ACFE CFE - Fraud Prevention Exam Dumps & Practice Test Questions
Question 1:
A Certified Fraud Examiner (CFE) must adhere to the ethical standards outlined in the ACFE Code of Professional Ethics, which govern professionalism, competence, and conduct during fraud investigations. Below are different actions taken by CFEs.
Which of these is most likely to be considered a violation of the ACFE Code of Professional Ethics?
A. Green, a CFE, was assigned to investigate a potential financial statement fraud. While investigating, he identified issues with internal controls that were outside the original scope of his task. He included these additional findings in his final report to management.
B. Stephanie, a CFE, took on a fraud examination task and delegated the review of cash records to a less experienced employee. Without confirming the employee’s findings, she relied on his assurance that no fraud had occurred, which resulted in a major fraud going undetected.
C. Susan, a CFE, found no fraud during her investigation for a client. A year later, a local prosecutor issued a court order requesting her records related to that client. Without asking for the client's consent, she handed over the requested information.
D. All of the above represent violations of the ACFE Code of Professional Ethics.
Answer: B
Explanation:
The ACFE Code of Professional Ethics emphasizes the importance of competence, due diligence, and professionalism when carrying out fraud investigations. All the situations described in the options could potentially raise ethical concerns, but Option B represents the most significant violation of the ethical standards, as it directly involves negligence in the CFE's duty to ensure proper investigation and validation of findings.
Why B is the Most Likely Violation:
Competence and Responsibility: The ACFE Code of Professional Ethics mandates that CFEs exercise due care, and take responsibility for their work. By delegating the review of cash records to a less experienced employee without verifying the employee's findings, Stephanie did not exercise the appropriate level of diligence. As a result, a major fraud went undetected, which directly reflects negligence and a failure to meet the ethical standard of professionalism required in fraud investigations.
Failure to Verify Work: The reliance on an inexperienced employee's unverified findings represents a lack of professional skepticism and a failure to independently confirm the accuracy of the investigation. In fraud examinations, it is essential that findings are thoroughly validated, especially when significant decisions are being made based on those findings.
Why the Other Options Are Less Likely Violations:
A. Green’s Actions: Green identified issues with internal controls outside of the original scope of his investigation and included these findings in his final report. While the ACFE Code of Professional Ethics does emphasize professionalism, this action is not necessarily an ethical violation. In fact, identifying weaknesses in internal controls could be seen as part of the CFE's responsibility to report any issues discovered during the investigation. As long as Green disclosed that these findings were outside the original scope and relevant to the investigation, his action does not appear to be a violation.
C. Susan's Actions: Susan handed over records to a prosecutor after a court order was issued, without asking for the client’s consent. This action would not be considered a violation of the ACFE Code of Professional Ethics. Legal compliance overrides the need for client consent when a court order is involved. The CFE is obligated to comply with legal requests, such as court orders, and in this case, Susan was right to provide the requested information. The failure to seek consent is not a violation in the face of a valid legal request.
While all of the described actions could raise ethical concerns, Option B stands out as the most likely violation of the ACFE Code of Professional Ethics because it directly involves negligence in fulfilling the CFE’s professional responsibilities. This failure to verify findings led to a fraud going undetected, which is a breach of the ethical standard requiring competence and due diligence. Therefore, the correct answer is B.
Question 2:
Blue, a Certified Fraud Examiner (CFE), is facing an ethical dilemma concerning the contractual terms of a professional assignment. He needs to decide the best course of action in this situation.
Which of the following would be considered the least authoritative source for helping Blue make his decision?
