CAT Internal Controls & Risk Assessment 2

Question 1

Which control activity ensures that no single employee can both authorize a transaction and record it in the accounting system?

Accepted Answer

Segregation of duties

Answer

Segregation of duties divides authorization, recording, and custody functions among different employees to prevent fraud and error.

Question 2

An organization's risk appetite is BEST described as:

Accepted Answer

The level of risk the organization is willing to accept in pursuit of its objectives

Answer

Risk appetite defines how much risk management is prepared to accept when pursuing strategic objectives.

Question 3

Which type of control is designed to discover errors or irregularities AFTER they have occurred?

Accepted Answer

Detective control

Answer

Detective controls identify problems that have already happened, such as bank reconciliations or exception reports.

Question 4

A company requires two authorized signatures on all checks exceeding $10,000. This is an example of:

Accepted Answer

Dual authorization

Answer

Dual authorization requires more than one person to approve high-value transactions, reducing the risk of unauthorized payments.

Question 5

Residual risk is defined as the risk that remains:

Accepted Answer

After management has responded to the risk

Answer

Residual risk is the exposure that still exists after management applies controls or other risk responses.

(CAT) Certified Accounting Technician Practice Test