CFE-Fraud-Prevention-and-Deterrence Questions and Answers

ACFE Code of Professional Ethics on Reporting Findings:

The Code allows fraud examiners to report on deficiencies in controls if these are relevant to their engagement. Highlighting such deficiencies helps improve the organization’s anti-fraud measures.

Why B is Correct:

Black is permitted to express his opinion about deficient controls, even if no fraud is found, as long as his conclusions are based on evidence and within the scope of his professional expertise.

References:

ACFE ethical guidelines encourage examiners to report all relevant findings to promote transparency and improved governance​​.

References for All Questions:

ISA 240 and professional auditing standards on fraud-related responsibilities​​.

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

Principles of professional skepticism in fraud detection and examination​​.

CFEs must act ethically and responsibly when handling sensitive information. Eliece should inform Jewel that she will try to maintain confidentiality but must adhere to professional and ethical obligations, which may require disclosing the information to appropriate parties such as her employer or relevant authorities. This balanced response encourages transparency while maintaining ethical standards.

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 Theory of Differential Association:

This theory suggests that criminal behavior is learned through interaction with others, primarily within intimate groups.

Principles of the theory include:

Learning through communication.

Acquiring criminal knowledge similarly to other forms of learning.

 Why A is Incorrect:

General needs and values, such as poverty or desire for wealth, do not directly explain criminal behavior under this theory. Instead, the behavior is attributed to learned influences from others.

 Clarification of Other Options:

B, C, and D accurately reflect the principles of differential association​​.

 Components of COSO Enterprise Risk Management (ERM):

The COSO ERM framework emphasizes the integration of risk management with strategy and performance, comprising the following components:

Governance and culture.

Strategy and objective-setting.

Performance.

Review and revision.

Information, communication, and reporting.

 Why D is Correct:

Governance and culture set the foundation for an organization’s risk management practices by establishing oversight, ethical values, and the operating structure.

 Why Other Options are Incorrect:

A (Independent monitoring): Monitoring is part of internal control, not specifically ERM.

B (Operating environment): Not a COSO ERM component.

C (Risk tolerance): A concept within ERM but not a standalone component​​.

 Fraud Risk Management Program Requirements:

A fraud risk management program includes mechanisms to detect and respond to noncompliance, sanctions for violations, and measures to address control failures.

 Why B is Incorrect:

Responsibility for handling suspected incidents should remain within the organization, typically assigned to compliance officers or internal audit teams. Delegating it to external parties undermines internal governance.

 Why Other Options are Correct:

A, C, and D describe essential elements of a fraud risk management program, including monitoring, sanctions, and corrective measures for anti-fraud controls​​.

Integrity in Fraud Examination:

Integrity involves trustworthiness, ethical behavior, and transparency. Admitting errors is a critical part of maintaining professional integrity.

Why D is Correct:

Refusal to admit errors is inconsistent with the ethical and professional standards of fraud examination.

Why Other Options are True:

A, B, and C align with the principles of integrity, emphasizing honesty, ethics, and impartiality​​.

References for All Questions:

COSO Enterprise Risk Management Framework​​.

ACFE Code of Professional Ethics and fraud examination best practices​​.

Strategies for fraud prevention and detection from professional auditing standards​​.

Elements of Routine Activities Theory:

This theory posits that crime occurs when three elements converge:

Availability of suitable targets.

Absence of capable guardians.

Presence of motivated offenders.

Analysis of Other Options:

A. Conditioning theory: Focuses on learned behaviors through reinforcement.

C. Rational choice theory: Examines decision-making processes of offenders.

D. Social control theory: Relates to societal bonds preventing deviant behavior.

Conclusion:Routine activities theory best explains the convergence of these elements leading to crime.

References:Criminological theories referenced in ACFE study materials​​.

Behavioral Studies by B.F. Skinner:

Punishment may temporarily suppress undesired behavior but does not address the root cause or provide alternative positive behaviors.

Once punishment ceases, the behavior often resurfaces.

Analysis of Options:

A. Increase in behavior: This contradicts findings; punishment reduces behavior temporarily.

B. No effect: Punishment does affect behavior but typically in the short term.

D. Permanent suppression: Rarely achieved without reinforcement of alternative behaviors.

Conclusion:Punishment results in temporary suppression of undesired behavior.

References:ACFE guidance on behavioral psychology and its application to fraud prevention​​.