A. Contractual law
B. The ACFE Code of Professional Ethics
C. How individuals he respects have handled similar situations
D. General moral and philosophical principles
Answer: C
Explanation:
In ethical decision-making, particularly in the professional context of a Certified Fraud Examiner (CFE), it is crucial to rely on authoritative sources that provide clear guidelines and legal or ethical standards. These sources offer a structured approach that helps guide decisions within the bounds of professionalism and legal obligations. Here's why Option C, "How individuals he respects have handled similar situations," would be considered the least authoritative source:
Why C is the Least Authoritative:
Subjective Influence: Relying on how individuals Blue respects have handled similar situations introduces subjectivity. While respecting others’ opinions is valuable, it lacks a formal, structured framework. The actions or decisions made by others, even those Blue admires, may not be aligned with established legal or ethical standards, and they may not apply in the same context. These actions could reflect personal values or experiences, rather than objective criteria that are universally recognized or accepted.
Potential for Bias: Decision-making based on the actions of respected individuals could introduce bias and lead to decisions influenced more by personal respect or admiration than by rational, ethical, or legal considerations. This could undermine the objectivity needed in a professional setting.
Why the Other Options Are More Authoritative:
A. Contractual law: Contractual law represents legal principles governing agreements and the rights of parties involved. As a CFE, Blue is expected to adhere to legal obligations, and any decisions made should align with the terms of the contract, ensuring that he remains within the boundaries of the law. Contractual law provides a clear and enforceable standard for Blue to follow.
B. The ACFE Code of Professional Ethics: The ACFE Code of Professional Ethics is a professional and ethical guideline that specifically addresses the responsibilities and ethical standards of fraud examiners. It provides detailed instructions on how to handle various professional situations, ensuring that Blue's decisions are consistent with the ethical expectations of the profession. This code offers a strong, authoritative framework for ethical decision-making.
D. General moral and philosophical principles: While more abstract, moral and philosophical principles offer fundamental ethical guidelines that can serve as the foundation for decision-making. These principles are typically universal and are often incorporated into the ACFE Code of Professional Ethics. They offer guidance on what is considered right or wrong based on broader ethical values, making them a reliable resource when making decisions that affect individuals and society.
The least authoritative source in this scenario is Option C – relying on how individuals Blue respects have handled similar situations. While these individuals may offer useful perspectives, their actions are personal and subjective, lacking the formal, universal, and legally binding authority that sources like contractual law or the ACFE Code of Professional Ethics provide. Therefore, the correct answer is C.
Question 3:
Which of the following is generally not considered part of a board of directors' responsibilities within an organization?
A. Acting as a liaison between shareholders and the executive team
B. Ensuring the protection and proper use of the company’s assets
C. Managing the day-to-day operations of the company and overseeing employees
D. Reviewing and assessing the strategic decisions made by management
Answer: C
Explanation:
The board of directors holds an important oversight role within an organization, but it is not typically responsible for managing the day-to-day operations of the company. Let’s break down the roles outlined in each option to understand why Option C is the correct answer.
Why C is Correct:
Managing day-to-day operations is typically the responsibility of the executive team, including the CEO and other senior managers. These individuals are directly involved in running the company's daily activities, whereas the board's primary role is to provide oversight, guidance, and strategic direction. The board does not engage in operational decision-making, leaving this to the executives.
A board of directors ensures that the executive team acts in the best interest of the organization and shareholders, but it does not get involved in the direct, hands-on management of employees or the company's day-to-day functions.
Why the Other Options Are Correct:
A. Acting as a liaison between shareholders and the executive team: One of the board’s roles is to act as an intermediary between shareholders and the executive team. The board communicates the interests of shareholders to management and keeps shareholders informed about the company’s performance, major decisions, and future directions.
B. Ensuring the protection and proper use of the company’s assets: The board is responsible for ensuring that the company’s assets are used wisely and protected. This includes overseeing the financial health of the company, risk management, and safeguarding the resources that contribute to the company's success. The board must ensure the company is acting in a manner that protects its assets and ensures their effective use.
D. Reviewing and assessing the strategic decisions made by management: A core responsibility of the board is to review and assess the strategic direction and decisions made by the executive management team. The board evaluates major initiatives and business strategies to ensure they align with shareholder interests, company values, and long-term goals.
