CFE-Fraud-Schemes-and-Financial-Crimes Dumps with Practice Exam Questions Answers

The correct answer is C. Change order abuse occurs after a contract has been awarded, when a contractor improperly increases the price, expands the work, or modifies contract terms through change orders. A corrupt contractor might submit a low bid to win the award and later recover profits through unnecessary or inflated change orders. This defeats the benefit of competitive bidding because the procuring entity no longer receives the price or terms that justified the original award. Option A is incorrect because the scheme usually increases, not decreases, the amount paid. Option B is too narrow because change order abuse can occur in competitive contracts. Option D is incorrect because the scheme often involves collusion between contractor and procurement personnel, not necessarily several contractors.

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Detailed Explanation:

Rationale for Correct Answer: Accrual basis accounting requires revenues and related expenses to be recorded in the same accounting period. This is known as the matching principle , ensuring accurate measurement of income.

Analysis of Incorrect Options:

A. Equity – Not relevant to matching expenses.

C. Expense – A category of cost, not a principle.

D. Financial record – Too general.

Key Concept: Accrual Accounting & Matching Principle .

The correct answer is B. A Ponzi scheme is a fraudulent investment arrangement in which funds from new investors are used to make payments to earlier investors. The payments create an appearance that the investment is legitimate and profitable, even though little or no genuine business activity or investment return exists. This artificial success helps the promoter attract more investors and delay detection. Option A describes a characteristic more closely associated with pyramid schemes, where compensation depends heavily on recruiting participants. Option C is incomplete because Ponzi schemes usually promise high returns with low or no stated risk, not openly high-risk investments. Option D also reflects pyramid-style recruitment structures rather than the defining feature of a Ponzi scheme.

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Shirley has most likely been victimized by a romance scheme. In romance, sweetheart, or friendship scams, the fraudster builds an emotional relationship with the victim, often through social networking or online communication, and then requests money under a sympathetic pretext. Simon befriends Shirley, creates expectations of a future meeting, claims financial hardship, receives $10,000, and then disappears. That pattern is typical of a romance scam. A grandparent scheme usually involves impersonating a grandchild or relative in distress. A bait-and-switch scheme involves advertising one product or service and substituting another. A vacation scheme would focus on fraudulent travel offers, not a fabricated romantic relationship used to obtain money. The ACFE material identifies romance and friendship sc hemes as consumer fraud schemes.

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Detailed Explanation:

Rationale for Correct Answer: Fraudsters often attempt to influence or bribe employees who have access to sealed bids . Access to sealed bids provides unfair knowledge of competitors’ pricing and terms, enabling collusion or bid manipulation.

Analysis of Incorrect Options:

A. Bid-splitting – A fraud scheme, not what vendors seek access to.

C. General purchasing – Too broad; not specifically tied to vendor fraud.

D. Tailor specifications – A corruption scheme, but not the specific target of vendor bribery.

Key Concept: Sealed bid access as a key target in procurement fraud.