Treadway Commission Recommendations:

Establishing an independent audit committee is essential for oversight and reducing fraud risk in financial reporting.

Audit committees play a critical role in ensuring the integrity of financial statements.

Analysis of Other Options:

A. Shareholder oversight of hotlines: Not a Treadway Commission recommendation.

B. Compensation committee resources: Not directly related to fraud prevention.

C. Management charter: Unrelated to the recommendations.

Conclusion:Mandatory independent audit committees are a key recommendation to reduce fraud risk.

References:Treadway Commission’s Report on Fraudulent Financial Reporting​​.

Ethical Obligations Under ACFE Code:

CFEs are obligated to report material findings, including deficiencies that may facilitate fraud, even if no fraud is found.

Providing such insights aligns with the principles of due diligence and professional responsibility.

Professional Reporting Practices:

Including opinions on internal control deficiencies adds value to the examination and supports fraud prevention efforts.

Conclusion:White may include her opinion on control deficiencies in her report.

References:ACFE Code of Professional Ethics and fraud examination standards​​.

Fraud Reporting Program Best Practices:

Ensuring anonymity encourages employees to report fraud without fear of retaliation. This enhances the effectiveness of the reporting program.

Why D is Correct:

Communicating confidentiality builds trust and increases participation in the fraud reporting program.

Why Other Options are Incorrect:

A: Fraud risks are not limited to organization size.

B: Restricting reports to immediate supervisors may create barriers.

C: Holding employees accountable for unsubstantiated tips discourages reporting.

References:

ACFE’s recommendations for successful fraud reporting systems emphasize confidentiality and employee trust​​.

References for All Questions:

ACFE Fraud Examination Guide​​.

COSO framework and ISA auditing standards​​.

Industry best practices for fraud prevention, governance, and due diligence​​.

The ACFE Code of Professional Ethics explicitly prohibits CFEs from participating in activities that create undisclosed conflicts of interest. This ensures that the examiner’s objectivity and independence remain intact throughout the investigation. While CFEs are allowed to provide professional opinions based on evidence and engage in legal activities, they must always disclose any potential conflicts of interest.

Purpose of Anti-Fraud Controls:

Preventive controls deter fraud before it occurs, making them the primary focus of an effective anti-fraud program.

Detective controls identify fraud after it has occurred, serving as a secondary line of defense.

Analysis of Options:

A. Fully eliminates risk: No system can fully eliminate fraud risk.

B. Focus on detective controls: Less effective than prevention.

D. Increases perception of detection: Important but not the primary focus.

Conclusion:An effective anti-fraud system emphasizes preventive controls.

References:ACFE guidance on fraud control systems​​.

Understanding Behaviorism and Punishment:

Behaviorists like B. F. Skinner argue that punishment temporarily suppresses undesired behaviors rather than eliminating them.

Once the punitive stimulus is removed, the behavior is likely to reappear unless it is replaced with a more desirable behavior through reinforcement.

Analysis of Options:

B. Permanently suppressed: This contradicts the principles of behaviorism, as punishment alone does not permanently modify behavior.

C. Occur more frequently: Punishment typically decreases behavior temporarily.

D. Not affected by punishment: Punishment impacts behavior, but the effect is often temporary.

Conclusion:The most likely outcome is that the behavior will return once the punishment ceases.

References:ACFE resources on behavioral psychology and fraud prevention strategies​​.

 Research Findings by Silk and Vogel:

Their research highlights that business leaders often justify non-compliance with regulations by arguing that adhering to such rules significantly increases operational costs and reduces profitability.

 Rationalization in Legal Violations:

This rationalization is consistent with the fraud triangle concept, where rationalization serves as a justification for unethical or illegal actions.

 Why A is Correct:

This accurately represents a common justification for regulatory non-compliance as documented in fraud and compliance research​​.

Rationalization in the Fraud Triangle:

Rationalization refers to the justification an individual uses to make fraudulent behavior acceptable in their mind.

In this case, Jody justifies his theft by believing the company owes him for his loyalty and hard work.

Why B is Correct:

Jody’s reasoning aligns with the rationalization leg of the fraud triangle, as he convinces himself his actions are justified.

Why Other Options are Incorrect:

A (Perceived non-shareable financial need): Involves financial pressure, not justification.

C (Perceived opportunity): Refers to the ability to commit fraud.

