CFE-LAW Online Practice Questions and Answers

Which of the following is the MOST ACCURATE statement about rules prohibiting securities broker-dealers from making unsuitable recommendations on investments or investment strategies?

A. A suitability violation occurs when a broker recommends an investment or investment strategy that is inconsistent with the client's objectives.

B. A suitability violation occurs when a broker does not carry out a trade requested by or promised to a customer.

C. A suitability violation occurs when a broker enters into transactions and manages a client's account for the purpose of generating excessive commissions.

D. A suitability violation occurs when a broker trades in a client's account without obtaining prior approval for making the transaction(s).

Which of the following is an example of a trade-based money laundering scheme?

A. An accountant overstates a restaurant's revenues to hide illegal funds that are secretly laundered through the business.

B. A drug cartel outside of the United States launders illicit funds by hiring runners to deposit small amounts of money in bank accounts throughout the United States.

C. An importer and an exporter conspire to conceal illicit funds by creating invoices that understate the quantity of goods shipped internationally.

D. A businessperson deposits illicit funds into the bank account of a company they secretly own, which then lends the funds back to them.

All of the following are common legal defenses for tax evasion EXCEPT:

A. Mental illness of the taxpayer

B. The actions were tax avoidance, not tax evasion

C. Death of the taxpayer

D. The taxpayer's reliance on an attorney or accountant

Greg is serving as an expert witness and is being cross-examined at trial. The questioning party gets Greg to state that he spent considerable time working on a certain issue in the case. Then, the questioning party asks many questions on a tangential issue in the case that Greg knows little about. Which of the following describes the questioning party's method?

A. Myopic vision

B. Personal attack

C. Bias

D. Sounding board

Grant, a fraud examiner, is investigating Beatrice for embezzlement on his employer's behalf. During his investigation, Grant learns that Beatrice has cheated on her spouse, and he tells several of Beatrice's coworkers about it. Beatrice discovers that Grant revealed the unflattering (albeit true) information about her and decides to file a claim of defamation against Grant. Which of the following is the BEST explanation of why Beatrice will not win her defamation case?

A. The information was true.

B. The communications to the subject's coworkers were privileged.

C. The statement was not printed and distributed.

D. The news was not communicated to enough people.

All of the following are methods of pretrial civil discovery commonly found in common law jurisdictions EXCEPT:

A. Oral examinations

B. Injunctions

C. Affidavits of documents or records

D. Written examinations

Evidence that tends to make some fact at issue more or less likely than it would be without the evidence is called:

A. Testamentary evidence

B. Circumstantial evidence

C. Demonstrative evidence

D. Relevant evidence

Which of the following situations would constitute a violation of the U.S. Foreign Corrupt Practices Act (FCPA)?

A. A private U.S. company pays a $2,000 foreign corporation fee that is required in order to do business within the country.

B. A private U.S. company transfers $100,000 to the sole proprietor of a Brazilian company to influence the award of a commercial imports contract.

C. A private UK company transfers $25,000 to a Chilean public official to influence the award of lucrative overseas contracts.

D. A private U.S. company transfers $45,000 to a foreign official to influence the award of a public construction contract.

Which of the following is NOT one of the elements that the government must prove to establish a violation of a law criminalizing false statements to government agencies?

A. The defendant made a false statement.

B. The defendant knew the statement was false.

C. The false statement was material.

D. The government relied on the false statement.

Ellis works for a business that filed for bankruptcy. The administrator presiding over the bankruptcy contacts Ellis and requests information regarding his employer's financial affairs. Assuming the administrator has all of the powers recommended in the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (World Bank Principles), which of the following is TRUE?

A. The administrator has no power to obtain the information under any circumstances.

B. The administrator may not obtain the information unless the business agrees in writing.

C. The administrator may only seek information regarding the business that filed bankruptcy if Ellis consents to providing it.

D. The administrator may compel Ellis to provide the information, despite Ellis's relationship to the business.