The board of directors is responsible for high-level oversight, strategic guidance, and ensuring the company adheres to its mission and legal obligations. However, it is not involved in the day-to-day operations of the company, which is the responsibility of the executive management team. Therefore, the correct answer is C.
Question 4:
Who has the primary responsibility for identifying and managing fraud within an organization?
A. Internal auditors
B. Senior management
C. The audit committee
D. Legal counsel
Answer: B
Explanation:
The primary responsibility for identifying and managing fraud within an organization lies with senior management. While other stakeholders play important roles in supporting fraud detection and response, senior management is ultimately accountable for creating a culture of integrity, implementing internal controls, and overseeing the organization's efforts to prevent and detect fraud. Here’s a breakdown of each option:
Why B is Correct:
Senior management is responsible for setting the tone at the top and ensuring that the organization has a strong anti-fraud program in place. This includes:
Creating and enforcing policies and procedures that discourage fraudulent activities.
Ensuring the existence of an effective internal control system to detect fraud.
Providing the resources and support necessary for fraud prevention, detection, and investigation.
Senior management has the authority to establish the framework and culture within the organization that prioritizes fraud risk management. Their leadership is crucial for setting expectations regarding ethical behavior and compliance throughout the organization.
Why the Other Options Are Less Appropriate:
A. Internal auditors: While internal auditors play a key role in identifying weaknesses in internal controls and detecting fraud through audits and investigations, they report to senior management or the audit committee. Their role is more focused on assessing and testing the effectiveness of controls, rather than managing fraud directly. They provide valuable insights and recommendations but are not primarily responsible for managing fraud.
C. The audit committee: The audit committee oversees the effectiveness of the internal audit function and financial reporting. While the audit committee has a critical role in ensuring that proper fraud risk management practices are in place, their responsibility is more about oversight rather than day-to-day management. They monitor senior management’s actions and help ensure that fraud risks are addressed, but they do not directly manage fraud within the organization.
D. Legal counsel: Legal counsel provides advice on legal implications of fraud and may be involved in legal actions related to fraud. However, their role is reactive rather than proactive. They support the organization’s efforts to handle fraud cases legally, but they are not responsible for identifying or managing fraud directly. The primary responsibility lies with senior management to establish frameworks and systems for fraud detection and prevention.
Although internal auditors, the audit committee, and legal counsel each play vital roles in addressing fraud, the primary responsibility for identifying and managing fraud lies with senior management. They have the ultimate responsibility to ensure that appropriate systems, controls, and policies are in place to prevent and detect fraud within the organization. Therefore, the correct answer is B.
Question 5:
Gray, a Certified Fraud Examiner (CFE) working independently, is hired by Green, the president of ABC Corporation, to investigate allegations of kickbacks involving one of ABC's employees. During the investigation, Gray uncovers evidence implicating Green in a separate fraud. According to the ACFE Code of Professional Ethics, what should Gray do in this situation?
A. Keep the information private and not reveal it.
B. Withdraw from the investigation and discontinue the engagement.
C. Report the findings to law enforcement.
D. Notify the company’s board of directors about Green's fraudulent actions.
Answer: D
Explanation:
The ACFE Code of Professional Ethics places great emphasis on the need for fraud examiners to act with integrity, objectivity, and professionalism, especially when handling sensitive information. In a situation like the one described, where Gray uncovers evidence implicating Green, the president of ABC Corporation, in a separate fraud, it is critical that Gray take the right course of action to address this ethical dilemma while adhering to professional standards.
Why D is the Correct Answer:
Notify the company’s board of directors about Green's fraudulent actions: According to the ACFE Code of Professional Ethics, if a CFE uncovers evidence that implicates someone in wrongdoing, and that person is in a position of significant authority (in this case, the president of the company), the CFE is obligated to act in a way that serves the best interest of the organization and its stakeholders. The board of directors has the responsibility for overseeing the actions of senior management and ensuring the integrity of the organization. Reporting the findings to the board ensures that the issue is handled by the proper governing body within the organization, and it allows the board to take appropriate corrective action.