D (Lack of personal integrity): Reflects a broader ethical deficiency, not a specific rationalization​​.

Information, communication, and reporting involve the continual process of gathering and sharing relevant information across an organization to support decision-making and risk management. This ensures that all stakeholders are informed and that information flows effectively to enhance organizational performance.

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Purpose of Fraud Risk Assessment:

The goal is to identify vulnerabilities to fraud and implement preventive measures, not to wait for conclusive evidence of fraud before designating high-risk areas.

Proactive Identification:

High-risk areas are identified based on susceptibility to fraud (e.g., lack of controls, high cash transactions), even if no fraud has been detected. This approach allows organizations to act preemptively.

Improving Fraud Awareness:

Employee education and behavior monitoring are integral components of the assessment process to reduce fraud risks.

Incorrect Assumption in D:

Waiting for conclusive evidence contradicts the proactive nature of fraud risk assessment and undermines its preventative function​​.

References for All Questions:

ACFE Code of Professional Ethics​​.

Auditor Essentials on fraud prevention and deterrence principles​.

COSO and risk assessment frameworks in internal controls​​.

 Responsibility of Auditors:

Under International Standards on Auditing (ISA) 240, auditors are required to investigate any indications of fraud, regardless of the materiality of the misstatement.

Evidence of intentional misstatements indicates the potential for broader fraudulent activity, necessitating a reassessment of audit procedures.

 Importance of Fraud Indicators:

Even if the misstatement does not exceed the materiality threshold, it represents a significant risk factor that could compromise the reliability of the financial statements.

 Why B is Correct:

Adjusting audit procedures ensures that the audit team addresses the broader implications of the fraud risk while maintaining professional skepticism and compliance with auditing standards​​.

International Standards on Auditing (ISAs) Requirements:

ISAs require auditors to communicate suspected or confirmed fraud to "those charged with governance" of the organization, as they have the responsibility for oversight.

ISA 240, “The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements,” mandates that findings be reported to appropriate governance bodies before considering further actions.

Confidentiality and Legal Obligations:

Auditors must maintain confidentiality unless legal or regulatory frameworks require disclosure to authorities. Immediate reporting to law enforcement (option B) may breach confidentiality without proper internal escalation.

Why Option D is Correct:

Reporting to governance ensures proper internal actions are taken and protects the integrity of the audit process. It allows the organization to address the issue before external involvement if required.

References:

ISA 240 and the ACFE guidelines on professional auditor conduct​​.

Best Practices for Protecting Whistleblowers:

Ensuring a safe environment for whistleblowers is critical to fostering an ethical organizational culture.

Establishing formal consequences for retaliation protects whistleblowers and promotes trust.

Analysis of Options:

A. Rules only for lower-level employees: Whistleblower protections must apply to all employees, regardless of rank.

B. Listing every type of misconduct: Comprehensive policies are good, but they do not need to enumerate all past misconduct.

C. Internal communication only: Communicating whistleblower procedures to external stakeholders (e.g., regulators) can be critical.

D. Formal consequences for retaliation: This is essential to discourage retaliatory actions and ensure fairness.

Conclusion:Establishing formal consequences for retaliation is the most accurate and aligned with best practices.

References:ACFE guidelines on whistleblower protections and ethical policies​​.

Risks Associated with Specialized Departments:

While specialization improves efficiency, it can create silos that hinder communication, coordination, and oversight, increasing fraud risk.

Isolated departments may lack cross-functional checks and balances.

Conclusion:Specialized departments often increase fraud risk if not managed with proper controls and oversight.

References:ACFE materials on fraud risk management and departmental structures​​.

COSO Definition of Internal Control:

COSO defines internal control as a process executed by an entity’s board, management, and personnel to provide reasonable assurance about achieving objectives in operations, reporting, and compliance.

Analysis of Options:

A. Corporate compliance: Corporate compliance focuses on adhering to laws and regulations, not the broader operational objectives.

B. Fraud risk management: This is a component of internal control, not its definition.

C. Risk assessment: This is a step within the internal control process but not the overarching process.

D. Internal control: Matches the COSO definition accurately.

Conclusion:Internal control is the correct answer as defined by COSO.

References:COSO Internal Control Framework documentation​​.

Corporate Governance Principles:

Transparency refers to disclosing material matters, enabling shareholders to make informed decisions.

This includes providing timely and accurate information about the company's financial performance, risks, and governance practices.

