AICPA Risk Management & Internal Control 2

Question 1

Under COSO ERM, which component addresses the organization's philosophy about managing risk and its risk appetite?

Accepted Answer

Internal Environment

Answer

The Internal Environment component sets the foundation for how risk is viewed and addressed, including risk philosophy and appetite.

Question 2

A company implements a policy requiring two signatures on checks exceeding $10,000. This is an example of which type of control?

Accepted Answer

Preventive control

Answer

Requiring dual signatures before a check is issued prevents unauthorized transactions from occurring, making it a preventive control.

Question 3

Which risk response strategy involves transferring risk to a third party through insurance or outsourcing?

Accepted Answer

Risk sharing

Answer

Risk sharing (also called risk transfer) moves some or all of the risk to another party, such as through insurance contracts.

Question 4

The Sarbanes-Oxley Act Section 404 requires management to assess the effectiveness of internal controls over:

Accepted Answer

Financial reporting

Answer

SOX Section 404 mandates that management assess and report on the effectiveness of internal controls over financial reporting.

Question 5

When auditors test the same control at different points during the year, this is best described as:

Accepted Answer

Interim testing with update procedures

Answer

Interim testing with update procedures allows auditors to test controls mid-year and then perform limited procedures at year-end.

(AICPA) Association of International Certified Professional Accountants Practice Test