Ethical Responsibility: Gray’s duty is to remain objective and act in the best interest of the organization. By reporting the findings to the board, Gray helps ensure the organization’s integrity is preserved. The board, rather than the president, should make decisions about the next steps, such as whether to pursue legal action or involve law enforcement.
Why the Other Options Are Incorrect:
A. Keep the information private and not reveal it: Keeping the information private would be a violation of the ethical duty to report fraudulent activity. Gray is not in a position to conceal evidence of fraud, especially when it involves someone in such a significant leadership position within the company. Confidentiality is important, but it should never be used to shield fraud or illegal activity. The ACFE Code of Professional Ethics requires CFEs to act with integrity and objectivity, which means reporting wrongdoing.
B. Withdraw from the investigation and discontinue the engagement: While it is important to avoid conflicts of interest, withdrawing from the investigation is not the correct action in this scenario. The ACFE Code of Professional Ethics does allow a CFE to withdraw from an engagement if they are unable to maintain objectivity, but this would not be appropriate simply because the evidence implicates the president of the company. The ethical choice is to report the findings and let the organization’s leadership or the board address the matter.
C. Report the findings to law enforcement: Reporting the findings to law enforcement could be considered an option, but it is not the first step in this situation. The CFE should follow the organization’s internal reporting procedures, which generally involve informing the board of directors before taking external actions. Law enforcement involvement might be necessary if the situation involves criminal activity, but the CFE should first report the findings to the board to give the organization the opportunity to address the issue internally.
The most ethical and professional course of action in this situation is for Gray to report the findings to the company’s board of directors. This aligns with the ACFE Code of Professional Ethics, ensuring that the matter is handled appropriately at the highest levels within the organization, with the board taking responsibility for any necessary next steps. Therefore, the correct answer is D.
Question 6:
Which of the following represents the best practice for organizations to protect and support whistleblowers?
A. Whistleblower protections should primarily be focused on lower-level employees, as they are more vulnerable to retaliation.
B. Organizations should implement clear and formal penalties for employees who retaliate against whistleblowers.
C. Whistleblower procedures should be communicated within the organization, but their details should remain confidential from external parties.
D. Organizations should create a detailed whistleblower policy that includes every possible instance of misconduct that has been reported in the company.
Answer: B
Explanation:
Whistleblowers play a crucial role in identifying fraud, misconduct, and unethical behavior within an organization. It is essential for companies to ensure that individuals who come forward with concerns are protected from retaliation. Here's an analysis of the options provided:
Why B is Correct:
Implement clear and formal penalties for employees who retaliate against whistleblowers: One of the best practices for supporting whistleblowers is to establish a strong anti-retaliation policy. By implementing clear and formal penalties for retaliation, the organization sends a strong message that whistleblowing will be taken seriously, and retaliation will not be tolerated. This approach creates a safe environment for employees to report wrongdoing without fear of reprisal. The penalties should be clearly outlined to ensure that employees understand the consequences of retaliation, which helps protect whistleblowers from both overt and subtle forms of retribution.
Clear penalties provide a strong deterrent for those who might otherwise consider retaliating against a whistleblower. This fosters a culture of trust and transparency, where employees feel confident that they can report unethical behavior without jeopardizing their career or facing personal harm.
Why the Other Options Are Less Effective:
A. Whistleblower protections should primarily be focused on lower-level employees, as they are more vulnerable to retaliation: While lower-level employees may indeed be more vulnerable to retaliation, whistleblower protections should apply equally to all employees within the organization. Focusing protections only on certain groups could create an imbalance, leaving more senior employees or those in more powerful positions unprotected. Best practice calls for a universal approach that applies to all employees, regardless of their rank or role within the organization.
