.

Question 9:

Which of the following terms best describes the process of investigating allegations of fraud, starting from the initial suspicion all the way through to the final resolution?

A. Forensic methodology
B. Fraud examination
C. Fraud theory
D. Fraud assessment

Answer: B. Fraud examination

Explanation:

Fraud examination refers to the comprehensive process of addressing fraud allegations, from the initial suspicion and investigation through to the final resolution, whether that means legal action or internal resolution. It encompasses various stages, including gathering evidence, interviewing suspects, and analyzing financial records to uncover fraud. Let's break down each option:

Option A: Forensic methodology refers to the systematic approach used in forensic investigations, but it is a broader term that applies to various types of investigations, not just fraud. While forensic methodology includes fraud examination, it also encompasses other areas like digital forensics, forensic accounting, and other forms of evidence analysis. It is not specifically tied to fraud.
Option B: Fraud examination is the correct answer. This term is specific to the process of investigating fraud allegations, including the detection, investigation, and resolution of fraud. Fraud examination involves identifying fraud, gathering evidence, determining the scope of the fraud, and following through with the necessary actions to address it.
Option C: Fraud theory is a concept used within fraud investigations, particularly during the hypothesis stage. It refers to the framework or explanation a fraud examiner creates regarding how the fraud was committed, but it is not a term used to describe the entire process from start to finish.
Option D: Fraud assessment is the process of evaluating potential fraud risks within an organization, which may involve reviewing internal controls, conducting risk assessments, and identifying areas where fraud is likely to occur. It does not necessarily involve resolving fraud allegations but instead focuses on identifying vulnerabilities and preventing fraud.

Therefore, the correct term for the process of investigating fraud allegations from start to finish is fraud examination.

Question 10:

Jana, the controller at XYZ Company, notices that hotel expenses for the company have increased significantly compared to the previous year. She wants to evaluate if this increase is justified by comparing hotel expenses with the number of travel days.

Which data analysis technique would be most helpful for Jana to analyze these two variables?

A. Correlation analysis
B. Duplicate testing
C. Verifying multiples of a number
D. Benford’s Law analysis

Answer: A. Correlation analysis

Explanation:

Correlation analysis is the correct choice because it is specifically designed to examine the relationship between two variables. In this case, Jana wants to compare hotel expenses with the number of travel days, and correlation analysis would allow her to determine if there is a statistical relationship between these two variables. Let’s look at each option in detail:

Option A: Correlation analysis is the statistical method used to evaluate the strength and direction of the relationship between two variables. In this case, Jana would use correlation analysis to assess whether an increase in hotel expenses is directly related to an increase in the number of travel days. This analysis will provide valuable insight into whether the increase in expenses is reasonable based on the number of days employees traveled.
Option B: Duplicate testing involves identifying duplicate entries within data sets, such as repeated transactions or entries. While this is useful for detecting fraud or data entry errors, it would not help Jana in comparing the relationship between hotel expenses and travel days. Duplicate testing is more focused on identifying redundancy in data rather than analyzing relationships between different variables.
Option C: Verifying multiples of a number is a mathematical technique used to check if a certain value appears as a multiple of another number. While this could be useful in detecting certain types of data manipulation or fraud, it is not appropriate for analyzing the relationship between two continuous variables like hotel expenses and travel days.
Option D: Benford’s Law analysis is a statistical tool used to detect anomalies in data by examining the frequency distribution of the first digits in numerical data. While Benford’s Law is useful for detecting fraud or irregularities in financial data, it is not relevant for comparing hotel expenses with travel days. Benford's Law is more effective in identifying unusual patterns or discrepancies in datasets with a large range of numbers.

Thus, correlation analysis is the best method to analyze whether the increase in hotel expenses is justified by the number of travel days, as it will provide a clear understanding of the relationship between the two variables.