ACFE CFE - Investigation Exam Dumps & Practice Test Questions

Question 1:

While examining the accounts payable transactions of Elm Company, which analytical method would most effectively help Jackson, a Certified Fraud Examiner (CFE), detect possible fraudulent activity?

A. Review discrepancies between depreciation reported in the financial records and tax filings.
B. Flag paycheck values that exceed a predetermined threshold.
C. Analyze high-value invoices by grouping them according to vendor and amount to detect unusual patterns.
D. All of the above

Correct Answer: C

Explanation:

When it comes to detecting fraudulent behavior within an organization’s accounts payable (AP) department, choosing the right data analysis technique is critical. Jackson, acting in his capacity as a Certified Fraud Examiner (CFE), is focusing specifically on identifying irregularities related to payments made to external vendors and suppliers—an area prone to various forms of fraud including overbilling, invoice duplication, and vendor kickbacks.

Option C, which involves grouping and analyzing large invoices by both amount and vendor, is the most targeted and effective method for this purpose. By organizing invoices into categories based on size and payee, Jackson can spot unusual trends or anomalies. For example, if a particular vendor is consistently submitting invoices just below the approval threshold or if there are repeated high-value invoices over a short period, these could be red flags. Such patterns might suggest collusion, overpayments, phantom vendors, or split invoices intended to bypass approval controls.

In contrast:

• Option A (comparing depreciation values between financial and tax records) deals more with potential financial statement manipulation, not operational fraud within AP. While important, it's more relevant to identifying tax-related discrepancies or accounting irregularities than transactional fraud involving vendor payments.

• Option B relates to payroll fraud, where employee salaries or overtime may be inflated. This is outside the scope of accounts payable, which focuses on external liabilities rather than internal wage disbursement.

Therefore, Option D ("All of the above") is not correct, as only Option C directly addresses the kind of data and fraud risks that Jackson is evaluating.

In summary, to uncover potential fraud in accounts payable, the most effective data analysis approach is to group large invoices by amount and vendor. This method enhances the ability to detect unusual payment behaviors, repetitive patterns, and suspicious vendor activity, all of which are key indicators of possible fraud in a corporate AP system.

Question 2:

Which of the following best describes the concept of predictive analytics as used in data analysis?

A. Programming systems to mimic human actions to automate repetitive tasks.
B. Analyzing past data using statistics and machine learning to create models that forecast future trends.
C. Utilizing deep learning algorithms and neural networks to examine complex datasets.
D. Employing unsupervised learning techniques to uncover hidden structures and anomalies in data.

Correct Answer: B

Explanation:

Predictive analytics is a sophisticated data analysis technique that uses historical data, combined with statistical modeling, machine learning algorithms, and data mining, to forecast future events or behaviors. It transforms raw data into actionable insights by identifying trends and patterns that inform strategic decision-making.

The essence of predictive analytics lies in its ability to build mathematical models that learn from past events and apply that knowledge to make predictions about future outcomes. For example, in fraud detection, predictive analytics can assess historical fraudulent transactions to identify patterns and then use that model to flag potentially fraudulent future transactions. In marketing, it might be used to forecast customer churn or identify potential new buyers based on past behaviors.

Option B correctly captures this core idea: it recognizes that quantitative analysis, grounded in historical data and enhanced by modern techniques like machine learning, is what powers predictive modeling.

To distinguish from the other options:

• Option A describes Robotic Process Automation (RPA), which is focused on automating repetitive manual tasks using rule-based scripts. While useful in efficiency improvements, RPA doesn't involve forecasting or statistical inference.

• Option C refers to deep learning, a subset of machine learning that relies on neural networks to model complex, non-linear relationships in large datasets. Deep learning can be part of predictive analytics but doesn’t define it.

• Option D describes unsupervised learning, where algorithms find hidden patterns or structures in data without labeled outcomes. While this technique is helpful in exploratory analysis and clustering, it is not equivalent to predictive analytics, which is usually supervised—meaning it relies on labeled datasets to predict known outcomes.

