CFCI STUDY GUIDE 2025/ 2026
QUESTIONS WITH VERIFIED
ANSWERS
Foreign Corrupt Practices Act (FCPA) - correct answer -a law that
prohibits U.S. corporations from making illegal payments to public
officials of foreign governments to obtain business rights or to
enhance their business dealings in those countries
Recording false revenues - correct answer -misrepresenting
financial performance involves recording nonexistent revenue or
misrepresenting the period in which the revenue was received.
Fraudulent revenue recognition - correct answer -involves
recording revenue—typically loan interest income and interest
from investments and related revenue—from a future reporting
period in the current period, or understating amounts set aside for
loan losses.
Manipulating liabilities - correct answer -Neglecting to record
expenses and burying vendor invoices, management can make it
,appear as if expenses for a particular reporting period are lower
than they actually are, thereby making earnings appear greater
than they are.
Overstating Assets - correct answer -failure to mark investments
to market when the securities markets decline, overstating the
amount of cash, or recording the value of an outstanding loan as
being greater than its estimated market value.(pg93)
Manipulating interest rates - correct answer -Libor (London Inter-
Bank Offered Rate) is an average interest rate calculated through
submissions of interest rates by major banks across the world.
The scandal arose when it was discovered that banks were
falsely inflating or deflating their rates so as to profit from trades,
or to give the impression that they were more creditworthy than
they were
Red Flags for all above management level internal fraud - correct
answer -pg 96-99
Checklist for management level fraud prevention - correct answer
-pg 99-103
,Chapter 5 review points - correct answer -pg 104
Chapter 6 (pg 105) - correct answer -External Fraud Against
Financial Service Company
Tool Theft - correct answer -Fraudster who removes tools from a
job site and then sells them and keeps the proceeds but reports
the tools as lost .
Materials Waste - correct answer -Fraudster orders more material
than necessary on an existing purchase order and reports the
excess s waste or scrap.
Product Substitution - correct answer -One grade of material is
specified, submitted, approved, an billed but a lower grade is
delivered.
, Duplicate payments - correct answer -Duplicate payments are
issued for legitimate vendors for legitimate invoices. One check
goes to the vendor and one goes to the fraudster but shows the
check as voided or canceled.
Employee ghosting - correct answer -Basically time card fraud,
where employees clock in for other employees or create a
fictitious employee and collect their pay.
Vehicle maintenance scheme - correct answer -fraudster agrees
to send construction company-owned or leased vehicles to a
service provider for what is described as regular maintenance.
However, either the pricing for the actual services rendered is
greater than the market price, or the services documented are not
actually rendered. In either case, the service provider gives a
kickback to the company employee.
Bid-Rigging Schemes or collusion - correct answer -collusive
fraud wherein an employee helps a vendor illegally obtain a
contract that was supposed to involve competitive bidding, by the
employee getting a kickback.
QUESTIONS WITH VERIFIED
ANSWERS
Foreign Corrupt Practices Act (FCPA) - correct answer -a law that
prohibits U.S. corporations from making illegal payments to public
officials of foreign governments to obtain business rights or to
enhance their business dealings in those countries
Recording false revenues - correct answer -misrepresenting
financial performance involves recording nonexistent revenue or
misrepresenting the period in which the revenue was received.
Fraudulent revenue recognition - correct answer -involves
recording revenue—typically loan interest income and interest
from investments and related revenue—from a future reporting
period in the current period, or understating amounts set aside for
loan losses.
Manipulating liabilities - correct answer -Neglecting to record
expenses and burying vendor invoices, management can make it
,appear as if expenses for a particular reporting period are lower
than they actually are, thereby making earnings appear greater
than they are.
Overstating Assets - correct answer -failure to mark investments
to market when the securities markets decline, overstating the
amount of cash, or recording the value of an outstanding loan as
being greater than its estimated market value.(pg93)
Manipulating interest rates - correct answer -Libor (London Inter-
Bank Offered Rate) is an average interest rate calculated through
submissions of interest rates by major banks across the world.
The scandal arose when it was discovered that banks were
falsely inflating or deflating their rates so as to profit from trades,
or to give the impression that they were more creditworthy than
they were
Red Flags for all above management level internal fraud - correct
answer -pg 96-99
Checklist for management level fraud prevention - correct answer
-pg 99-103
,Chapter 5 review points - correct answer -pg 104
Chapter 6 (pg 105) - correct answer -External Fraud Against
Financial Service Company
Tool Theft - correct answer -Fraudster who removes tools from a
job site and then sells them and keeps the proceeds but reports
the tools as lost .
Materials Waste - correct answer -Fraudster orders more material
than necessary on an existing purchase order and reports the
excess s waste or scrap.
Product Substitution - correct answer -One grade of material is
specified, submitted, approved, an billed but a lower grade is
delivered.
, Duplicate payments - correct answer -Duplicate payments are
issued for legitimate vendors for legitimate invoices. One check
goes to the vendor and one goes to the fraudster but shows the
check as voided or canceled.
Employee ghosting - correct answer -Basically time card fraud,
where employees clock in for other employees or create a
fictitious employee and collect their pay.
Vehicle maintenance scheme - correct answer -fraudster agrees
to send construction company-owned or leased vehicles to a
service provider for what is described as regular maintenance.
However, either the pricing for the actual services rendered is
greater than the market price, or the services documented are not
actually rendered. In either case, the service provider gives a
kickback to the company employee.
Bid-Rigging Schemes or collusion - correct answer -collusive
fraud wherein an employee helps a vendor illegally obtain a
contract that was supposed to involve competitive bidding, by the
employee getting a kickback.
