Certified Fraud Examiner CFE Practice

Certified Fraud Examiner (CFE) Practice Exam Questions And Correct Answers (Verified Answers) Plus Rationales 2026 Q&A | Instant Download Pdf

• Which of the following is the most common type of occupational

fraud?

• Asset misappropriation
• Corruption
• Financial statement fraud
• Identity theft

Answer: A. Asset misappropriation

Rationale: Asset misappropriation is the most frequent type of occupational

fraud, involving theft or misuse of an organization’s assets.

2. A fraud triangle consists of:

• Pressure, opportunity, motivation
• Pressure, rationalization, collusion 1 / 4

• Pressure, opportunity, rationalization
• Opportunity, coercion, rationalization

Answer: C. Pressure, opportunity, rationalization

Rationale: The fraud triangle explains why individuals commit fraud: they feel pressure, see an opportunity, and can rationalize their behavior.

• Which of the following is considered a red flag for financial statement

fraud?

• Consistent profits with industry trends
• Significant related-party transactions
• Transparent internal controls
• Strong corporate governance

Answer: B. Significant related-party transactions

Rationale: Unusual or significant transactions with related parties may

indicate manipulation of financial statements.

• Who typically investigates fraud allegations in an organization?
• Marketing team
• Certified Fraud Examiners (CFEs)
• External auditors only
• Human resources

Answer: B. Certified Fraud Examiners (CFEs)

Rationale: CFEs are trained professionals who detect, investigate, and

prevent fraud. 2 / 4

• Which of the following is a proactive measure to prevent fraud?
• Conducting forensic audits after losses
• Implementing strong internal controls
• Ignoring employee complaints
• Waiting for regulatory intervention

Answer: B. Implementing strong internal controls

Rationale: Preventive controls, such as segregation of duties, reduce the

opportunity for fraud.

6. The term “embezzlement” most closely relates to:

• Inflating expenses
• Misappropriation of funds by an employee
• Bribery of public officials
• Manipulation of stock prices

Answer: B. Misappropriation of funds by an employee

Rationale: Embezzlement involves theft of money or property entrusted to

someone.

• Which of the following best describes lapping in accounts receivable?
• Paying vendors late
• Using payments from one customer to cover the theft of another

customer’s payment

• Forging invoices
• Manipulating inventory 3 / 4

Answer: B. Using payments from one customer to cover the theft of another

customer’s payment

Rationale: Lapping conceals theft of receivables by applying subsequent

payments to previous accounts.

• What is the primary objective of a fraud risk assessment?
• To fire employees suspected of fraud
• To identify areas vulnerable to fraud
• To comply with tax regulations
• To reduce marketing costs

Answer: B. To identify areas vulnerable to fraud

Rationale: Fraud risk assessments help organizations proactively address

weaknesses that could lead to fraud.

• Which method is most effective for detecting fraud in financial

statements?

• Employee interviews only
• Analytical procedures and ratio analysis
• Customer satisfaction surveys
• Supplier feedback

Answer: B. Analytical procedures and ratio analysis

Rationale: Comparing financial ratios over time or with industry norms can

reveal inconsistencies that indicate fraud.

• / 4