Analysis of Other Options:

B. Fairness: Involves equitable treatment of all shareholders.

C. Responsibility: Focuses on fulfilling legal and ethical obligations.

D. Accountability: Pertains to holding the board and management responsible for their actions.

Conclusion:Transparency ensures shareholders have the necessary information for decision-making.

References:Corporate governance best practices and G20/OECD Principles of Corporate Governance​​.

 Deterrence Theory in Criminology:

This theory posits that crime can be prevented by making the potential consequences severe enough to deter individuals from offending. It emphasizes the certainty, severity, and swiftness of punishment.

 Why A is Correct:

The threat of criminal sanctions is a cornerstone of deterrence theory, designed to reduce crime by increasing the perceived risks and consequences.

 References:

Criminological studies and fraud deterrence strategies emphasize the effectiveness of deterrence in reducing criminal behavior​​.

Risk assessment is a core component of the COSO Framework and focuses on identifying, analyzing, and evaluating risks that could affect the organization's objectives. Andrew's initiative to evaluate threats aligns with this component, as it involves understanding the potential risks and their impact on achieving the organization's goals.

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Composition of Fraud Risk Assessment Teams:

Effective teams require diverse perspectives, skills, and experiences to identify and address fraud risks comprehensively.

Why C is Incorrect:

Limiting team size to three individuals restricts diversity and may not provide sufficient expertise for a thorough assessment. Larger teams, with a range of skills, are often necessary.

Why Other Options are Correct:

A: Experience in gathering information is critical for the effectiveness of the team.

B: Including external experts adds objectivity.

D: Diverse perspectives enhance the assessment's scope​​.

References for All Questions:

ACFE Fraud Examination Guide and Standards​​.

ISA standards on audit procedures and unpredictability​​.

Fraud risk assessment guidelines from COSO and ACFE resources​​.

 Diane Vaughan's Theory on Organizational Crime:

Vaughan argued that organizational environments prone to crime exhibit a "normalization of deviance," often influenced by management decisions that misalign employee incentives with organizational objectives.

 Why C is Correct:

Misaligned goals create conflicting priorities, increasing the likelihood of unethical behavior to meet individual or team objectives.

 Why Other Options are Incorrect:

A: Challenging the status quo promotes innovation and ethical accountability.

B: Social functions fostering loyalty do not inherently encourage crime​​.

Impact of Reporting to Law Enforcement:

Reporting fraud incidents to law enforcement demonstrates a zero-tolerance approach, acting as a deterrent to potential fraudsters.

It also ensures that perpetrators face legal consequences, discouraging others from engaging in fraudulent activities.

Prevention Mechanism:

The public nature of such actions signals organizational commitment to ethics and integrity, enhancing its reputation and strengthening internal controls.

Supporting References:

ACFE guidelines advocate for reporting fraud to appropriate authorities as part of an effective fraud prevention strategy​​.

Understanding G20/OECD Principles of Corporate Governance:These principles provide a framework to improve corporate governance worldwide. Key elements include board responsibilities, shareholder rights, equitable treatment, and stakeholder roles.

Analysis of Options:

A. Guidance on board structures: This is included in the principles to ensure effective governance and oversight.

C. Framework for corporate governance: Governments are encouraged to create legal and regulatory frameworks supporting corporate governance.

D. Stakeholder importance: Stakeholders' roles in governance are recognized, acknowledging their contribution to sustainable business practices.

B. Stronger protection for foreign shareholders: The principles advocate for equitable treatment of all shareholders, not preferential treatment for any group.

Conclusion:Option B contradicts the principle of equitable treatment, making it the correct answer.

References:G20/OECD Principles of Corporate Governance documentation​​.

Internal Audit Reporting Responsibilities:

Internal audit must maintain open communication with senior management and the board to ensure appropriate handling of fraud-related issues.

Establishing reporting protocols in advance ensures timely and consistent responses when fraud occurs.

Analysis of Other Options:

B. Periodic reporting is optional: Reporting fraud risks is a required responsibility.

C. Non-disclosure: Fails to fulfill the role of internal audit in governance and accountability.

D. No communication with the board: Misrepresents the internal audit's role in fraud oversight.

Conclusion:Discussing reporting protocols proactively with senior management and the board is the correct approach.

References:ACFE guidelines and internal audit reporting standards​​.

