Risk Management & Mitigation Flashcards
7 cards from real CB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management & Mitigation flashcards as text
A company's policy requires that all capital expenditures over $5,000 must be approved by the CFO. This is an example of which risk control?
Answer: Authorization control
Authorization controls ensure that transactions are approved by individuals with appropriate authority before they are processed.
Which of the following scenarios best illustrates the risk of 'management override of controls'?
Answer: A CFO instructs staff to record a sale before it is complete to meet quarterly targets
Management override occurs when executives use their authority to circumvent established controls, often to manipulate financial results.
A company keeps its blank check stock in a locked cabinet accessible only to the controller. This is an example of which control?
Answer: Physical safeguard control
Physical safeguard controls protect assets and records by restricting physical access to authorized personnel only.
Which financial statement is most directly used to assess a company's liquidity risk?
Answer: Statement of cash flows
The statement of cash flows shows whether a company generates sufficient cash to meet its short-term obligations, directly revealing liquidity risk.
An employee who processes payroll also has the ability to add new employees to the system. Which risk does this combination create?
Answer: Creation of ghost employees
When one person can add employees and process payroll, they can create fictitious (ghost) employees and divert the fraudulent paychecks to themselves.
A bookkeeper is asked to record a contingent liability for a pending lawsuit. Under US GAAP, which condition must be met to require accrual?
Answer: The loss is probable and the amount is reasonably estimable
ASC 450 requires accrual of a contingent loss only when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Which of the following is a key characteristic of a strong whistleblower policy as a fraud risk mitigation tool?
Answer: Anonymous reporting channels are available
Anonymous reporting channels encourage employees to report suspected fraud without fear of retaliation, increasing the likelihood that misconduct is detected.