Forensic Accounting & Fraud Detection:
2026 Exam Prep
Fraud Examination, Legal Principles & Digital Forensics (100 Questions)
1. According to the classic "Fraud Triangle," what are the three elements necessary for
fraud to occur?
A) Greed, Opportunity, and Cash
B) Pressure (Motivation), Opportunity, and Rationalization
C) Pressure, Intelligence, and Rationalization
D) Debt, Opportunity, and Justification
Correct Answer: B) Pressure (Motivation), Opportunity, and Rationalization
2. In the expanded "Fraud Diamond," what fourth element is added to the Fraud Triangle?
A) Greed
B) Capability (the skills/knowledge to commit the fraud)
C) Revenge
D) Collusion
Correct Answer: B) Capability (the skills/knowledge to commit the fraud)
3. Which organization is the world's largest anti-fraud organization and provider of the
CFE credential?
A) AICPA
B) ACFE (Association of Certified Fraud Examiners)
C) SEC
D) FBI
Correct Answer: B) ACFE (Association of Certified Fraud Examiners)
4. According to the ACFE, which category of occupational fraud is the most common?
A) Financial Statement Fraud
B) Asset Misappropriation
C) Corruption
D) Identity Theft
Correct Answer: B) Asset Misappropriation
5. Which category of occupational fraud is the most costly (highest median loss)?
A) Asset Misappropriation
B) Financial Statement Fraud
,C) Corruption
D) Expense Reimbursement Fraud
Correct Answer: B) Financial Statement Fraud
6. "Skimming" is defined as:
A) Stealing cash from a company before it is recorded in the accounting system
B) Stealing cash after it has been recorded
C) Using company equipment for personal use
D) Overstating expenses
Correct Answer: A) Stealing cash from a company before it is recorded in the accounting
system
7. "Lapping" is a fraud scheme that involves:
A) Running personal errands on company time
B) Stealing a customer's payment and covering it up by applying the next customer's payment to
the first customer's account
C) Creating fake invoices
D) Stealing physical inventory
Correct Answer: B) Stealing a customer's payment and covering it up by applying the
next customer's payment to the first customer's account
8. A "Shell Company" scheme is a type of:
A) Skimming fraud
B) Billing scheme where payments are made to a fake entity controlled by the fraudster
C) Payroll fraud
D) Corruption
Correct Answer: B) Billing scheme where payments are made to a fake entity controlled
by the fraudster
9. "Ghost Employee" fraud occurs when:
A) An employee works at night
B) A fake person (or someone who does not work for the company) is put on the payroll system
to receive wages
C) An employee steals intellectual property
D) An employee claims to be sick but is not
Correct Answer: B) A fake person (or someone who does not work for the company) is
put on the payroll system to receive wages
10. What is "Economic Extortion"?
, A) Offering a bribe to a government official
B) Demanding money or a favor under the threat of economic harm
C) Stealing from a cash register
D) Inflating the price of goods
Correct Answer: B) Demanding money or a favor under the threat of economic harm
11. A "Conflict of Interest" becomes a fraud when:
A) Two employees disagree
B) An employee has an undisclosed economic or personal interest in a transaction that
adversely affects the employer
C) An employee asks for a raise
D) A manager dates a subordinate
Correct Answer: B) An employee has an undisclosed economic or personal interest in a
transaction that adversely affects the employer
12. "Channel Stuffing" is a type of financial statement fraud that involves:
A) Stuffing cash into a safe
B) Forcing distributors to buy more inventory than they can sell to artificially inflate
current-period revenue
C) Hiding inventory in a warehouse
D) Understating liabilities
Correct Answer: B) Forcing distributors to buy more inventory than they can sell to
artificially inflate current-period revenue
13. "Cookie Jar Reserves" are used to:
A) Store extra cash for the office
B) Over-accrue expenses in good times to create a hidden reserve, which is then used to boost
earnings in bad times (Earnings Management)
C) Pay bribes to officials
D) Hide stolen inventory
Correct Answer: B) Over-accrue expenses in good times to create a hidden reserve,
which is then used to boost earnings in bad times
14. Improperly capitalizing ordinary expenses (e.g., WorldCom) instead of expensing
them immediately causes Net Income to:
A) Decrease
B) Be artificially overstated (increased)
C) Remain unchanged
D) Become negative
Correct Answer: B) Be artificially overstated (increased)
2026 Exam Prep
Fraud Examination, Legal Principles & Digital Forensics (100 Questions)
1. According to the classic "Fraud Triangle," what are the three elements necessary for
fraud to occur?
