| Exam Code | CFE-Fraud-Investigations-and-Legal-Issues |
| Exam Name | Certified Fraud Examiner (CFE) - Fraud Investigations and Legal Issues |
| Update Date | 29 Aug, 2026 |
| Total Questions | 508 Questions Answers With Explanation |
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All of the following are true with regard to textual analytics EXCEPT:
A. When conducting textual analysis, the fraud examiner should come up with a list of fraudkeywords to search for.
B. Textual analytics is used to reveal patterns, sentiments, and relationships indicative offraud
C. The purpose of textual analytics is to search for and find an admission of fraud that canbe presented in court
D. Textual analytics provides the ability to uncover warning signs of potentially fraudulentemployee behavior
Under the World Bank Principles for Effective Insolvency and Credit/Debtor Regimes (World Bank Principles), which of the following parties should administer the debtor's estate in liquidation bankruptcy proceedings?
A. The jurisdiction's commerce department or equivalent agency
B. The creditor with the largest claim against the debtor
C. The debtor, supervised by an independent insolvency representative
D. An independent insolvency representative
Which of the following is the LEAST ACCURATE statement about seizing a computer for examination?
A. When taking a computer for examination, if the computer is off. it should remain offwhen it is removed
B. When seizing a computer that is running, it is acceptable for a fraud examiner to reviewthe files contained on the machine prior to seizing it.
C. Before removing a computer system from a scene for further analysis, it is important todocument the system's setup with photographs or diagrams.
D. When seizing a computer for examination, the seizing party should took around the areafor passwords because many people leave passwords near their computers
The same customer goes into a bank each day and purchases bearer instruments withcash in amounts just under the mandatory reporting requirements in the jurisdiction. Thebank employees suspect that the customer is attempting to violate the jurisdiction’s moneylaundering regulations. If the jurisdiction’s anti-money laundering AML regulations followthe Financial Action Task Force FATF Recommendations, then the bank:
A. May not file a report of suspicious transactions related to potential criminal activity withthe appropriate authorities
B. Is required to file a cash transaction report for possible criminal activity with theappropriate authorities because the purchases involved cash
C. Is required to file a report of suspicious transactions with the appropriate authoritiesbecause the employees suspect money laundering violations
D. May, but is not required to, file a report of suspicious transactions related to possiblemoney laundering with the appropriate authorities
Luciano, a Certified Fraud Examiner (CFE) for XYZ Co., learns that Sylvia, a purchasingmanager, recently bought an expensive home in the mountains. Luciano also sees Sylviawearing luxury jewelry and high-end clothing. Luciano has sufficient predication to:
A. Search Sylvia’s email account for evidence of financial misconduct.
B. Inform the executive team at XYZ Co. that Sylvia might have committed fraud.
C. Arrange a meeting with Sylvia to make a direct fraud allegation.
D. Conduct discreet inquiries about Sylvia’s responsibilities as a purchasing manager.
Which of the following is NOT true with regard to tracing the disposition of loan proceeds?
A. Tracing loan proceeds can reveal previous civil offenses committed by the subject
B. Tracing loan proceeds can determine if the proceeds were deposited into hidden
accounts
C. Tracing loan proceeds can uncover previously unknown witnesses
D. Tracing loan proceeds can determine if hidden accounts were used for loan payments.
__________ insurance is a type of insurance under which an insured entity is coveredagainst losses caused by the dishonest or fraudulent acts of its employees
A. Fidelity
B. Inherent risk
C. Opportunity
D. Residual risk
In systems using adversarial processes, an attorney may impeach an opposing party'switness by showing that the witness:
A. Has a keen ability to observe
B. Made poor consistent statements
C. Testified from personal knowledge
D. Is influenced by bias or self-interest
In most countries, it is not necessary for employers to provide notice to their employeesbefore implementing an employee monitoring program.
A. True
B. False
Which of the following can affect the rights that employees may have during an internalinvestigation?
A. Existence of fraud risk factors
B. Existence of violation red flags
C. Existence of interstate compacts
D. Existence of an employment contract
Freya, a government contractor, has been convicted of colluding with other contractors tomanipulate the competitive bidding process. After her conviction, Freya's name is added toa list of individuals who are prohibited from bidding on government contracts for a period offive years. The administrative penalty that Freya received is BEST described as:
A. License revocation
B. Disenfranchisement
C. Debarment
D. License suspension
Which of the following typically does NOT need to be present for communications betweenan attorney and the attorney's client to be protected by a legal professional privilege?
A. Communication between a legal advisor and a client
B. Purpose of the communications was to seek or provide legal advice
C. Intent to keep the communications confidential
D. A lawsuit has been filed
Which of the following is FALSE regarding link analysis?
A. Link analysis is a poor tool to use for investigating a money laundering scheme
B. Link analysis can be used to map connections between entities that share an address
C. Link analysis helps identify indirect relationships with several degrees of separation
D. Link analysis is an effective tool for demonstrating complex networks
Which of the following is generally NOT one of the goals of deferred prosecutionagreements?
A. To postpone prosecution until a company conducts an extensive internal investigation
B. To get an organization to reform its policies
C. To allow prosecutors to resolve a case while still punishing malfeasance
D. To reduce the risk of illegal practices at an organization
Marcus is trying to locate the financial statements of Acme Airlines, a multinational publiclytraded corporation. Which of the following sources would be MOST EFFECTIVE for findingthis information?
A. Commercial filings
B. Civil litigation records
C. Organizational filings
D. Regulatory securities records
Which of the following types of files is the most difficult to recover during a digital forensicexamination?
A. Overwritten files
B. Deleted until
C. Deleted link (shortcut) files
D. Hidden files
During an interview, Alex asked a fraud suspect if he could retrieve the suspect's accountrecords from her bank. The suspect said, "yes." but she did not provide consent in writingAlthough the suspect orally consented, the suspect's bank is NOT required to allow Alex toaccess the suspect's account records at this point.
A. True
B. False
Which of the following statements regarding steps fraud examiners should take beforeseizing digital evidence is MOST ACCURATE?
A. Fraud examiners should make sure that all forensic equipment has been validated andmaintain the validation on file.
B. Fraud examiners should assign a digital forensic tool to each member of the fraudexamination team.
C. Fraud examiners should collect all documentary evidence and interview potentialsuspects before seizing any digital evidence.
D. Fraud examiners should plan to collect evidence in person instead of considering anyremote evidence collection procedures.
If the following statements were included in a fraud examination report of a qualified expert,which of them would be IMPROPER?
A. "When asked a second time about the amount of funds missing, the suspectcontradicted their previous testimony."
B. "The evidence shows that between S1 million and S1.5 million in assets weretransferred to an offshore account."
C. "The organization must address the inadequate separation of accounting duties toprevent such an event from happening again."
D. "In light of all the evidence, the suspect is most likely guilty of fraud against theorganization."
In systems using adversarial processes, an attorney may impeach an opposing party'switness by showing that the witness:
A. Testified from personal knowledge
B. Has a reputation for being truthful
C. Made prior inconsistent statements
D. Possesses a strong ability to observe
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