In conclusion, predictive analytics is best described as the use of historical data, statistical tools, and machine learning to forecast future events, making Option B the most accurate and complete definition. It plays a crucial role across industries, helping organizations anticipate risks, optimize operations, and make more informed decisions.

Question 3:

Jade, a Certified Fraud Examiner, is investigating a case involving suspected inventory theft. The stolen items are believed to be sold via a shell company named Hidden Finds, LLC. 

When Jade tries to visit the company’s website, she is redirected to a URL that ends with “.onion.” To successfully access this site, Jade needs a specialized browser that can navigate which type of online environment?

A. The internet archives
B. The dark web
C. The free web
D. The deep archives

Correct Answer: B

Explanation:

The domain suffix “.onion” is specifically associated with the dark web, a hidden section of the internet that cannot be accessed using conventional web browsers like Chrome or Firefox. Websites using the .onion extension operate on the Tor (The Onion Router) network, which encrypts and anonymizes internet traffic, making it extremely difficult to trace user activity or the website’s physical server.

In fraud and cybercrime investigations, Certified Fraud Examiners (CFEs) and digital forensic professionals may encounter .onion websites while tracking illicit operations. These sites often host illegal marketplaces, unregistered shell companies, forums, or communication hubs for criminal enterprises. To access such resources, investigators like Jade must use the Tor browser, a free tool specifically designed to connect users to the Tor network, enabling access to .onion domains.

Here’s a breakdown of the answer options:

• A. The internet archives refers to services like archive.org (Wayback Machine), which allow users to view historical snapshots of public websites. These do not support .onion domains and are unrelated to the dark web.

• B. The dark web is the correct choice. It is a segment of the “deep web,” but not all deep web content is dark. The dark web is intentionally concealed and requires specialized tools for access.

• C. The free web generally refers to the open internet, where content is accessible without special software. Traditional websites and search engines operate here.

• D. The deep archives is not an established term in cybersecurity or forensic investigations. It may be confused with the “deep web,” which includes password-protected or paywalled content (e.g., medical records, academic databases) but still differs from the dark web.

In conclusion, since Jade needs to visit a .onion website during her investigation, she will need access to the dark web, which requires using the Tor browser. This environment is commonly used for concealing illegal activities, making it a crucial area for cyber fraud investigations.

Question 4:

Which of the following is NOT typically a valid use of publicly accessible information sources during a fraud investigation?

A. Confirming or refuting claims made by witnesses
B. Researching personal background details of individuals
C. Identifying and tracking people or their property
D. Reviewing someone's income tax records

Correct Answer: D

Explanation:

Publicly available information plays a significant role in fraud investigations, background checks, and asset tracing. Investigators and Certified Fraud Examiners frequently rely on various open-source platforms, databases, and government records to gather intelligence without breaching privacy laws. These sources often include:

• Court records and case filings

• Property ownership registries

• Business incorporation documents

• Professional license directories

• Social media profiles and networking sites

These tools are effective in corroborating statements, building profiles, and uncovering potential assets or hidden affiliations. However, there are strict limitations on what qualifies as "public" information, particularly regarding confidential financial data, such as income tax filings.

Let’s evaluate each option:

• A. Confirming or refuting witness statements is a common use of public records. For instance, property deeds or prior court judgments might validate—or contradict—details provided during an interview or deposition.

• B. Background research is one of the first steps in any investigation. Public records offer insight into a subject’s employment history, legal issues, affiliations, and even behavioral patterns via social media.

• C. Locating individuals and their assets often begins with a public records search. Investigators may use vehicle registration databases, real estate holdings, or business ownership details to build a comprehensive asset profile.

• D. Income tax filings, however, are protected by privacy laws in nearly every jurisdiction. These documents contain sensitive financial information, such as income, deductions, and liabilities. Unless specifically authorized by the subject or accessed through a legal procedure (like a subpoena or court order), such records are not available via public channels.

In summary, while public information sources are powerful tools in fraud examination, they have boundaries—especially around personal financial records. Option D is the correct answer because income tax filings are private and not considered publicly accessible under standard investigative practices.

Question 5:

During an investigation, Anne utilized a confidential informant named Will. She documented his contributions in her final report using only his initials, paid him in cash, and received a signed receipt for the payment. 