A) Greed, Opportunity, and Cash
B) Pressure (Motivation), Opportunity, and Rationalization
C) Pressure, Intelligence, and Rationalization
D) Debt, Opportunity, and Justification
Correct Answer: B) Pressure (Motivation), Opportunity, and Rationalization
2. In the expanded "Fraud Diamond," what fourth element is added to the Fraud Triangle?
A) Greed
B) Capability (the skills/knowledge to commit the fraud)
C) Revenge
D) Collusion
Correct Answer: B) Capability (the skills/knowledge to commit the fraud)
3. Which organization is the world's largest anti-fraud organization and provider of the
CFE credential?
A) AICPA
B) ACFE (Association of Certified Fraud Examiners)
C) SEC
D) FBI
Correct Answer: B) ACFE (Association of Certified Fraud Examiners)
4. According to the ACFE, which category of occupational fraud is the most common?
A) Financial Statement Fraud
B) Asset Misappropriation
C) Corruption
D) Identity Theft
Correct Answer: B) Asset Misappropriation
5. Which category of occupational fraud is the most costly (highest median loss)?
A) Asset Misappropriation
B) Financial Statement Fraud
,C) Corruption
D) Expense Reimbursement Fraud
Correct Answer: B) Financial Statement Fraud
6. "Skimming" is defined as:
A) Stealing cash from a company before it is recorded in the accounting system
B) Stealing cash after it has been recorded
C) Using company equipment for personal use
D) Overstating expenses
Correct Answer: A) Stealing cash from a company before it is recorded in the accounting
system
7. "Lapping" is a fraud scheme that involves:
A) Running personal errands on company time
B) Stealing a customer's payment and covering it up by applying the next customer's payment to
the first customer's account
C) Creating fake invoices
D) Stealing physical inventory
Correct Answer: B) Stealing a customer's payment and covering it up by applying the
next customer's payment to the first customer's account
8. A "Shell Company" scheme is a type of:
A) Skimming fraud
B) Billing scheme where payments are made to a fake entity controlled by the fraudster
C) Payroll fraud
D) Corruption
Correct Answer: B) Billing scheme where payments are made to a fake entity controlled
by the fraudster
9. "Ghost Employee" fraud occurs when:
A) An employee works at night
B) A fake person (or someone who does not work for the company) is put on the payroll system
to receive wages
C) An employee steals intellectual property
D) An employee claims to be sick but is not
Correct Answer: B) A fake person (or someone who does not work for the company) is
put on the payroll system to receive wages
10. What is "Economic Extortion"?
, A) Offering a bribe to a government official
B) Demanding money or a favor under the threat of economic harm
C) Stealing from a cash register
D) Inflating the price of goods
Correct Answer: B) Demanding money or a favor under the threat of economic harm
11. A "Conflict of Interest" becomes a fraud when:
A) Two employees disagree
B) An employee has an undisclosed economic or personal interest in a transaction that
adversely affects the employer
C) An employee asks for a raise
D) A manager dates a subordinate
Correct Answer: B) An employee has an undisclosed economic or personal interest in a
transaction that adversely affects the employer
12. "Channel Stuffing" is a type of financial statement fraud that involves:
A) Stuffing cash into a safe
B) Forcing distributors to buy more inventory than they can sell to artificially inflate
current-period revenue
C) Hiding inventory in a warehouse
D) Understating liabilities
Correct Answer: B) Forcing distributors to buy more inventory than they can sell to
artificially inflate current-period revenue
13. "Cookie Jar Reserves" are used to:
A) Store extra cash for the office
B) Over-accrue expenses in good times to create a hidden reserve, which is then used to boost
earnings in bad times (Earnings Management)
C) Pay bribes to officials
D) Hide stolen inventory
Correct Answer: B) Over-accrue expenses in good times to create a hidden reserve,
which is then used to boost earnings in bad times
14. Improperly capitalizing ordinary expenses (e.g., WorldCom) instead of expensing
them immediately causes Net Income to:
A) Decrease
B) Be artificially overstated (increased)
C) Remain unchanged
D) Become negative
Correct Answer: B) Be artificially overstated (increased)
