ACFE CFE-Law Certified Fraud Examiner (CFE) - Law Exam Practice Test

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Certified Fraud Examiner (CFE) - Law Questions and Answers

Question 1

The Organisation for Economic Co-operation and Developments (OECD) Recommendation on Combating Bribery m International Business (Recommendation) urges member states to combat the bribery of foreign public officials by taking steps to improve which of the following primary areas within their respective infrastructures?

Options:

Public health and safety regulations

Laws and regulations related to public subsidies licenses, and contract procurement

Laws and regulations covering e-commerce

Consumer data protection laws

Question 2

The MOST COMMON bankruptcy fraud scheme is:

Options:

Forged filing

A planned bustcut

A credit card bustout

Concealment of assets

Question 3

In common law jurisdictions, which of the following scenarios would MOST LIKELY result in sanctions for an organization for failing to preserve evidence?

Options:

An employee intentionally destroys a relevant document prior to the company announcing the possibility of litigation.

An employee unintentionally alters a digital document that is not directly relevant to any potential litigation that the company has announced to its staff.

An employee accidentally deletes a digital document that is relevant to litigation after the company announces that such litigation is a possibility.

An employee abstains from destroying a document relevant to an ongoing proceeding even though this act violates the company's document retention policy.

Question 4

Jay files for bankruptcy in order to settle all of his debts. During the bankruptcy proceeding, the court sells off his property and uses the proceeds to pay Jay's creditors, thereby discharging all of Jay's dischargeable debts. This type of bankruptcy proceeding can BEST be described as:

Options:

Debt adjustment bankruptcy

Liquidation bankruptcy

Reorganization bankruptcy

Debt dismissal bankruptcy

Question 5

Which of the following statements concerning fact finders in criminal trials in common law jurisdictions is MOST ACCURATE?

Options:

The presence of a jury is always required to make factual findings in a common law criminal trial

A panel of a professional judge and lay judges usually serves as the fact finder in serious cases

A judge is typically responsible for factual findings

Juries usually serve as the fact finder in serious cases

Question 6

In most civil law systems, which of the following parties typically serves as the fact finder in criminal proceedings?

Options:

judge

A jury

A panel comprised of laypersons

A panel of court-appointed attorneys

Question 7

Which of the following is the MOST ACCURATE statement about serf-regulatory organizations (SROs) in the securities industry?

Options:

An SRO generally has sole regulatory authority over the securities industry in the jurisdiction in which it operates

In most jurisdictions. SROs are prohibited from participating in the resolution of disputes related to securities transactions

An SRO is a governmental entity that exercises regulatory authority over the securities industry in its jurisdiction

In some jurisdictions SROs establish the standards and rules under which members of the securities industry operate

Question 8

Which of the following is TRUE in regard to authenticating evidence in most common law systems?

Options:

Digital records cannot be authenticated by testimony from a witness with personal knowledge

For evidence to be authenticated it must be reviewed and voted on by a jury

Exhibits that cannot be authenticated will not be admitted regardless of relevance

The purpose of authentication is to ensure that hearsay is not admitted into evidence

Question 9

A custodial arrest occurs when a law enforcement officer informs the suspect of their rights as a criminal defendant

Options:

True

False

Question 10

Which of the following statements about the International Organization of Securities Commissions (IOSCO) s TRUE?

Options:

IOSCO is a self-regulatory organization for companies that have securities traded on international securities markets

IOSCO provides a forum for regular cooperation on banking supervisory matters affecting developing nations

IOSCO is an oversight body responsible for issuing and enforcing regulations that govern all international securities markets

IOSCO is recognized as the international standard-setter for securities markets

Question 11

Which of the following is NOT an element generally required to establish a claim alleging the common law civil wrong for intentional infliction of emotional distress?

Options:

The defendant acted intentionally or recklessly

The victim was an employee of the defendant

The victim suffered distress as a result of the defendants conduct

The defendant engaged in extreme and outrageous conduct

Question 12

Greg is serving as an expert witness and is being cross-examined at trial. The questioning party gets Greg to state that he spent considerable time working on a certain issue in the case. Then the questioning party asks many questions on a tangential issue in the case that Greg knows little about. Which of the following describes the questioning party's method?

Options:

Myopic vision

Personal attack

Bias

Sounding board

Question 13

In most countries, it is not necessary for employers to provide notice to their employees before implementing an employee monitoring program.

Options:

True

False

Question 14

Antonio is investigating Sam on behalf of their employer, XYZ Company. During the investigation, Antonio tells a group of their coworkers who are not involved in the investigation that he discovered Sam has a serious gambling addiction, which is true. Assuming that their jurisdiction has civil laws for all of the following causes of action, which one would give Sam the BEST chance for success if he decides to bring a civil action against Antonio?

