CCCP Risk Management & Internal Controls 5

Question 1

Which element distinguishes an 'emerging risk' from a 'known risk' in enterprise risk management?

Accepted Answer

Emerging risks have uncertain probability and limited historical data

Answer

Emerging risks are characterized by high uncertainty, novel circumstances, and limited historical data, making them difficult to quantify using traditional risk assessment methods.

Question 2

A compliance officer is evaluating whether to implement a control that costs $200,000 annually to reduce a risk with an expected annual loss of $150,000. The BEST decision framework to apply is:

Accepted Answer

Cost-benefit analysis

Answer

Cost-benefit analysis compares the cost of implementing a control against the financial benefit (reduced expected loss), and in this case the control cost exceeds the benefit.

Question 3

Which of the following is an example of a 'detective' rather than a 'preventive' internal control?

Accepted Answer

Conducting monthly bank reconciliations

Answer

Monthly bank reconciliations detect discrepancies that have already occurred, making them a detective control, whereas the other options prevent problems before they happen.

Question 4

In the context of internal controls over financial reporting (ICFR), a 'significant deficiency' differs from a 'material weakness' in that it:

Accepted Answer

Is less severe and represents a lower risk of material misstatement

Answer

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

Question 5

A compliance team is using a 'bow-tie' risk analysis. What does the LEFT side of the bow-tie represent?

Accepted Answer

Causes and threat pathways leading to the risk event

Answer

In a bow-tie analysis, the left side maps the threats and causes (with preventive controls) leading to the central risk event, while the right side maps consequences and recovery controls.

(CCCP) Certified Corporate Compliance Professional Practice Test

(CCCP) Certified Corporate Compliance Professional Practice Test

CCCP Risk Management & Internal Controls 5