CFT MONITOR CERTIFICATION (QUESTIONS AND --
ANSWER-S) EXAM 2025/26!!
Question 1:
Which of the following is the BEST definition of fraud?
A. A unintentional misstatement of financial information
B. A deliberate deception to secure unfair or unlawful gain ✓
C. A breach of contract that results in financial loss
D. An error in accounting that leads to misrepresentation
Verified --answer- & Explanation: B. A deliberate deception to secure unfair or
unlawful gain.
Explanation: Fraud is an intentional act involving deception to obtain an
unauthorized benefit, either financial or non-financial. It requires intent, which
distinguishes it from errors or unintentional misstatements.
Question 2:
What is the primary purpose of the "fraud triangle"?
A. To calculate the financial impact of fraud
B. To identify the three factors that are present when fraud occurs ✓
C. To determine the legal penalties for fraud
D. To classify different types of fraud schemes
Verified --answer- & Explanation: B. To identify the three factors that are
present when fraud occurs.
Explanation: The fraud triangle, developed by criminologist Donald Cressey,
outlines three elements that are typically present when fraud occurs:
opportunity, pressure (or incentive), and rationalization. This model helps in
understanding the conditions that lead to fraud and in developing preventive
measures.
,Question 3:
Which of the following is an example of asset misappropriation?
A. Falsifying financial statements to meet earnings targets
B. Stealing inventory from the company warehouse ✓
C. Bribing a government official to secure a contract
D. Manipulating stock prices through false press releases
Verified --answer- & Explanation: B. Stealing inventory from the company
warehouse.
Explanation: Asset misappropriation involves the theft or misuse of an
organization's assets. This can include theft of cash, inventory, or other tangible
assets. Falsifying financial statements is financial statement fraud, and bribery is a
type of corruption.
Question 4:
What is the key difference between fraud and error in financial reporting?
A. The materiality of the misstatement
B. The intent to deceive ✓
C. The impact on the company's stock price
D. The level of management involved
Verified --answer- & Explanation: B. The intent to deceive.
Explanation: The distinguishing factor between fraud and error is intent. Fraud
involves intentional deception, while errors are unintentional mistakes. Both can
result in misstatements, but the cause and the response to them differ
significantly.
Question 5:
In the context of fraud examination, what is "predication"?
A. The process of predicting where fraud will occur
B. The reason to believe that fraud may have occurred ✓
C. The legal term for convicting a fraudster
D. The calculation of fraud losses
Verified --answer- & Explanation: B. The reason to believe that fraud may have
occurred.
Explanation: Predication is the totality of circumstances that would lead a
, reasonable, professionally trained, and prudent individual to believe a fraud has
occurred, is occurring, or will occur. It is the basis for initiating a fraud
examination.
Question 6:
Which of the following is a red flag for financial statement fraud?
A. High employee turnover in the warehouse
B. Consistent meeting of earnings projections by a small margin ✓
C. Increased sales during the holiday season
D. Expansion into new markets
Verified --answer- & Explanation: B. Consistent meeting of earnings projections
by a small margin.
Explanation: While meeting earnings projections is not inherently fraudulent,
consistently meeting them by a small margin can be a red flag because it may
indicate earnings management or manipulation to meet analysts' expectations.
Question 7:
What is the primary goal of a fraud examination?
A. To punish the fraudster
B. To recover lost assets
C. To determine the truth regarding whether fraud occurred ✓
D. To improve internal controls
Verified --answer- & Explanation: C. To determine the truth regarding whether
fraud occurred.
Explanation: The objective of a fraud examination is to ascertain whether fraud
has taken place and, if so, to determine who is responsible, how it was done, and
how much was lost. It is a fact-finding process.
Question 8:
Which of the following is a preventive control against fraud?
A. Regular audits by external auditors
B. Segregation of duties ✓
C. Investigation of fraud allegations
D. Prosecution of fraudsters
ANSWER-S) EXAM 2025/26!!
Question 1:
Which of the following is the BEST definition of fraud?
A. A unintentional misstatement of financial information
B. A deliberate deception to secure unfair or unlawful gain ✓
C. A breach of contract that results in financial loss
D. An error in accounting that leads to misrepresentation
Verified --answer- & Explanation: B. A deliberate deception to secure unfair or
unlawful gain.
Explanation: Fraud is an intentional act involving deception to obtain an
unauthorized benefit, either financial or non-financial. It requires intent, which
distinguishes it from errors or unintentional misstatements.
Question 2:
What is the primary purpose of the "fraud triangle"?
A. To calculate the financial impact of fraud
B. To identify the three factors that are present when fraud occurs ✓
C. To determine the legal penalties for fraud
D. To classify different types of fraud schemes
Verified --answer- & Explanation: B. To identify the three factors that are
present when fraud occurs.
Explanation: The fraud triangle, developed by criminologist Donald Cressey,
outlines three elements that are typically present when fraud occurs:
opportunity, pressure (or incentive), and rationalization. This model helps in
understanding the conditions that lead to fraud and in developing preventive
measures.
,Question 3:
Which of the following is an example of asset misappropriation?
A. Falsifying financial statements to meet earnings targets
B. Stealing inventory from the company warehouse ✓
C. Bribing a government official to secure a contract
D. Manipulating stock prices through false press releases
Verified --answer- & Explanation: B. Stealing inventory from the company
warehouse.
Explanation: Asset misappropriation involves the theft or misuse of an
organization's assets. This can include theft of cash, inventory, or other tangible
assets. Falsifying financial statements is financial statement fraud, and bribery is a
type of corruption.
Question 4:
What is the key difference between fraud and error in financial reporting?
A. The materiality of the misstatement
B. The intent to deceive ✓
C. The impact on the company's stock price
D. The level of management involved
Verified --answer- & Explanation: B. The intent to deceive.
Explanation: The distinguishing factor between fraud and error is intent. Fraud
involves intentional deception, while errors are unintentional mistakes. Both can
result in misstatements, but the cause and the response to them differ
significantly.
Question 5:
In the context of fraud examination, what is "predication"?
A. The process of predicting where fraud will occur
B. The reason to believe that fraud may have occurred ✓
C. The legal term for convicting a fraudster
D. The calculation of fraud losses
Verified --answer- & Explanation: B. The reason to believe that fraud may have
occurred.
Explanation: Predication is the totality of circumstances that would lead a
, reasonable, professionally trained, and prudent individual to believe a fraud has
occurred, is occurring, or will occur. It is the basis for initiating a fraud
examination.
Question 6:
Which of the following is a red flag for financial statement fraud?
A. High employee turnover in the warehouse
B. Consistent meeting of earnings projections by a small margin ✓
C. Increased sales during the holiday season
D. Expansion into new markets
Verified --answer- & Explanation: B. Consistent meeting of earnings projections
by a small margin.
Explanation: While meeting earnings projections is not inherently fraudulent,
consistently meeting them by a small margin can be a red flag because it may
indicate earnings management or manipulation to meet analysts' expectations.
Question 7:
What is the primary goal of a fraud examination?
A. To punish the fraudster
B. To recover lost assets
C. To determine the truth regarding whether fraud occurred ✓
D. To improve internal controls
Verified --answer- & Explanation: C. To determine the truth regarding whether
fraud occurred.
Explanation: The objective of a fraud examination is to ascertain whether fraud
has taken place and, if so, to determine who is responsible, how it was done, and
how much was lost. It is a fact-finding process.
Question 8:
Which of the following is a preventive control against fraud?
A. Regular audits by external auditors
B. Segregation of duties ✓
C. Investigation of fraud allegations
D. Prosecution of fraudsters
