Certified Internal Auditor Risk Assessment & Management 5

Question 1

The Three Lines Model assigns primary responsibility for risk management and internal controls to:

Accepted Answer

Operational management (first line)

Answer

In the Three Lines Model, operational management (first line) owns and manages risks as part of day-to-day activities.

Question 2

Scenario analysis differs from sensitivity analysis in that scenario analysis:

Accepted Answer

Examines the effect of multiple simultaneous variable changes

Answer

Scenario analysis evaluates the combined impact of multiple risk factors changing simultaneously, while sensitivity analysis varies one variable at a time.

Question 3

An auditor is evaluating a risk that has a 10% probability of occurring and would result in a $500,000 loss. The expected value of this risk is:

Accepted Answer

$50,000

Answer

Expected value = probability × impact = 0.10 × $500,000 = $50,000.

Question 4

Which of the following is a primary limitation of relying solely on historical data for risk assessment?

Accepted Answer

Past events may not reflect future risk exposures accurately

Answer

Historical data reflects past conditions; new technologies, markets, or operating environments can produce novel risks not captured in historical records.

Question 5

A control that reduces the likelihood of a risk event occurring is classified as a:

Accepted Answer

Preventive control

Answer

Preventive controls are designed to stop risk events from happening, reducing their probability of occurrence.

Certified Internal Auditor Practice Test

Certified Internal Auditor Practice Test

Certified Internal Auditor Risk Assessment & Management 5