CFE – Fraud Prevention and Deterrence — Question 17

Which of the following would MOST LIKELY be a violation of the ACFE Code of Professional Ethics?

Answer options

• A. Green, a CFE, uncovered several material internal control deficiencies unrelated to the financial statement fraud he was investigating. In his final report to management, Green included information about the deficiencies even though they were unrelated to the situation he was hired to investigate.
• B. Stephanie, a CFE, accepted a fraud examination assignment and then instructed a lower-level employee to assess the company’s cash records for signs of fraud. She took his word when he said there was no evidence of wrongdoing and ended up failing to uncover a very costly fraud scheme.
• C. Susan, a CFE, was hired by a client to conduct a fraud examination but found nothing amiss. A year later, she received a legal order from the local prosecutor’s office to provide the client’s file. Susan complied with the court order, even though she did not have the client’s authorization to do so.
• D. All of the above are violations.

Correct answer: B

Explanation

The correct answer is B because Stephanie failed to conduct her own investigation and relied solely on a subordinate's assessment, thereby neglecting her professional responsibility. Options A and C, while potentially problematic, do not represent the same level of negligence in professional judgment as failing to uncover a significant fraud scheme.