Options:

Public disclosure of private facts

Negligent misrepresentation

Slander

Defamation

Question 15

Which of the following is the MOST ACCURATE statement about the different types of alternative dispute resolution'?

Options:

The agreements reached in mediations are generally nonbinding.

In a mediation session, the mediator decides who should win the dispute at issue

The decisions reached in all arbitrations are always binding

In an arbitration proceeding the arbitrator acts as a judge or jury by deciding the dispute at issue on its merits

Question 16

Which of the following statements about the appeals process in cranial cases is MOST ACCURATE?

Options:

In common law jurisdictions, appellate courts are generally not permitted to make their own factual determinations when reviewing a case

In civil law jurisdictions appellate courts are generally not permitted to make their own legal conclusions when reviewing a case

Appellate courts will usually hear an appeal even if the petition was not filed in a timely manner

Appellate courts will usually reverse a conviction even if the trial court's error did not affect the outcome of the case

Question 17

Which of the following statements concerning civil trials in civil law jurisdictions is MOST ACCURATE?

Options:

The standard of proof in civil trials is often described as the inner conviction of the judge.

The standard of proof in civil trials is lower than it is in criminal trials.

Civil trials are typically a single event rather than a continual series of meetings and correspondences.

Neither side may appeal an adverse judgment in a civil case.

Question 18

Luke filed a civil action against Brenda for embezzlement. He is worried that Brenda will spend the money she embezzled before the court issues a final judgment. Which type of order should Luke seek from the court if he wants to keep Brenda from spending the money?

Options:

Preservation order

Declaratory relief

Litigation hold

Prejudgment attachment

Question 19

Which of the following is a legal element that must be shown to prove a claim for commercial bribery?

Options:

The defendant acted negligently.

The defendant gave or received a thing of value.

The principal suffered damages as a result of the bribe

The defendant failed to exercise due care.

Question 20

Which of the following statements is TRUE regarding criminal proceedings and discovery in adversarial jurisdictions?

Options:

Most criminal proceedings are divided into pretrial, investigative and trial phases

Parties typically cannot request evidence from each other until after the trial begins.

The majority of criminal discovery usually occurs before the trial begins.

The judge is the primary driver of the discovery process in criminal proceedings.

Question 21

Aliyah is an employee at Chatham, a publicly traded corporation, and she owns shares of Chatham's stock. Aliyah learns that Chatham is going to publicly announce low earnings, so she sells her shares of Chatham's stock. If her conduct is illegal in the jurisdiction where she works and resides, then what type of crime did Aliyah MOST LIKELY commit?

Options:

Churning

Insider trading

Trading on margin

Futures fraud

Question 22

John deliberately understated his income so that he could pay a lesser amount on his tax bill. This is an example of tax avoidance.

Options:

True

False

Question 23

Clara is a fraud examiner investigating a potentially fraudulent misrepresentation made in the sale of a security. Which of the following questions should Clara ask to determine if the misrepresentation was material?

Options:

"Would a reasonable investor want to know the information to make an informed decision?"

"Is the person who made the misrepresentation registered as a broker-dealer?"

"Were potential investors promised guaranteed returns in the misrepresentation?"

"Did the person who made the representation have authorization to make the statements that are in dispute?"

Question 24

Which of the following can affect the rights that employees may have during an internal investigation?

Options:

Existence of fraud risk factors

Existence of violation red flags

Existence of interstate compacts

Existence of an employment contract

Question 25

In most civil law jurisdictions which of the following BEST describes when a party is required to begin taking steps to preserve and produce relevant evidence?

Options:

When the court orders such steps to be taken

When litigation has started

When the party receives a service of process

When the charging documents are filed

Question 26

Which of the following is an example of a trade-based money laundering scheme?

Options:

An importer and an exporter conspire to conceal illicit funds by creating invoices that understate the quantity of goods shipped internationally

An accountant overstates a restaurants revenues to hide illegal funds that are secretly laundered through the business

A drug cartel outside of the United States launders illicit funds by hiring runners to deposit small amounts of money in bank accounts throughout the United States

A businessperson deposits illicit funds into the bank account of a company they secretly own which then lends the funds back to them

Question 27

Leslie, a business owner, submits tax information regarding her company's finances to her country's taxing authority. The taxing authority allows companies to subtract the cost of production from their gross sales to determine the taxable income. To reduce her tax liability, Leslie inflates the costs of production on her tax forms. Which of the following schemes has Leslie MOST LIKELY committed?

