CBA Risk Management & Mitigation 4

Question 1

Which internal control mechanism MOST directly mitigates the risk of unauthorized or fraudulent expenditures in a government budget?

Accepted Answer

Segregation of duties between authorization, custody, and record-keeping functions

Answer

Segregation of duties ensures that no single individual controls all aspects of a financial transaction, which is the foundational control against fraud and error.

Question 2

A budget analyst performs a Monte Carlo simulation on a major capital project. The primary purpose of this technique is to:

Accepted Answer

Model a range of possible budget outcomes by running thousands of scenarios with variable inputs

Answer

Monte Carlo simulation runs thousands of iterations with randomized inputs to produce a probability distribution of possible budget outcomes, quantifying uncertainty.

Question 3

When an agency purchases an insurance policy to cover potential losses from natural disasters affecting its facilities, this is an example of risk:

Accepted Answer

Transfer

Answer

Purchasing insurance transfers the financial consequences of a risk to a third party (the insurer) rather than bearing the cost internally.

Question 4

Which of the following is an example of a 'secondary risk' in budget management?

Accepted Answer

A new risk that arises as a direct result of implementing a risk response action

Answer

Secondary risks are unintended new risks created by the act of implementing a mitigation strategy, requiring their own assessment and response.

Question 5

A city budget office is preparing for potential revenue shortfalls due to an economic downturn. The MOST prudent risk mitigation step would be to:

Accepted Answer

Develop tiered budget reduction scenarios (e.g., 5%, 10%, 15% cuts) for potential activation

Answer

Pre-developing tiered reduction scenarios enables rapid, coordinated response if revenues fall short without disrupting operations unnecessarily.

(CBA) Certified Budget Analyst Practice Test

(CBA) Certified Budget Analyst Practice Test

CBA Risk Management & Mitigation 4