C. Whistleblower procedures should be communicated within the organization, but their details should remain confidential from external parties: It is important that whistleblower procedures are clearly communicated within the organization to ensure that employees are aware of how to report misconduct. However, maintaining confidentiality from external parties can limit the effectiveness of the process. While protecting the identity of whistleblowers is important to prevent retaliation, being open about the procedures and how they work can help foster a culture of accountability and transparency. This will encourage employees to come forward when they see misconduct. Additionally, if external authorities need to be involved, confidentiality may need to be lifted to comply with legal or regulatory requirements.
D. Organizations should create a detailed whistleblower policy that includes every possible instance of misconduct that has been reported in the company: While a comprehensive policy is important, overly detailed policies listing every type of misconduct could be cumbersome and unrealistic. It's more effective to have a clear, concise policy that outlines the general procedures for reporting misconduct, the protection available to whistleblowers, and the processes that will be followed to investigate claims. A highly detailed list of every possible misconduct instance could make the policy overwhelming and difficult to navigate. Instead, the focus should be on ensuring the process is clear, accessible, and trusted.
The best practice for organizations to protect and support whistleblowers is to implement clear and formal penalties for retaliation. This policy ensures that employees feel safe in reporting misconduct without fear of adverse consequences, thus encouraging a culture of ethical behavior and accountability. Therefore, the correct answer is B.
Question 7:
Which criminological theory focuses on the role of accessible targets, the lack of capable guardians (such as auditors or security personnel), and the presence of motivated offenders in influencing crime?
A. Routine activities theory
B. Conditioning theory
C. Rational choice theory
D. Social control theory
Answer: A
Explanation:
The criminological theory that focuses on the role of accessible targets, the lack of capable guardians, and the presence of motivated offenders in influencing crime is Routine Activities Theory. This theory explains how crimes occur based on the routine activities of individuals and how certain conditions or situations can make crime more likely. Let’s break down why A is the correct answer and why the other options are less appropriate.
Why A is Correct:
Routine Activities Theory was developed by criminologists Lawrence Cohen and Marcus Felson in 1979. The theory argues that for a crime to occur, three elements must be present:
Motivated offenders: Individuals who have the desire and intention to commit a crime.
Suitable targets: Objects, individuals, or property that are easy to steal, harm, or exploit.
Lack of capable guardians: People or systems (such as auditors, security personnel, or surveillance systems) that could potentially prevent the crime from occurring.
According to this theory, the likelihood of crime increases when a motivated offender finds an accessible target and when there is a lack of capable guardians. For example, if an individual is motivated to commit a theft and the target (such as an unprotected building or an unsecured asset) is easily accessible, and there are no guards or security measures in place, the probability of the crime occurring increases. This theory emphasizes how the routine movements and behaviors of people (such as working, shopping, or socializing) influence the opportunities for crime.
Why the Other Options Are Incorrect:
B. Conditioning theory: Conditioning theory, associated with behaviorist psychology, focuses on how behavior is learned through interactions with the environment, particularly through reinforcement and punishment. It doesn’t directly address the situational factors that contribute to crime, such as accessible targets or the presence of guardians. Instead, it’s more concerned with how behaviors (including criminal behaviors) are conditioned or learned.
C. Rational choice theory: Rational choice theory is based on the idea that individuals make decisions to commit crimes based on a cost-benefit analysis. They weigh the potential rewards of the crime against the risks of getting caught. While rational choice theory does emphasize decision-making, it doesn’t focus specifically on the situational factors like accessible targets or guardianship, which are central to Routine Activities Theory.
D. Social control theory: Social control theory, developed by Travis Hirschi, suggests that people commit crimes when their bonds to society (such as attachment to family, commitment to work, involvement in conventional activities, and belief in societal rules) are weak. It focuses more on the individual’s relationship to society and why some people refrain from crime due to these bonds, rather than the situational conditions (like the presence of motivated offenders or accessible targets) emphasized in Routine Activities Theory.
Routine Activities Theory provides a framework for understanding crime based on the interaction of motivated offenders, suitable targets, and lack of capable guardians. It emphasizes how routine patterns of behavior and situational factors influence the occurrence of crime. Therefore, the correct answer is A.
