ACCA Risk Management and Internal Controls

Question 1

Which of the following best describes 'inherent risk' in an organizational context?

Accepted Answer

The raw or untreated risk before any controls

Answer

The risk remaining after management controls are applied

Answer

The risk that internal controls will fail

Answer

The risk of material misstatement due to fraud

Question 2

In enterprise risk management (ERM), what is a 'risk appetite'?

Accepted Answer

The amount of risk an organization is willing to accept in pursuit of its objectives

Answer

The maximum loss the company can absorb before insolvency

Answer

The residual risk after all controls are applied

Answer

The probability of a risk event occurring

Question 3

Which framework is most widely referenced for internal control and risk management, comprising five components including the control environment and monitoring?

Accepted Answer

COSO ERM Framework

Answer

ISO 31000

Answer

Basel III

Answer

Sarbanes-Oxley Act

Question 4

Which of the following is an example of a detective control?

Accepted Answer

Bank reconciliation reviews

Answer

Segregation of duties

Answer

Physical locks on server rooms

Answer

Requiring dual authorization for payments

Question 5

A company's board is considering using derivatives to hedge foreign currency exposure. This risk response is best classified as:

Accepted Answer

Risk transfer

Answer

Risk avoidance

Answer

Risk acceptance

Answer

Risk reduction

Question 6

Which of the following statements about the 'three lines of defense' model is correct?

Accepted Answer

Management controls and internal controls form the first line

Answer

External auditors form the first line of defense

Answer

Risk management and compliance functions form the first line

Answer

The board forms the second line of defense