CFE-Financial-Transactions-and-Fraud-Schemes Exam Dumps - Certified Fraud Examiner - Financial Transactions and Fraud Schemes Exam

Detailed Explanation:

Rationale for Correct Answer:This scheme is known as a Turnaround Sale or Flip. The employee secretly purchases an asset their employer needs and then resells it to the employer at a markup, thereby profiting at the employer’s expense.

Analysis of Incorrect Options:

A. Conflict of interest in sale – Too general; does not describe the flipping mechanism.

C. Unauthorized sale – Not an ACFE fraud category in this context.

D. Written sale of unique assets – Not a recognized scheme.

Key Concept: Conflict of Interest scheme — Turnaround Sales/Flips.

Detailed Explanation:

Rationale for Correct Answer:This is unbundling, where services that should be billed under a single comprehensive code are split into multiple components to inflate reimbursement.

Analysis of Incorrect Options:

A. Fictitious services – Charging for services not performed.

B. False diagnosis – Fabricating diagnoses to justify billing.

C. Upcoding – Billing for more expensive services than provided.

Key Concept: Health care billing fraud — unbundling.

Detailed Explanation:

Rationale for Correct Answer: In the detection and analysis phase of cybersecurity incident response, the focus is on identifying the scope of the incident, including all breaches, compromised systems, and the method of attack. Containment, eradication, and recovery occur in later steps. Thus, identifying all breaches is the correct activity for this step.

Analysis of Incorrect Options:

A. Limiting damage – This occurs in the containment phase.

B. Creating an incident response plan – This is part of the preparation phase.

C. Restoring control of affected systems – This occurs during eradication and recovery.

Key Concept: Incident response methodology: preparation → detection/analysis → containment → eradication → recovery.

Detailed Explanation:

Rationale for Correct Answer: A kickback scheme occurs when vendors make payments to employees of a purchasing organization in exchange for steering business their way. Here, Bob steered contracts to Oak Company and received a percentage of profits, a textbook kickback arrangement.

Analysis of Incorrect Options:

B. Illegal gratuity scheme – Involves rewards after a decision, without a prior agreement. Here, the agreement was prearranged.

C. Diversion scheme – Refers to diversion of assets, not procurement favoritism.

D. Economic extortion scheme – Involves coercion of the vendor; this was voluntary bribery.

Key Concept: Bribery and kickbacks as forms of corruption.

Detailed Explanation:

Rationale for Correct Answer: In a false refund scheme, the fraudster enters a fictitious refund into the register system, making it appear that merchandise was returned. The register log reflects the fraudulent refund, so the cash on hand does balance with the adjusted log. Thus, the mismatch described in the question does not occur.

Analysis of Incorrect Option:

A. True – Incorrect because the log and cash are manipulated to match, concealing the theft.

Key Concept: Cash register fraud (false refunds vs. false voids).

Detailed Explanation:

Rationale for Correct Answer:Key GAAP principles include Conservatism, Historical Cost, and Full Disclosure. Quality control is not a GAAP principle; rather, it is a concept from auditing standards related to ensuring audit quality.

Analysis of Incorrect Options:

A. Conservatism – GAAP principle requiring cautious reporting of uncertain outcomes.

B. Cost – Historical cost principle is central to GAAP.

C. Full disclosure – Requires all relevant information to be presented.

D. Quality control – Belongs to auditing, not GAAP.

Key Concept:GAAP principles — distinguishing accounting standards from auditing practices.

Detailed Explanation:

Rationale for Correct Answer:Prepaid debit and gift cards are attractive because they allow fraudsters to convert stolen credit card funds into cash or easily launder illicit funds. They are widely available and accepted both in person and online, making option A correct.

Analysis of Incorrect Options:

B. Only from financial institutions – False; cards are sold at retail stores and online.

C. Not accepted online – False; they are accepted by most online retailers.

D. All of the above – Incorrect since B and C are false.

Key Concept: Prepaid card fraud as part of asset misappropriation and identity theft schemes.

Detailed Explanation:

Rationale for Correct Answer:Filing a claim shortly after a policy begins is a classic red flag of potential insurance fraud, as it may indicate the loss occurred before coverage or is fabricated.

Analysis of Incorrect Options:

B. One prior claim in five years – Not unusual by itself.

C. Small electronics/jewelry – Common theft items, not automatically suspicious.

D. Recently purchased items with receipts – Strong documentation actually supports legitimacy.

Key Concept: Insurance fraud red flags.