Based on standard informant handling protocols, which of Anne’s actions deviates from accepted best practices?

A. Incorporating Will's information in her final investigative report
B. Compensating Will with cash
C. Collecting a signed receipt for the payment from Will
D. Using Will’s initials to reference him in official documentation

Correct Answer: B

Explanation:

In law enforcement and intelligence investigations, strict adherence to informant management protocols is essential to ensure transparency, protect informant identities, and maintain the ethical standards of the investigation. Informants play a pivotal role in gathering intelligence, but how they are handled must align with recognized best practices to preserve both the integrity of the case and the safety of the individual.

Anne followed several acceptable practices: documenting the informant’s contribution anonymously, collecting a receipt for payment, and incorporating relevant intelligence into the final report. However, her decision to pay Will in cash violates established guidelines.

Paying an informant in cash is discouraged due to its lack of traceability. Cash transactions can appear suspicious, and because they don’t generate a clear financial trail, they may raise questions during audits or legal reviews. Furthermore, cash payments can be perceived as informal or even coercive. Best practices recommend using traceable payment methods—such as checks, prepaid debit cards, or digital transfers—so that each transaction is verifiable, securely recorded, and auditable.

Now let’s examine the other options:

• Option A: Including Will’s intelligence in the final report is acceptable, as long as it contributes to the investigation and is properly vetted. The content, not the source’s identity, is the focus of such documentation.

• Option C: Obtaining a signed receipt from Will is essential. It provides proof of the transaction, supports transparency, and safeguards both parties from disputes or misconduct allegations.

• Option D: Referring to Will by his initials helps maintain confidentiality. Protecting the identity of informants is critical for their safety and for preserving trust in the investigative process.

In summary, while Anne followed most of the correct steps in handling Will as an informant, paying in cash undermines the transparency and traceability required in official operations. Therefore, Option B is the correct answer because it contradicts established best practices in informant compensation.

Question 6:

When analyzing how loan funds are used during an investigation, which of the following statements does NOT accurately reflect the typical outcomes of this tracing process?

A. Tracing loan funds can reveal if undisclosed accounts were involved in repaying the loan
B. Tracking loan funds can expose past civil violations by the subject
C. Following loan funds may lead to the discovery of new, previously unknown witnesses
D. Tracing loan funds can show whether proceeds were deposited into hidden accounts

Correct Answer: B

Explanation:

Loan fund tracing is a vital method used in financial crime investigations to follow the flow of borrowed money and verify whether it was used for its intended purpose. This process helps identify fraud, misrepresentation, and hidden assets. Investigators and forensic accountants commonly use this technique to uncover inconsistencies and build evidence in financial misconduct cases.

Let’s examine each option to understand their validity in the context of tracing loan funds:

• Option A: This is accurate. By tracing the flow of loan proceeds, investigators can determine whether payments were made using undisclosed or unauthorized accounts. If an individual attempts to hide repayments by using shell accounts or accounts in other people's names, this would be evident through thorough tracing.

• Option C: Also true. Tracing the path of funds can lead to new individuals or entities who were involved in managing, receiving, or facilitating the movement of the money. These individuals can potentially serve as witnesses or even become subjects of further investigation.

• Option D: Valid as well. A core goal in tracing is to verify the destination of the loan funds. If the money ends up in secret or undeclared accounts, it may indicate financial misconduct, concealment, or attempts to defraud the lender or regulatory authorities.

• Option B: This is the incorrect or least accurate statement. Tracing loan funds generally focuses on current or recent financial activity related to the specific loan in question. While the misuse of funds may indicate new violations, it does not retroactively uncover past civil offenses that predate the loan. Civil violations such as contractual disputes, zoning violations, or prior unpaid debts fall outside the scope of typical loan tracing efforts. These types of violations are usually revealed through background checks, not through tracking financial transactions.

In conclusion, while tracing loan funds is an effective method for identifying hidden financial activities and gathering leads, it is not intended to uncover unrelated historical civil infractions. That makes Option B the correct answer, as it inaccurately represents the capabilities of loan fund tracing.

