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

Detailed Explanation:

Rationale for Correct Answer:The term Employee deviance refers to conduct that is harmful both to the organization and to the employee engaging in it. This encompasses a broad set of behaviors, including fraud, theft, abuse, and violations of organizational norms. While employee theft and fraud are subsets, deviance is the umbrella concept.

Analysis of Incorrect Options:

B. Employee theft – Specific to stealing from the employer, not the broader definition of detrimental conduct.

C. Employee fraud – Specific to deceptive practices, not all deviant acts.

D. All of the above – Incorrect, since the definition most accurately matches “Employee deviance.”

Key Concept:Employee Deviance — broader behavioral category that includes fraud, theft, and other misconduct.

Detailed Explanation:

Rationale for Correct Answer:This is True. When an employee has significant authority or discretion in the procurement process (e.g., drafting specifications, approving vendors, or evaluating bids), they are more capable of steering contracts toward favored suppliers. This increases the risk of corruption schemes like kickbacks or bid-rigging.

Analysis of Incorrect Options:

B. False – Incorrect; influence grows with authority over procurement.

Key Concept:Procurement authority is a key risk factor for corruption.

Detailed Explanation:

Rationale for Correct Answer:The Fraud Examiners Manual (2020) highlights document reviews, audit tracing, financial analysis, and inside witnesses as the primary methods of proving corrupt payments. Secret infiltration is not a standard fraud examination technique; it is more aligned with law enforcement undercover operations.

Analysis of Incorrect Options:

A. Taxation inquiries – A valid method to confirm payment sources.

C. Inside witness – Valuable evidence in corruption cases.

D. Tracing payments – Fundamental audit step in proving illicit payments.

Key Concept: Proving corrupt payments — standard audit and investigative methods.

Detailed Explanation:

Rationale for Correct Answer:One form of bid-rigging occurs when colluding vendors agree that one will submit a low bid and later withdraw it, allowing another conspirator to win the contract. This practice is sometimes referred to as “complementary bidding” or the withdrawal of low bids.

Analysis of Incorrect Options:

A. Bribery receipt – Refers to corrupt payments, not collusion.

B. Bid solicitation – The process of inviting bids, not collusion.

D. Contract acceptance – A legitimate procurement step, not fraud.

Key Concept:Bid-rigging through collusion — vendors withdrawing low bids to favor co-conspirators.

Detailed Explanation:

Rationale for Correct Answer:The balance sheet provides a snapshot of a company’s financial position at a specific date. It shows assets, liabilities, and equity, allowing stakeholders to assess book value and solvency.

Analysis of Incorrect Options:

A. Equity – A component of the balance sheet, not the full report.

C. Income statement – Shows performance over a period, not book worth at a date.

D. Financial record – Too general.

Key Concept:Balance Sheet as a tool for determining book worth at a point in time.

Detailed Explanation:

Rationale for Correct Answer: Economic extortion occurs when someone demands payment or benefit under threat of harm (explicit or implicit). A government official demanding money in exchange for awarding a contract is classic extortion.

Analysis of Incorrect Options:

A – This is a billing scheme (fraudulent disbursement), not extortion.

C – This is a kickback scheme (corruption).

D – This is an illegal gratuity scheme (reward after action).

Key Concept: Types of corruption—extortion vs. bribery vs. gratuities.

Detailed Explanation:

Rationale for Correct Answer:Gross profit = Net sales – Cost of Goods Sold (COGS). This is the correct definition, as per standard accounting principles.

Analysis of Incorrect Options:

A. Gross revenue – Defined as total sales before deductions, not after.

B. Net profit – Net profit is after all expenses (operating, interest, taxes), not before.

D. Operating expenses – Appear after gross profit, not at the top.

Key Concept: Income statement structure and key definitions.

Detailed Explanation:

Rationale for Correct Answer:This statement is False. Shrinkage is a general term for unaccounted-for inventory losses, and it can indeed result from theft, errors, damage, or waste. To say shrinkage does not result from theft is misleading because theft is one of its primary causes.

Analysis of Incorrect Options:

A. True – Incorrect, as theft is often a major contributor to shrinkage.

B. False – Correct, since shrinkage can include theft.

Key Concept:Shrinkage includes theft as a cause of unexplained inventory loss.