Options:

A value-added tax evasion scheme

A falsified tax deduction scheme

A sales tax scheme

A tax credit evasion scheme

Question 28

Robert, a Certified Fraud Examiner (CFE), wants to ensure that the authenticity of the evidence he collected during his investigation is not compromised. His main objective should be to:

Options:

Limit access to the evidence to judicial officials prior to trial proceedings.

Prevent all other parties from obtaining physical control of the evidence.

Establish a clear chain of custody to show that the evidence has not been altered.

Only alter or materially change the evidence himself if absolutely necessary.

Question 29

Which of the following is NOT a requirement of the European Union's (EU) General Data Protection Regulation (GDPR)?

Options:

An organization must delete a data subject's personal data automatically when the data are no longer m use.

An organization must have a documented lawful basis for collecting or processing personal data.

An organization generally must notify all affected data subjects without undue delay when a high-risk data breach occurs

An organization must confirm or deny that it possesses a data subject's personal data upon that individual's request

Question 30

Ramona is investigating Eugene for misconduct Ramona and Eugene both work for Elek-Tek, which operates in a jurisdiction with evil laws for defamation, invasion of privacy and conflict of interest During the investigation Ramona obtained ^formation that Eugene is cheating on his spouse Ramona to a large group of Elek-Tek employees that Eugene was committing adultery, which turned out to be true Which cause of action would give Eugene the BEST chance for success m a civil suit against Ramona?

Options:

Conflict of interest

Defamation

Public disclosure of private facts

Slander

Question 31

The MAIN PURPOSE for maintaining the chain of custody on an item of evidence is to

Options:

Establish that the evidence has not been altered or changed from the time it was collected through its production in court

Verify that the item of evidence has only been handled by court officials prior to its production m court.

event opposing parties from accessing evidence without a court order

Eliminate re need to authenticate the item of evidence in court

Question 32

Company A sued Company B to recover damages tor the breach of a contract. In the same proceeding Company B sought damages for an allegation that Company A fraudulently induced Company B into entering the contract In this case what would Company B's claim against Company A be called?

Options:

Cross-claim

Collateral attack

Reversal

Counterclaim

Question 33

Company A used Company B to recover damages for the breach of a contract. In the same proceeding. Company B sought damages for an allegation that Company A fraudulently induced Company B into entering the contract. In this case, what would Company B's claim against Company A be called?

Options:

Counterclaim

Collateral attack

Reversal

Cross-claim

Question 34

Bob receives a memorandum from his attorney that is protected by a legal professional privilege Bob emails the memorandum to a third party who has no need to know the information in the memorandum Which of the following statements is MOST ACCURATE?

Options:

Bob did not walve the privilege because the legal professional privilege belongs to the attorney, not the client

Bob might have waived the privilege because he transmitted the protected information to a third party who has no need to know the information

Bob might have waived the privilege because he used email to transmit the protected information.

Bob did not waive the privilege because the legal professional privilege cannot be waived by transmitting protected information to a third party

Question 35

Management at ABC Org. suspects that Marcia, an employee in charge of negotiating vendor contracts, has a conflict of interest. For ABC Org.'s conflict-of-interest claim to be actionable, which of the following scenarios must be TRUE?

Options:

The alleged conflict must have resulted in a direct personal benefit for Marcia.

Marcia must have failed to disclose that she had a personal or economic interest in a matter that could influence her professional role.

Marcia must have informed the organization that she had a connection to one or more of the vendors with whom she was negotiating.

The alleged conflict must have resulted in a financial loss for the organization.

Question 36

Which of the following statements concerning front businesses as a method of laundering money is the LEAST ACCURATE?

Options:

A red flag of a front business is the observation of a large number of customers during peak operating hours

Front businesses provide cover for delivery and transportation related to illegal activity

From criminals' perspective a disadvantage to front businesses is that they generally must pay taxes on the illicit income

Front businesses benefit launderers by providing a safe place to manage criminal activities

Question 37

The Financial Action Task Force (FATF) Recommendations suggest that countries should do which of the following?

Options:

Use a risk-based approach when creating and establishing their anti-money laundering policies.

Require financial institutions to monitor their customers' social media activity for signs of money laundering.

Only conduct business with other countries that comply with the anti-money laundering recommendations.

Impose a sentence of five years of imprisonment for all money laundering and terrorist financing convictions.

Question 38

Which of the following situations would constitute a violation of the US Foreign Corrupt Practices Act (FCPA)

Options:

A private U.S company pays a S2.000 foreign corporation fee that is required in order to do business within the country

A private UK company transfers $25,000 to a Chilean public official to influence the award of lucrative overseas contracts.

