ACFE CFE - Law (Certified Fraud Examiner - Law) Practice Test 1

Question 1

A securities-fraud complaint arises under a federal statute, although both parties live in the same state. Which basis may permit a federal court to hear it?

  1. Diversity jurisdiction
  2. Personal jurisdiction
  3. Federal-question jurisdiction
  4. Venue

Explanation

Correct Answer

C:

A cause of action arising under federal law may support the federal court's power over the subject matter even when the litigants are not diverse.

Incorrect Answers

A:

Federal diversity jurisdiction depends on specified citizenship and amount-in-controversy conditions, not simply an allegation of dishonest conduct; federal-question jurisdiction is the issue raised by the described conduct.

B:

A court ordinarily must have lawful authority over the defendant, with the constitutional contacts or consent analysis depending on the forum; the inquiry instead concerns Federal-question jurisdiction, with its own elements.

D:

Venue chooses the appropriate geographic district for litigation and remains a distinct inquiry from jurisdiction over parties or subject matter; the relevant step in this scenario is Federal-question jurisdiction.

Question 2

Two citizens of different U.S. states dispute a large private fraud loss and invoke the federal forum. Which separate jurisdictional route may apply if statutory requirements are met?

  1. Diversity jurisdiction
  2. Personal jurisdiction
  3. Venue
  4. Federal-question jurisdiction

Explanation

Correct Answer

A:

Federal diversity jurisdiction depends on specified citizenship and amount-in-controversy conditions, not simply an allegation of dishonest conduct.

Incorrect Answers

B:

A court ordinarily must have lawful authority over the defendant, with the constitutional contacts or consent analysis depending on the forum; those prerequisites should not be confused with Diversity jurisdiction.

C:

Venue chooses the appropriate geographic district for litigation and remains a distinct inquiry from jurisdiction over parties or subject matter; diversity jurisdiction addresses the distinct legal requirement stated in the facts.

D:

A cause of action arising under federal law may support the federal court's power over the subject matter even when the litigants are not diverse; diversity jurisdiction raises a different threshold from this alternative.

Question 3

A defendant has no meaningful forum contacts and contests being sued there. Which jurisdictional question concerns authority over that defendant?

  1. Statutory law
  2. Diversity jurisdiction
  3. Federal-question jurisdiction
  4. Judicial precedent
  5. Venue
  6. Personal jurisdiction

Explanation

Correct Answer

F:

A court ordinarily must have lawful authority over the defendant, with the constitutional contacts or consent analysis depending on the forum.

Incorrect Answers

A:

Statutes are rules enacted by a legislature, applied according to their text and controlling interpretation rather than created by witness testimony; the circumstances point to Personal jurisdiction rather than that separate test.

B:

Federal diversity jurisdiction depends on specified citizenship and amount-in-controversy conditions, not simply an allegation of dishonest conduct; personal jurisdiction is the issue raised by the described conduct.

C:

A cause of action arising under federal law may support the federal court's power over the subject matter even when the litigants are not diverse; the inquiry instead concerns Personal jurisdiction, with its own elements.

D:

Controlling prior decisions supply authoritative interpretations for lower courts within a hierarchy under the doctrine of stare decisis; the relevant step in this scenario is Personal jurisdiction.

E:

Venue chooses the appropriate geographic district for litigation and remains a distinct inquiry from jurisdiction over parties or subject matter; here the operative distinction is Personal jurisdiction.

Question 4

A corporation concedes jurisdiction but says the lawsuit should proceed in another federal district. Which location concept is being disputed?

  1. Venue
  2. Diversity jurisdiction
  3. Personal jurisdiction
  4. Federal-question jurisdiction

Explanation

Correct Answer

A:

Venue chooses the appropriate geographic district for litigation and remains a distinct inquiry from jurisdiction over parties or subject matter.

Incorrect Answers

B:

Federal diversity jurisdiction depends on specified citizenship and amount-in-controversy conditions, not simply an allegation of dishonest conduct; here the operative distinction is Venue.

C:

A court ordinarily must have lawful authority over the defendant, with the constitutional contacts or consent analysis depending on the forum; those prerequisites should not be confused with Venue.

D:

A cause of action arising under federal law may support the federal court's power over the subject matter even when the litigants are not diverse; venue addresses the distinct legal requirement stated in the facts.

Question 5

A court in one state considers its own statute governing a domestic accounting-fraud claim. Which legal source is it interpreting?

  1. Judicial precedent
  2. Statutory law
  3. Administrative regulation
  4. Common-law doctrine

Explanation

Correct Answer

B:

Statutes are rules enacted by a legislature, applied according to their text and controlling interpretation rather than created by witness testimony.

Incorrect Answers

A:

Controlling prior decisions supply authoritative interpretations for lower courts within a hierarchy under the doctrine of stare decisis; that concept must be distinguished from Statutory law here.

