Ethics for Fraud Examiners: Free CFE Practice Questions

Question 1

Legal counsel for a company engages a fraud examiner to examine suspected purchasing irregularities by a purchasing manager. During the examination, the examiner finds that a senior executive authorized several of the questioned transactions. Counsel asks that this finding be left out of the written report because it weakens the company's case against the manager. Under the professional code of ethics, how should the examiner respond?

Omit the finding from the report but disclose it orally to counsel Move the finding to a confidential appendix reserved for the client Report all material facts found, including the executive's role Withdraw from the engagement, citing a conflict of interest

Correct Answer: Report all material facts found, including the executive's role

The ACFE Code of Professional Ethics requires a fraud examiner to reveal all material matters discovered during an examination which, if omitted, could cause a distortion of the facts. The executive's authorization of the questioned transactions is material, so it must appear in the report regardless of whom it helps or hurts.
Telling counsel orally while leaving it out of the report still produces a distorted written record. A confidential appendix hides a material fact from the report's other readers. Withdrawing is unnecessary because no conflict of interest exists; the examiner simply declines to suppress evidence.
Key concept: the duty to disclose all material facts and to report objectively without distortion.

Question 2

Professional skepticism means a fraud examiner presumes that management is dishonest until the evidence gathered during the examination demonstrates otherwise.

True False

Correct Answer: False

Professional skepticism is an attitude of a questioning mind and a critical assessment of evidence. The fraud examiner assumes neither that management is dishonest nor that it is unquestionably honest. Instead, the examiner stays alert to information that contradicts other evidence and keeps gathering and evaluating evidence objectively.

Question 3

Which of the following BEST describes a fraud examiner's disclosure obligation concerning conflicts of interest in an engagement?

Only actual conflicts must be disclosed, as apparent ones alter no facts Both actual and apparent conflicts must be noted in the working papers Apparent conflicts must be disclosed only if the subject later objects Both actual and apparent conflicts must be disclosed to the client

Correct Answer: Both actual and apparent conflicts must be disclosed to the client

Under the ACFE Code of Professional Standards, a fraud examiner must disclose any actual or apparent conflict of interest to the client, because even the appearance of bias can undermine the credibility and objectivity of the engagement.
Limiting disclosure to actual conflicts ignores that perceived bias damages trust in the findings just as real bias does. Waiting until the subject objects is wrong because the duty arises immediately and is owed to the client, not triggered by the subject. Merely noting conflicts in the working papers is insufficient because documentation alone does not inform the client, who must be told so they can decide how to proceed.
Key concept: Independence, objectivity, and conflict-of-interest disclosure standards.

Ethics for Fraud Examiners

CFE - Ethics for Fraud Examiners Example Questions

Question 1

Question 2

Question 3

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