Question 7:

Which statement most accurately reflects the primary objective during the analysis stage of a digital forensic investigation?

A. Investigators should concentrate solely on uncovering evidence that supports the suspect’s innocence.
B. It is recommended to rely on a single forensic tool for the entirety of the evidence analysis process.
C. Preserving the integrity of all digital evidence is the top priority during this phase.
D. The analysis stage must only commence after confirming that the suspect’s device lacks relevant information.

Correct Answer: C

Explanation:

The analysis phase in digital forensics is a structured and methodical process where collected digital evidence is evaluated to draw meaningful conclusions. The foremost priority throughout this phase is to preserve the integrity of the evidence. Ensuring that data remains unchanged is essential not just for ethical investigations but also for maintaining admissibility in legal proceedings.

Let’s assess each option:

• Option A suggests that forensic examiners should focus only on uncovering evidence that proves a suspect's innocence. This is misleading and unprofessional. A digital forensic expert must approach every investigation with objectivity, searching for both inculpatory and exculpatory evidence. Ignoring evidence that may imply guilt could skew the findings and undermine the investigation’s credibility.

• Option B recommends using just one forensic tool during analysis. In reality, this is not best practice. No single tool can fully handle all possible data types or formats. Investigators commonly use multiple validated tools to verify results and fill in gaps that may be missed by others. Cross-validation between tools enhances the accuracy and thoroughness of the investigation.

• Option C correctly highlights the importance of data integrity. From collection through to reporting, digital evidence must not be altered. Forensic investigators often work on bit-by-bit copies of original data to avoid modifying the source. Maintaining a chain of custody and using write blockers are also standard techniques used to uphold integrity.

• Option D falsely claims that analysis should only begin if it's verified that no relevant data exists on the suspect’s device. This is counterintuitive. The analysis is the process through which investigators determine whether relevant evidence exists. Preemptively ruling out relevance undermines the entire purpose of analysis.

In summary, preserving the integrity of evidence during analysis is fundamental to any digital forensic investigation. It ensures the evidence remains credible and legally defensible, and supports a fair, unbiased examination of the facts.

Question 8:

During an interview, a suspect avoids eye contact while responding to questions. Can the interviewer conclusively interpret this behavior as an indication of dishonesty?

A. True
B. False

Correct Answer: B

Explanation:

In the context of forensic interviewing or fraud investigations, non-verbal cues, such as body language, facial expressions, and eye contact, can provide potential indicators of a subject’s emotional state or comfort level. However, it is inaccurate and unprofessional to rely solely on a single behavior—like avoiding eye contact—as conclusive proof of dishonesty.

• Option A asserts that a lack of eye contact automatically means the person is lying. While this belief is common in popular culture, it lacks scientific backing. Numerous studies have shown that eye contact behavior varies significantly between individuals and across cultures. For instance, in some cultures, direct eye contact may be seen as disrespectful. Additionally, people who are anxious, shy, or nervous might avoid eye contact regardless of their truthfulness.

• Option B is correct because no single behavioral cue should be considered absolute evidence of deceit. Investigators are trained to look for clusters of behavioral indicators, such as inconsistent stories, changes in voice pitch, hesitation in responses, and contradictory non-verbal actions. Importantly, these cues are only meaningful when interpreted in context and in combination with other evidence.

In forensic interviews, the focus should be on establishing rapport, using open-ended questions, and observing both verbal and non-verbal patterns over time. Professionals use tools such as statement analysis, behavior analysis interviewing (BAI), and cognitive interviewing techniques to evaluate truthfulness more reliably.

Furthermore, relying solely on behavioral observations without corroborating evidence may lead to confirmation bias, where the interviewer sees what they expect to see, rather than what is objectively true. This can cause investigators to misjudge cooperative but anxious individuals, or to overlook skilled deceivers who display calm, confident body language.

In conclusion, a lack of eye contact alone is insufficient to conclude deception. Interviewers must take a comprehensive, evidence-based approach, considering the full context of the interview and the subject's baseline behavior. Only by integrating behavioral cues with factual findings can a well-supported assessment of truthfulness be made.

