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

McCaghy's Perspective on Organizational Deviance:Criminologist Charles McCaghy identified regulatory pressure as a significant factor influencing organizational deviance. Excessive or poorly implemented regulations can lead companies to cut corners or engage in fraudulent behavior to remain competitive.

Supporting Analysis:

Regulatory pressure can create a perception that compliance is too costly or burdensome, leading to unethical practices.

This aligns with the concept of "strain theory," where organizations under pressure may resort to deviance.

Conclusion:McCaghy's assertion that regulatory pressure is a key driver of organizational deviance is accurate.

ï‚· Definition of Focus Groups:

Focus groups involve small groups of individuals discussing a specific topic under the guidance of a facilitator. This technique is used to gather qualitative insights through direct interaction and observation.

ï‚· Why A is Correct:

Observing employee interactions during a focus group provides rich, contextual data about attitudes, understanding, and engagement with fraud awareness training.

ï‚· Why Other Options are Incorrect:

B (Surveys):Collect quantitative data but lack interaction and observational opportunities.

C (Anonymous feedback mechanisms):Useful for confidentiality but do not allow observation.

D (Interviews):Individualized and do not involve group dynamics​​.

ï‚· Indirect Costs of Fraud:

Reputational damage is a significant indirect cost of fraud. It can lead to loss of customer trust, reduced employee morale, and long-term financial impact.

ï‚· Why A is Correct:

Quantifying reputational damage is challenging due to its intangible nature. The effects often manifest over time and are influenced by various factors, making precise calculation difficult​​.

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​​.

Employee background checks are considered a preventive control because they are designed to identify potentially risky hires before employment. The manual states that “background checks are a front-line preventive measure in combating fraud by screening out individuals who pose higher risk.”

ï‚· ACFE Code of Professional Ethics:

CFEs must not make definitive statements about the absence of fraud, as such statements can mislead stakeholders and compromise professional integrity.

ï‚· Why A is Correct:

Jane cannot state the company is "free of fraud" because no examination can guarantee the complete absence of fraud, only that no evidence was found based on the scope of work.

ï‚· References:

ACFE ethical guidelines on reporting and assurance practices​​.

Integration of Fraud Risk Assessment in Audits:

The fraud risk assessment provides valuable input but does not replace the auditor’s independent responsibility to identify and assess fraud risks.

Why B is Correct:

Professional auditing standards require auditors to perform their own risk assessments, and the fraud risk assessment is only a tool to enhance this process.

Why Other Options are Correct:

A, C, and D reflect appropriate uses of fraud risk assessments in the audit process, such as increasing awareness and designing effective audit tests​​.

References for All Questions:

ACFE Code of Professional Ethics and Fraud Examination Guide​​.

COSO frameworks for corporate governance and fraud risk management​​.

Standards for incorporating fraud risk assessments into the audit process​​.

ï‚· Professional Auditing Standards:

Standards such as ISA and GAAS emphasize the need for "unpredictability" in audit procedures to prevent fraudulent actors from anticipating audit actions.

ï‚· Why B is Correct:

Predictability undermines the effectiveness of audits by allowing individuals to manipulate activities in areas repeatedly tested in the same way.

ï‚· References:

ISA standards on fraud risk highlight the importance of incorporating unpredictability in audit approaches​​.