CAA Internal Controls & Risk Management 3

Question 1

How is a 'significant deficiency' in internal controls distinguished from a 'material weakness'?

Accepted Answer

A significant deficiency is less severe than a material weakness but still warrants attention from those charged with governance

Answer

A significant deficiency is a control deficiency that is less severe than a material weakness but important enough to merit the attention of those responsible for financial oversight.

Question 2

What is residual risk in risk management?

Accepted Answer

The risk that remains after all controls and mitigation strategies have been applied

Answer

Residual risk is the level of risk that remains after management has implemented controls and other risk responses to reduce the inherent risk.

Question 3

What does the concept of 'tone at the top' refer to in internal control?

Accepted Answer

Management's ethical values, integrity, and commitment to internal controls that set the organizational culture

Answer

'Tone at the top' refers to the ethical environment established by senior leadership and the board, which strongly influences the behavior and culture of the entire organization.

Question 4

Which type of risk primarily involves the potential for employees or external parties to steal or misappropriate company assets?

Accepted Answer

Fraud risk

Answer

Fraud risk encompasses the potential for theft, misappropriation of assets, and intentional misstatement of financial information by employees or external parties.

Question 5

What is the purpose of a corrective control in an internal control system?

Accepted Answer

To fix errors or irregularities after they have been detected

Answer

Corrective controls are designed to remediate or fix problems that have been identified by detective controls, restoring the system to its intended state.

(CAA) Certified Accounting Analyst Practice Test

(CAA) Certified Accounting Analyst Practice Test

CAA Internal Controls & Risk Management 3