C:

Regulations derive from a lawful delegation and govern regulated conduct within the agency's statutory authority; the circumstances point to Statutory law rather than that separate test.

D:

Judge-developed rules can govern issues not displaced by controlling statutes, while precedent determines the applicable formulation; statutory law is the issue raised by the described conduct.

Question 6

A judge follows a binding appellate decision when deciding a new case with materially similar facts. What source of law controls?

  1. Common-law doctrine
  2. Administrative regulation
  3. Statutory law
  4. Judicial precedent

Explanation

Correct Answer

D:

Controlling prior decisions supply authoritative interpretations for lower courts within a hierarchy under the doctrine of stare decisis.

Incorrect Answers

A:

Judge-developed rules can govern issues not displaced by controlling statutes, while precedent determines the applicable formulation; the relevant step in this scenario is Judicial precedent.

B:

Regulations derive from a lawful delegation and govern regulated conduct within the agency's statutory authority; here the operative distinction is Judicial precedent.

C:

Statutes are rules enacted by a legislature, applied according to their text and controlling interpretation rather than created by witness testimony; those prerequisites should not be confused with Judicial precedent.

Question 7

An agency issues a compliance rule under a law delegating rulemaking power to it. What kind of authority is involved?

  1. Statutory law
  2. Common-law doctrine
  3. Judicial precedent
  4. Administrative regulation

Explanation

Correct Answer

D:

Regulations derive from a lawful delegation and govern regulated conduct within the agency's statutory authority.

Incorrect Answers

A:

Statutes are rules enacted by a legislature, applied according to their text and controlling interpretation rather than created by witness testimony; administrative regulation raises a different threshold from this alternative.

B:

Judge-developed rules can govern issues not displaced by controlling statutes, while precedent determines the applicable formulation; that concept must be distinguished from Administrative regulation here.

C:

Controlling prior decisions supply authoritative interpretations for lower courts within a hierarchy under the doctrine of stare decisis; the circumstances point to Administrative regulation rather than that separate test.

Question 8

The parties dispute an agreement's fraud remedy, and the court applies established nonstatutory doctrine. Which lawmaking tradition is illustrated?

  1. Statutory law
  2. Administrative regulation
  3. Common-law doctrine
  4. Judicial precedent

Explanation

Correct Answer

C:

Judge-developed rules can govern issues not displaced by controlling statutes, while precedent determines the applicable formulation.

Incorrect Answers

A:

Statutes are rules enacted by a legislature, applied according to their text and controlling interpretation rather than created by witness testimony; the inquiry instead concerns Common-law doctrine, with its own elements.

B:

Regulations derive from a lawful delegation and govern regulated conduct within the agency's statutory authority; the relevant step in this scenario is Common-law doctrine.

D:

Controlling prior decisions supply authoritative interpretations for lower courts within a hierarchy under the doctrine of stare decisis; here the operative distinction is Common-law doctrine.

Question 9

A fraud prosecution is commenced by the state and may result in imprisonment. Which branch of liability is involved?

  1. Civil liability
  2. Administrative enforcement
  3. Criminal liability
  4. Internal disciplinary action

Explanation

Correct Answer

C:

Criminal proceedings enforce public prohibitions and may impose punishment after the prosecution proves the offense beyond a reasonable doubt.

Incorrect Answers

A:

Private civil claims ordinarily seek remedies for legal injury, with an applicable civil proof standard and available damages or equitable relief; criminal liability addresses the distinct legal requirement stated in the facts.

B:

An authorized regulator may impose professional or regulatory consequences under statutory procedures without seeking a criminal conviction; criminal liability raises a different threshold from this alternative.

D:

Employer discipline arises from workplace policy and employment law; it does not itself establish civil damages or a criminal offense; that concept must be distinguished from Criminal liability here.

Question 10

A deceived investor seeks compensation from the person who misled her. Which branch of liability is invoked?

  1. Criminal liability
  2. Administrative enforcement
  3. Internal disciplinary action
  4. Civil liability

Explanation

Correct Answer

D:

Private civil claims ordinarily seek remedies for legal injury, with an applicable civil proof standard and available damages or equitable relief.

Incorrect Answers

A:

Criminal proceedings enforce public prohibitions and may impose punishment after the prosecution proves the offense beyond a reasonable doubt; civil liability is the issue raised by the described conduct.

B:

An authorized regulator may impose professional or regulatory consequences under statutory procedures without seeking a criminal conviction; the inquiry instead concerns Civil liability, with its own elements.

C:

Employer discipline arises from workplace policy and employment law; it does not itself establish civil damages or a criminal offense; the relevant step in this scenario is Civil liability.

Certified Fraud Examiner - Law (CFE - Law) Practice Tests