CB Risk Management & Mitigation 3

Question 1

Which of the following best describes inherent risk in the context of internal controls?

Accepted Answer

The risk existing before any controls are in place

Answer

Inherent risk is the susceptibility of a financial statement assertion to material misstatement assuming no related controls exist.

Question 2

A company sells goods on credit to customers without checking their creditworthiness. Which risk is the company most directly increasing?

Accepted Answer

Credit risk

Answer

Credit risk is the possibility that a customer or counterparty will fail to meet their financial obligations, leading to a loss for the company.

Question 3

An accounts payable clerk notices that the same vendor invoice number appears twice in the payment queue. What is the best immediate action?

Accepted Answer

Flag the duplicate for supervisor review before processing

Answer

Flagging potential duplicates for review before payment is a preventive measure that avoids double-payment fraud while ensuring proper authorization.

Question 4

Which principle requires that financial record-keeping responsibilities be divided among multiple employees to reduce fraud risk?

Accepted Answer

Segregation of duties

Answer

Segregation of duties divides key financial tasks among different employees so that no single person controls all aspects of a transaction.

Question 5

A manufacturing company faces the risk that raw material prices could rise sharply. Which tool is commonly used to mitigate this commodity price risk?

Accepted Answer

Futures contracts or hedging

Answer

Hedging with futures contracts locks in prices in advance, reducing exposure to adverse commodity price fluctuations.

(CB) Certified Bookkeeper Practice Test

(CB) Certified Bookkeeper Practice Test

CB Risk Management & Mitigation 3