A private U S company transfers $45,000 to a foreign official to influence the award of a public construction contract.

A private U.S company transfers $100,000 to the sole proprietor of a Brazilian company to influence the award of a commercial imports contract.

Question 39

Which of the following is required for a contract, transaction, or scheme to qualify as an investment contract?

Options:

The investment must not have been made with expectations of making a profit.

The investment must be made in cash.

The investment is in a common enterprise.

The investment activity is managed solely by the efforts of the investor and no others.

Question 40

Which of the following statements concerning examinations of expert witnesses in most inquisitorial jurisdictions is accurate?

Options:

Both the parties and the judge may determine how much consideration should be given to an expert's testimony.

Both the parties and the judge may question an expert's credibility.

Only the parties are allowed to make objections regarding an expert's biases.

Only the judge is allowed to question the expert's analysis and the methods that they used in their determinations.

Question 41

In jurisdictions that allow for corporate criminal liability which of the following is typically required for the corporation to be vicariously liable for the acts of one of its employees?

Options:

Management was directly involved with the offense

Management knew of the underlying offense but did not correct it

The corporation had previous violations of a similar nature

The employee was acting within the scope of their employment

Question 42

A business files for bankruptcy with the goal of obtaining relief from creditors so that it can rearrange its financial affairs and continue as a going concern. Which of the following describes this type of bankruptcy proceeding?

Options:

Reorganization bankruptcy

Debt adjustment bankruptcy

Debt dismissal bankruptcy

Liquidation bankruptcy

Question 43

Which of the following is MOST LIKELY to affect the rights that an employee may have during an internal investigation?

Options:

The likelihood that the case will eventually go to trial.

The existence of a collective bargaining agreement.

The amount of evidence that the employer possesses.

The length of the employee's tenure at the organization.

Question 44

Which of the following is the MOST ACCURATE statement about the litigation privilege in common law jurisdictions?

Options:

The primary purpose of the litigation privilege is to protect confidential communications between a client and the client's legal representative

The litigation privilege only protects documents and materials prepared by an attorney

The litigation privilege applies only while a trial is underway

The litigation privilege applies only to documents and materials prepared in anticipation of litigation

Question 45

At the end of a civil proceeding, the court finds the defendant, a company, liable and orders it to pay a large sum of money to compensate for the plaintiffs losses. Which of the following BEST describes this type of remedy?

Options:

Declaratory relief

Carnages

Equitable relief

Injunction

Question 46

__________ insurance is a type of insurance under which an insured entity is covered against losses caused by the dishonest or fraudulent acts of its employees.

Options:

Fidelity

Inherent risk

Opportunity

Residual risk

Question 47

Kamala is conducting a fraud examination in a country where courts apply laws from codified statutes to each case. When deciding legal issues, the courts are not bound by similar court decisions from previous cases. The country where Kamala is working MOST LIKELY has a __________ judicial system.

Options:

Common law

Civil law

Substantive law

Statutory law

Question 48

Cory has been charged with lax evasion for filing a false tax return. As a defense, Cory claims that he made an honest mistake due to the tax law's complexity, and he did not intentionally submit an incorrect tax return If the court finds that his mistake was in good faith the most likely will NOT be found to have "willfully'" engaged m fraudulent actions to avoid reporting or paying his taxes.

Options:

True

False

Question 49

Which of the following is generally one of the goals of deferred prosecution agreements?

Options:

To help reduce the risk of future illegal practices by an organization accused of misconduct.

To save trial resources by getting the defendant to plead guilty to a less serious offense.

To postpone prosecution until a company conducts an adequate internal investigation.

To increase the likelihood of conviction if a company is accused of subsequent misconduct.

Question 50

Which of the following is NOT a legal element that must be shown to prove a claim for fraudulent misrepresentation of material facts?

Options:

The victim relied on the misrepresentation

The defendant acted negligently

The defendant made a false statement (i, e., a misrepresentation of fact)

The victim suffered damages as a result of the misrepresentation

Question 51

Which of the following statements regarding civil lawsuits in most jurisdictions is CORRECT?

Options:

The plaintiffs initial filing does not typically need to contain a summary of the evidence

Civil lawsuits begin with the filing of a pleading, usually in the jurisdiction in which the defendant resides or where the claim arose

The plaintiff’s initial filing with the court does not typically need to include the specific facts on which the claim relies.

All of the above are correct

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ACFE CFE-Law Certified Fraud Examiner (CFE) - Law Exam Practice Test

Certified Fraud Examiner (CFE) - Law Questions and Answers

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