 Definition of Professional Skepticism:

Professional skepticism requires maintaining a questioning mindset and critically assessing evidence throughout the fraud examination process.

 Why D is Correct:

Professional skepticism ensures that fraud examiners remain vigilant and rely on evidence to conclude whether fraud has occurred or not. It is dispelled only when sufficient evidence supports a clear conclusion.

 Why Other Options are Incorrect:

A: While skepticism is critical, it does not mean refusing to acknowledge credible evidence.

B: Assuming no fraud occurred contradicts the principle of skepticism.

C: Hypotheses should consider the nature of the assignment and available information​​.

Behaviorist Theories in Conditioning:

Positive reinforcement, such as offering bonuses, is more effective than punishment in encouraging adherence to policies and reducing deviations.

Employees are more likely to repeat behaviors that are rewarded.

Why C is Correct:

This approach aligns with behaviorist principles, fostering compliance through incentives rather than fear or criticism, which could negatively impact morale.

Why Other Options are Incorrect:

A and D: Punishments may lead to resentment and reduced motivation.

B: Public criticism can create a toxic work environment, discouraging open communication​​.

References for All Questions:

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

ISA and GAAS requirements on unpredictability in audit procedures​​.

Behaviorist theories on employee motivation and conditioning​​.

Implications of Management Manipulation:

Intentional manipulation, even if quantitatively immaterial, raises concerns about the reliability of management representations and the integrity of audit evidence.

Why Option A is Correct:

Reassessing the reliability of previously obtained evidence ensures that the auditors address potential biases or systemic issues arising from management's actions.

Analysis of Other Options:

B. Withdrawing from the audit: Premature unless the issue is pervasive.

C. Legal definition of fraud: Auditors are not required to meet this threshold for assessing evidence.

D. Quantitative materiality: Misstatements can be qualitatively material if they indicate intentional manipulation.

Conclusion:The auditors must reconsider the reliability of evidence due to the qualitative implications of management's actions.

References:Auditing standards and ACFE guidance on assessing audit evidence reliability​​.

Overview of Compliance Programs:An effective compliance program requires clear communication, enforcement, and promotion of ethical standards within an organization. Promoting compliance involves setting up positive incentives, such as rewards for ethical behavior, to encourage adherence to policies and regulations.

Role of Incentives:

Incentives serve as motivators for employees to align with the compliance culture. Examples include bonuses for meeting compliance goals, recognition for ethical behavior, and career advancement opportunities tied to compliance performance.

The U.S. Federal Sentencing Guidelines for Organizations emphasize that for a compliance program to be effective, it must include incentives to encourage proper behavior and discipline to deter violations.

Supporting Reference Materials:

The Association of Certified Fraud Examiners (ACFE) highlights the importance of integrating incentives into compliance programs. These incentives are seen as essential for fostering a culture of ethics and preventing fraud.

Industry standards and frameworks, such as COSO’s "Internal Control - Integrated Framework," also stress the integration of incentives to promote adherence to internal controls and compliance standards​​.

Importance of Positive Reinforcement:

Positive reinforcement through incentives leads to higher employee morale, enhanced commitment to ethical practices, and a reduced likelihood of non-compliance.

A compliance program that merely penalizes non-compliance without rewarding adherence can fail to motivate employees to prioritize compliance.

Application in Fraud Prevention:

By actively incentivizing compliance, organizations can proactively mitigate risks of fraud and unethical practices. This aligns employees’ personal goals with the organization’s ethical standards.

References:

ACFE’s Fraud Prevention Guidelines​​.

COSO Framework for Internal Controls​​.

Relevant sections from Auditor Essentials and Excel for Auditors supporting the implementation of compliance measures​​.

 Auditor's Responsibility Under ISA Standards:

ISA 265 requires auditors to communicate significant deficiencies in internal control to those charged with governance in writing.

This ensures proper corrective actions are taken and maintains transparency in the audit process.

 Why B is Correct:

Written communication to governance authorities is the appropriate course of action to address control deficiencies without breaching confidentiality or overstepping regulatory boundaries.

 References:

ISA 265, “Communicating Deficiencies in Internal Control,” supports this approach​​.

Internal Auditor's Role in Fraud Risk Management:

Internal auditors are not directly responsible for establishing or maintaining anti-fraud controls (Option D). This responsibility lies with management.