Question 8:
During an admission-seeking interview, Smith, an accounts payable clerk, admits to embezzling funds from the company. Is it appropriate for Jones, the Certified Fraud Examiner (CFE) conducting the investigation, to refer to Smith as "guilty" in the fraud examination report?
A. True
B. False
Answer: B
Explanation:
In a fraud examination, it is crucial that the Certified Fraud Examiner (CFE) remains objective and impartial, adhering to the professional and ethical standards of the Association of Certified Fraud Examiners (ACFE). Even though Smith admits to embezzling funds during an interview, it would be inappropriate and unprofessional for the CFE to refer to Smith as "guilty" in the fraud examination report. Here's why:
Why B is Correct:
Guilt is a legal determination: The term "guilty" is a legal conclusion that can only be made by a court of law, not by an investigator or CFE. In the context of a fraud examination, the CFE is gathering evidence and conducting a thorough investigation, but they are not making legal judgments or issuing findings of guilt. The role of the CFE is to investigate the facts, gather evidence, and report the findings to the relevant parties (such as management, legal counsel, or law enforcement). Only after due process and legal proceedings can an individual be formally deemed "guilty" of a crime
Reporting should be neutral and objective: The CFE’s report should focus on facts and evidence without making conclusions that could be seen as prejudicing the case. The use of the word "guilty" could be viewed as a biased statement or an overreach, as it suggests that the individual has been legally convicted without the appropriate judicial process. Even if Smith confessed during an admission-seeking interview, the CFE should simply document the admission as part of the evidence rather than jumping to a legal conclusion.
The importance of due process: The legal system provides the framework for determining guilt through a trial process, where the defendant is allowed the opportunity to present a defense and where a court makes a ruling. The CFE's responsibility is to collect and document evidence that could be used in such a legal process, not to replace it with their own conclusions about guilt.
Confession is not the same as conviction: While Smith's admission may suggest guilt, in a legal context, an admission of guilt is not automatically equivalent to a legal conviction. There could be various reasons for a confession, and a confession may need to be corroborated with further evidence before any legal action is taken.
Why A is Incorrect:
Referring to Smith as "guilty" in the report is not appropriate because it would imply that the CFE is making a legal judgment, which is beyond their role and responsibility. Guilt is for the courts to decide, and the CFE should avoid making statements that could be seen as prejudicial or influencing the outcome of any potential legal proceedings.
In the context of a fraud examination, it is important for the Certified Fraud Examiner (CFE) to maintain objectivity and professionalism by refraining from making legal conclusions like referring to someone as "guilty." The CFE's report should focus on the facts and evidence and should not prematurely conclude legal outcomes. Therefore, the correct answer is B (False).
Question 9:
Which of the following best describes an ethical challenge that CFEs may face while handling fraud examinations?
A. Balancing objectivity while managing personal biases
B. Being pressured by management to minimize fraud findings
C. Ensuring that confidentiality is maintained even when legal obligations arise
D. All of the above represent ethical challenges faced by CFEs
Answer: D
Explanation:
Certified Fraud Examiners (CFEs) face a variety of ethical challenges when conducting fraud examinations. These challenges require them to navigate complex situations while adhering to professional standards and ensuring the integrity of their work. Let's analyze each option in detail:
Why D is Correct:
Balancing objectivity while managing personal biases: One of the primary ethical challenges for any investigator, including CFEs, is maintaining objectivity throughout the investigation. Personal biases can inadvertently influence how evidence is interpreted or which leads are pursued. For example, if a CFE has preconceived notions about a particular individual or department, it could affect their ability to remain neutral and fair during the investigation. The ACFE Code of Professional Ethics emphasizes the need for objectivity, and CFEs are expected to conduct investigations without letting personal feelings or biases compromise their professional judgment. Striving for objectivity ensures that the findings are credible, trustworthy, and legally sound.
