Pass CFE-Fraud-Prevention-and-Deterrence Exam Guide

Diane Vaughan’s Research:

Vaughan highlights that linking employee performance goals with company goals can create undue pressure, fostering an environment where unethical behavior becomes rationalized.

Analysis of Other Options:

A. Diversity in hiring: Encourages broader perspectives and does not inherently lead to crime.

B. Rewarding challenges to the status quo: Promotes innovation and integrity, reducing crime risk.

Conclusion:Management’s linking of performance goals with company goals is the factor most associated with increased crime inclination.

References:ACFE criminological studies and Diane Vaughan’s findings​​.

ACFE Code of Professional Ethics Overview:

The Code explicitly prohibits unethical behavior, undisclosed conflicts of interest, and illegal activities. However, drawing evidence-based conclusions is encouraged as part of professional practice.

Why B is Correct:

Drawing conclusions based on evidence is central to the fraud examination process and is explicitly supported by ACFE standards.

Why Other Options are Prohibited:

A, C, and D: Engaging in unethical, conflicting, or illegal activities violates ACFE ethical guidelines​​.

References for All Questions:

ACFE Fraud Examination Guide and Code of Professional Ethics​​.

Best practices for fraud risk assessment and reporting​​.

Reporting standards and ethics in fraud examination​​.

Scope of Fraud Risk Assessment:

The fraud risk assessment team must consider various factors, including:

A. Incentive programs: Can create pressures that lead to fraud.

B. Management override of controls: A key risk for fraud occurring despite existing safeguards.

C. Risks to reputation: Fraud incidents can harm the organization's public image.

Comprehensive Discussion:

Considering all these factors ensures a thorough identification of inherent fraud risks.

Conclusion:The fraud risk assessment team should discuss all listed items.

References:ACFE fraud risk assessment guidance​​.

 Treadway Commission Recommendations:

The National Commission on Fraudulent Financial Reporting (Treadway Commission) issued guidelines to strengthen financial reporting integrity and reduce fraud risks.

One key recommendation was to ensure that the audit committee is well-resourced and has sufficient authority to oversee financial reporting processes effectively.

 Audit Committee Role:

An adequately empowered audit committee improves oversight, supports the internal audit function, and ensures proper implementation of controls to prevent and detect fraud.

 Why D is Correct:

This recommendation directly addresses the reduction of fraud probability by enhancing oversight capabilities​​.