They are also not responsible for obtaining reasonable assurance that financial statements are free of fraud (Option A). This is the role of external auditors.

Oversight of management's fraud risk actions (Option B) is primarily a governance role, not the auditor's direct responsibility.

Internal auditors focus on identifying and assessing fraud risks, evaluating controls, and recommending further action when necessary.

Conclusion:Option C aligns with the internal auditor's responsibilities as per the standards outlined in the ACFE's fraud risk management framework.

References:ACFE documentation on internal auditing responsibilities and fraud risk assessments​​.

COSO Definition of Internal Control:

COSO defines internal control as a process enacted by an entity's board, management, and personnel to provide reasonable assurance regarding objectives in operations, reporting, and compliance.

Analysis of Options:

A. Operational risk assessment: A component of internal control, not the overall process.

C. Fraud risk management: Focuses specifically on fraud risks, a subset of internal control.

D. Financial reporting: A specific objective addressed by internal control.

Conclusion:The correct answer is internal control, as defined by COSO.

References:COSO Internal Control—Integrated Framework​​.

 Professional Responsibility Under ACFE Code of Ethics:The ACFE Code of Professional Ethics requires Certified Fraud Examiners (CFEs) to disclose material information to the proper authorities. When fraud is discovered, the CFE must act in the best interest of the organization while adhering to ethical standards.

In this scenario, Gray must report Green's involvement in unrelated fraud to ABC Corporation's board of directors. This ensures transparency and accountability without breaching client confidentiality unnecessarily.

 Relevant Principles from ACFE Code of Ethics:

Integrity: CFEs must act honestly and report findings to the appropriate parties.

Objectivity: The CFE must avoid conflicts of interest and ensure impartiality in all findings and disclosures.

 Board Reporting Responsibility:

Reporting to the board is appropriate because they are responsible for corporate governance and oversight. Law enforcement involvement should follow organizational protocols unless laws explicitly mandate direct reporting​​.

Rational Choice Theory Overview:

This theory posits that individuals consciously weigh the benefits and risks of committing a crime and make calculated decisions to engage in criminal behavior if the perceived benefits outweigh the risks.

Deterrence Mechanism:

Crime can be deterred by reducing opportunities (e.g., strong internal controls) and increasing the likelihood of detection and punishment (e.g., effective monitoring systems).

Why Other Options are Incorrect:

A. Routine activities theory: Focuses on the convergence of motivated offenders, suitable targets, and lack of guardianship.

B. Differential association theory: Explains crime as learned behavior through interaction with others.

D. Social conflict theory: Suggests crime results from societal inequalities and power struggles.

Why C is Correct:

Rational choice theory explicitly addresses crime prevention through increased risks and reduced opportunities​​.

References for All Questions:

ACFE Fraud Examination Guide​​.

Criminological theories as applied to fraud prevention and deterrence​​.

Corporate governance frameworks and corruption-related risks​​.

Fraud Triangle and Employee Support Programs:

The Fraud Triangle identifies pressure, opportunity, and rationalization as the key elements contributing to fraud.

Employee support programs help alleviate pressures, such as financial stress or workplace dissatisfaction, which could lead employees to commit fraud.

Analysis of Options:

A. Rationalization: Not addressed directly by support programs.

B. Lack of integrity: Focuses on individual ethics, not pressures.

C. Opportunity: Mitigated through controls, not support programs.

Conclusion:Employee support programs address the pressure element of the Fraud Triangle.

References:ACFE Fraud Triangle framework​​.

Allowing employees to report fraud anonymously is a best practice in fraud reporting programs. This encourages whistleblowers to come forward without fear of retaliation or reprisal, increasing the likelihood of fraud detection. Transparency about confidentiality policies further supports employee trust in the reporting system.

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Fraud Risk Management Program Requirements:

Effective fraud risk management programs ensure transparency, consistency, and fairness.

Sanctions for noncompliance should be transparent and communicated to demonstrate a commitment to accountability.

Analysis of Options:

A. Mechanisms for breaches: Necessary to address compliance issues.

B. Consistent and firm punishment: Ensures a deterrent effect.

D. Designated compliance monitors: Vital for program enforcement.

C. Enacted privately: This is false because transparency is essential to maintain trust and deter similar actions.

Conclusion:Option C is false as formal sanctions should be communicated appropriately to promote deterrence and accountability.

References:ACFE materials on fraud risk management and enforcement practices​​.