Being pressured by management to minimize fraud findings: In some cases, CFEs may face external pressures from management or other stakeholders to downplay or ignore fraud findings. This is a significant ethical issue because it compromises the integrity of the investigation and can lead to the cover-up of illegal or unethical activity. A CFE must maintain professional independence and resist any attempts to influence the findings or conclusions of the investigation. Upholding professional integrity requires that CFEs report all findings accurately and without bias, regardless of potential external pressures.
Ensuring that confidentiality is maintained even when legal obligations arise: Confidentiality is a cornerstone of the fraud examination process. However, there are times when legal obligations may require the CFE to disclose information, such as during court proceedings or when subpoenaed by authorities. CFEs must carefully navigate the balance between maintaining confidentiality and complying with legal requirements. Violating confidentiality could have legal ramifications and undermine the integrity of the investigation. At the same time, failing to disclose information when legally obligated can expose the CFE and their organization to legal liability. Therefore, maintaining confidentiality while ensuring compliance with legal obligations presents a complex ethical challenge.
All three of the challenges described in options A, B, and C are significant ethical challenges that CFEs face in the course of their work. Maintaining objectivity, resisting pressure from management, and balancing confidentiality with legal obligations are all crucial aspects of conducting a fraud examination with integrity and professionalism. Therefore, the correct answer is D.
Question 10:
In the context of fraud examinations, what does the principle of “due professional care” primarily emphasize?
A. Thoroughness in investigating fraud, without ignoring any leads
B. Keeping all findings confidential, even in the face of legal challenges
C. Maintaining independence and objectivity throughout the investigation
D. Avoiding bias or personal judgment in the assessment of evidence
Answer: A
Explanation:
The principle of “due professional care” is a key ethical and professional standard in fraud examinations. It requires Certified Fraud Examiners (CFEs) to conduct investigations in a manner that reflects the highest level of professional competence and care. This involves a comprehensive approach to the investigation, ensuring that all aspects of the case are examined thoroughly, and no relevant leads or evidence are overlooked. Let’s break down each option and explain why A is the most appropriate answer.
Why A is Correct:
Due professional care emphasizes thoroughness in the investigation process. This means CFEs should follow a comprehensive approach to ensure that all leads are explored, all relevant evidence is reviewed, and no critical pieces of information are ignored. It requires CFEs to give proper attention to the fraud examination at every stage, without cutting corners or rushing through the investigation. For example, a CFE may need to review financial records, interview witnesses, or conduct forensic analysis to uncover potential fraud, ensuring that no potential clues are disregarded. Thoroughness is crucial to ensure that the fraud investigation is complete, reliable, and credible.
Why the Other Options are Incorrect:
B. Keeping all findings confidential, even in the face of legal challenges: While confidentiality is a critical aspect of the fraud examination process, due professional care focuses more on the quality and thoroughness of the investigation rather than solely on maintaining confidentiality. The principle of due professional care does not mean that confidentiality must be maintained under all circumstances, especially when there are legal obligations to disclose findings (e.g., subpoenaed documents or court orders). Maintaining confidentiality is important, but it is not the central focus of due professional care.
C. Maintaining independence and objectivity throughout the investigation: While independence and objectivity are critical for CFEs and are emphasized in the ACFE Code of Professional Ethics, these principles are more closely related to the ethical conduct of CFEs rather than the principle of due professional care. Due professional care pertains to the thoroughness and completeness of the investigation rather than the personal attributes (such as objectivity) that the examiner must maintain during the process.
D. Avoiding bias or personal judgment in the assessment of evidence: Avoiding bias is an important component of conducting a fair and objective fraud examination. However, the principle of due professional care focuses more on ensuring the investigation is conducted comprehensively and with due diligence, rather than simply avoiding bias. While avoiding bias is crucial, due professional care is more about giving the proper attention and effort to all aspects of the examination.
The principle of due professional care in fraud examinations primarily emphasizes thoroughness in investigating fraud, ensuring that all relevant leads are pursued, and no critical evidence is overlooked. The goal is to provide a complete, credible, and reliable examination that can withstand scrutiny. Therefore, the correct answer is A.
