CFE-Fraud-Prevention-and-Deterrence Exam Dumps - Certified Fraud Examiner - Fraud Prevention and Deterrence Exam

COSO Definition of Internal Control:

COSO defines internal control as a process executed by an entity’s board, management, and personnel to provide reasonable assurance about achieving objectives in operations, reporting, and compliance.

Analysis of Options:

A. Corporate compliance: Corporate compliance focuses on adhering to laws and regulations, not the broader operational objectives.

B. Fraud risk management: This is a component of internal control, not its definition.

C. Risk assessment: This is a step within the internal control process but not the overarching process.

D. Internal control: Matches the COSO definition accurately.

Conclusion:Internal control is the correct answer as defined by COSO.

References:COSO Internal Control Framework documentation​​.

Purpose of a Code of Conduct:

A professional code of conduct serves as a guideline for ethical behavior, provides benchmarks for decision-making, and facilitates enforcement within the profession.

It does not replace the personal responsibility to exercise individual judgment and consult one's conscience.

Analysis of Other Options:

B, C, and D: These accurately describe the purposes of a professional code of conduct.

Conclusion:The code of conduct does not eliminate the need for personal ethical reflection, making Option A incorrect.

References:ACFE and other professional ethics codes​​.

Professional Skepticism Defined:

Professional skepticism is an attitude that includes a questioning mind and a critical assessment of evidence. Fraud examiners must remain vigilant to indications of potential fraud throughout an engagement.

Consistent Application:

ACFE standards emphasize that skepticism should be applied consistently, even if initial findings do not indicate fraud, to avoid overlooking potential risks.

Why D is Correct:

Relaxing skepticism can lead to missed evidence or poor judgment, undermining the examination's effectiveness​​.

Three General Approaches to Controlling Corporate Crime:

Government Intervention: Strong regulations and enforcement to ensure accountability.

Voluntary Corporate Changes: Encouraging ethical practices through organizational policies.

Consumer Action: Pressure from consumers demanding corporate responsibility.

Why D is Incorrect:

Media blacklisting is not a formal or systematic approach to controlling corporate crime. It is a consequence rather than a preventive or corrective measure.

References:

ACFE and corporate governance frameworks emphasize formal mechanisms like government intervention and organizational self-regulation​​.

Internal Audit Reporting Responsibilities:

Internal audit must maintain open communication with senior management and the board to ensure appropriate handling of fraud-related issues.

Establishing reporting protocols in advance ensures timely and consistent responses when fraud occurs.

Analysis of Other Options:

B. Periodic reporting is optional: Reporting fraud risks is a required responsibility.

C. Non-disclosure: Fails to fulfill the role of internal audit in governance and accountability.

D. No communication with the board: Misrepresents the internal audit's role in fraud oversight.

Conclusion:Discussing reporting protocols proactively with senior management and the board is the correct approach.

References:ACFE guidelines and internal audit reporting standards​​.

Step by Step Comprehensive Detailed Explanation with All References:

Proactive Fraud Auditing:

Proactive fraud audit procedures aim to prevent and detect fraud before it escalates. Implementing these procedures signals to employees and stakeholders that fraud will not be tolerated.

Such actions align with creating a strong anti-fraud culture within the organization.

Examples of Proactive Fraud Audits:

Surprise audits, continuous monitoring, and analytical procedures identify discrepancies and potential fraud risks.

Fraud prevention and deterrence are enhanced through consistent implementation.

Effectiveness and Prevention:

Unlike reactive measures, proactive approaches demonstrate an organization’s commitment to maintaining integrity and ethical standards​​.

ï‚· ISO 31000:2018 Guidelines:

This standard emphasizes that a risk management framework should align with the organization’s size, complexity, objectives, and operations to ensure effectiveness and relevance.

ï‚· Why A is Correct:

Proportionality ensures that resources are allocated efficiently, addressing risks that directly impact the organization’s goals while avoiding overcomplication.

ï‚· References:

ISO 31000:2018 risk management principles​​.

CFEs must act ethically and responsibly when handling sensitive information. Eliece should inform Jewel that she will try to maintain confidentiality but must adhere to professional and ethical obligations, which may require disclosing the information to appropriate parties such as her employer or relevant authorities. This balanced response encourages transparency while maintaining ethical standards.

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