CB Risk Management & Mitigation 5

Question 1

A company's accounts receivable balance has grown significantly, but sales have remained flat. Which risk does this pattern most likely signal?

Accepted Answer

Collectibility and credit risk

Answer

A rising AR balance without corresponding sales growth suggests customers are not paying on time, increasing the risk of bad debts.

Question 2

Which internal control procedure is designed to detect errors in financial records after they have occurred?

Accepted Answer

Supervisory review of reports

Answer

Supervisory review of financial reports is a detective control that identifies errors or irregularities after transactions have been recorded.

Question 3

A business owner wants to assess which risks pose the greatest threat to the organization. They multiply the probability of each risk by its potential financial impact. What is this technique called?

Accepted Answer

Risk prioritization matrix (expected value)

Answer

Multiplying probability by impact yields the expected value of each risk, allowing management to rank and prioritize risks for mitigation efforts.

Question 4

A company decides not to enter a new international market because the regulatory and currency risks are too high. Which risk response strategy does this represent?

Accepted Answer

Risk avoidance

Answer

Risk avoidance means choosing not to engage in an activity that carries unacceptable risk, eliminating exposure entirely.

Question 5

Which of the following best describes residual risk?

Accepted Answer

Risk that remains after controls have been implemented

Answer

Residual risk is the level of risk that persists after management has applied controls and other risk mitigation measures.

(CB) Certified Bookkeeper Practice Test

(CB) Certified Bookkeeper Practice Test

CB Risk Management & Mitigation 5