Question 9:

Which term accurately describes the structured approach used to investigate suspected fraud, starting from the initial identification of red flags to the final resolution?

A. Forensic methodology
B. Fraud examination
C. Fraud theory
D. Fraud assessment

Correct Answer: B

Explanation:

Fraud examination refers to the systematic process of detecting, investigating, and resolving instances of suspected fraudulent activity. This term is specifically designed to encapsulate the full lifecycle of a fraud investigation—from the moment suspicions arise, through detailed investigation procedures, to final outcomes, which may include internal resolution, disciplinary actions, civil litigation, or criminal prosecution.

The fraud examination process typically follows these core stages:

1. Detection of Suspicion: This may arise through whistleblower reports, audit red flags, or anomalies detected in financial records.

2. Preliminary Investigation: This step involves gathering basic facts to assess whether a deeper inquiry is warranted.

3. Planning the Examination: A plan is developed, which might include identifying potential suspects, interviewing witnesses, and determining what documentation or digital evidence needs review.

4. Evidence Collection: Physical and digital records are analyzed, transactions are reviewed, and financial data is scrutinized for inconsistencies.

5. Interviewing Parties: This includes interviewing witnesses and conducting interrogations with suspects using techniques to elicit admissions or confirm evidence.

6. Conclusion and Resolution: The findings are documented, and decisions are made regarding prosecution, disciplinary action, or internal corrective steps.

Let’s analyze the other choices:

• A. Forensic methodology refers to the general framework of applying scientific and analytical methods to legal or investigative questions. While fraud examination can use forensic methodology (such as forensic accounting), the term itself is too broad and not exclusive to fraud.

• C. Fraud theory refers to the hypothesis a fraud examiner forms about how fraud might have occurred. This theory guides the investigation but is not the process itself. It’s more of a conceptual step within the broader investigation.

• D. Fraud assessment usually focuses on identifying risks of fraud before it happens. It involves reviewing internal controls and assessing where fraud might occur—not investigating an actual case.

In conclusion, fraud examination is the only option that accurately encompasses all stages of a fraud investigation from suspicion to closure.

Question 10:

Jana, a company controller, wants to determine if the recent increase in hotel expenses correlates with an increase in travel days. 

Which data analysis technique is best suited for exploring the relationship between these two variables?

A. Correlation analysis
B. Duplicate testing
C. Verifying multiples of a number
D. Benford’s Law analysis

Correct Answer: A

Explanation:

Correlation analysis is a statistical method used to evaluate whether a relationship exists between two quantitative variables and to what degree they move in relation to each other. This makes it the ideal tool for Jana’s goal of analyzing whether rising hotel expenses are justified by a corresponding increase in employee travel days.

The correlation coefficient (r) that results from this analysis ranges from -1 to +1:

• A value close to +1 indicates a strong positive relationship (as travel days increase, hotel expenses also increase).

• A value near 0 suggests no significant relationship.

• A value near -1 indicates a negative relationship (as one variable increases, the other decreases).

In Jana’s case, if the correlation is high and positive, it suggests that the expense rise is proportionate to increased travel. If the correlation is weak or nonexistent, it may indicate potential overspending or misreporting.

Now, reviewing the other options:

• B. Duplicate testing identifies repeated or redundant entries in a dataset. While useful for catching fraud such as duplicate invoice payments, it doesn't analyze relationships between variables and therefore isn't appropriate here.

• C. Verifying multiples of a number is more relevant in identifying structured fraud patterns (e.g., fixed-rate billing anomalies) and does not help in analyzing the proportionality between hotel costs and travel days.

• D. Benford’s Law analysis evaluates whether the distribution of leading digits in numeric datasets conforms to expected norms. It is commonly used to flag manipulated or fabricated data but not for comparing two sets of related numeric data.

Thus, the only method that provides insight into whether two continuous numerical variables (hotel expenses and travel days) are moving together is correlation analysis. It enables controllers and auditors to determine whether operational trends (like travel activity) are aligned with financial trends (like expenses), which is essential for detecting anomalies or justifying costs.