ACFE Certified Fraud Examiner (CFE)

✅

Reasoning: Collusion, involving two or more individuals, directly overcomes well-designed internal controls, especially segregation of duties. Controls often rely on independent action and verification; collusion circumvents these checks by having multiple parties conspire, enabling fraudulent activities that would otherwise be prevented or detected. ❌ Why the other choices are incorrect:

• Option A is incorrect: A shell company is typically an instrument or vehicle for executing fraud (e.g., billing schemes) rather than the mechanism that inherently overcomes internal controls themselves. It facilitates the fraud, often exploiting existing control weaknesses.
• Option B is incorrect: Fraudulent invoices are a type of fraud or the result of control failures. Well-designed controls, such as proper authorization and reconciliation, are specifically designed to prevent or detect fraudulent invoices, not be overcome by them.
• Option D is incorrect: Rubber stamp supervisors indicate a weakness in the control environment or a failure to execute controls effectively. This is a symptom of poor control rather than an active method for overcoming truly well-designed and properly enforced internal controls.

✅ Reasoning: Inventory larceny occurs when assets, like inventory, are legitimately acquired and owned by the company, but an employee or fraudster then physically steals those assets directly from the company's premises or possession. This precisely fits the

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✅ Analysis:

• Option B is incorrect: Fraudulent purchase schemes involve the company being tricked into buying goods or services it doesn't need, or from fictitious vendors, making the purchase itself fraudulent. Here, the purchase was intentional and presumably legitimate.
• Option C is incorrect: "Asset receiving scheme" is not a standard, recognized fraud classification for the misappropriation described. While receiving processes can be manipulated, the core act of stealing already-owned assets is larceny.
• Option D is incorrect: Falsifying shipping is a method often used to conceal the theft of assets or to divert legitimate shipments. It is not the primary scheme for assets intentionally purchased and then simply misappropriated from company possession; that is larceny.

✅ **False **

Reasoning: This statement fundamentally misrepresents a core principle of fraud deterrence. A stronger perception of detection serves as a deterrent, significantly reducing the likelihood of employee theft. Employees are less prone to engage in deviant behavior when they believe they will be caught, making the statement's assertion (that it increases likelihood) incorrect. ❌ Why the other choices are incorrect:

• Option A is incorrect: Affirming this statement as true would contradict established fraud prevention principles, which emphasize that robust controls and perceived certainty of detection are crucial in discouraging and preventing dishonest acts by employees.

✅

Reasoning: "Fraud & Cost" describes a broad category encompassing various fraudulent acts and their financial impact. It is a general term referring to aspects of fraud, not a specific scheme like skimming, which is a method of theft where funds are stolen before being recorded. ❌ Why the other choices are incorrect:

• Option A is incorrect: Unrecorded sales directly describe a common skimming technique where cash from a sale is not entered into the books and is instead stolen by the perpetrator.
• Option C is incorrect: Theft of checks through the mail is a form of receivables skimming, where payments are intercepted before the company records them, thus falling under the definition of skimming.
• Option D is incorrect: Understated sales and receivables is a skimming method where a portion of a sale or receivable payment is recorded, but the remainder is stolen. The full amount is never accurately reflected in company records.

✅ ****Accounts receivable journal **

Reasoning: Although technically a "Sales Journal" is where credit sales are recorded, which then debit Accounts Receivable, "Accounts receivable journal" can be used to broadly refer to the primary journal (Sales Journal) where transactions that establish or modify customer receivables (i.e., sales on credit) are listed. The question's inclusion of "cash sales" is a slight imprecision as cash sales typically go to the cash receipts journal, but in the context of listed options, B is the closest**

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✅ Analysis:

• Option A is incorrect: A disbursement journal records cash outflows for payments made by the company, not sales made to customers.
• Option C is incorrect: An accounts payable journal (or purchases journal) records credit purchases made by the company from its suppliers, not sales made to customers.
• Option D is incorrect: A general journal records transactions that do not fit into specialized journals. While all transactions could theoretically be recorded there, it's not the primary, specialized journal for routine sales.