CA Audit & Risk Management 4

Question 1

A risk heat map typically plots risks on two axes. What are those axes?

Accepted Answer

Likelihood of occurrence vs. impact/severity

Answer

A risk heat map plots each identified risk based on its likelihood of occurring and the severity of its potential impact, helping prioritize risk responses visually.

Question 2

Which of the following BEST describes 'operational risk' as defined by Basel II/III?

Accepted Answer

The risk of loss resulting from inadequate or failed internal processes, people, systems, or external events

Answer

Basel II/III defines operational risk as the risk of loss from inadequate or failed internal processes, people, and systems, or from external events, including legal risk but excluding strategic and reputational risk.

Question 3

During an audit of revenue recognition, the auditor is MOST concerned with which financial statement assertion?

Accepted Answer

Occurrence (existence)

Answer

For revenue, auditors are primarily concerned with the occurrence assertion — that recorded revenues represent genuine transactions that actually took place — since management may be motivated to inflate revenues.

Question 4

What is the purpose of a 'walk-through' procedure in an internal control audit?

Accepted Answer

To trace a single transaction through each step of the relevant process to confirm that controls exist and operate as described

Answer

A walk-through traces one or a few transactions through the entire process from initiation to recording, confirming that documented controls exist and function as described in the narrative or flowchart.

Question 5

The risk appetite of an organization is BEST defined as:

Accepted Answer

The amount and type of risk the organization is willing to accept in pursuit of its objectives

Answer

Risk appetite is the amount and type of risk an organization is willing to accept in pursuit of its strategic objectives, established by the board to guide risk-taking decisions.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Audit & Risk Management 4