Certified Management Accountant Internal Controls 4

Question 1

Which risk response strategy involves transferring the financial consequences of a risk to a third party?

Accepted Answer

Risk sharing

Answer

Risk sharing (or transfer) moves the financial impact of a risk to another party, such as through insurance or outsourcing.

Question 2

Under the COSO Enterprise Risk Management (ERM) framework, 'risk appetite' is defined as:

Accepted Answer

The amount of risk an entity is willing to accept in pursuit of value

Answer

Risk appetite is the broad-based amount of risk an organization is willing to pursue or retain while pursuing its strategy.

Question 3

Password complexity requirements, automatic logoffs, and encryption are all examples of:

Accepted Answer

Logical access controls

Answer

Logical access controls restrict access to systems and data through software-based mechanisms like passwords and encryption.

Question 4

A company processes payroll in-house. Which control best prevents a fictitious employee from being added to payroll?

Accepted Answer

Requiring HR and payroll to be separate departments that both authorize new hires

Answer

Separating HR (authorization of employees) from payroll (processing of payments) prevents a single person from creating and paying fictitious employees.

Question 5

When assessing internal controls, 'residual risk' refers to:

Accepted Answer

Risk that remains after management has implemented controls

Answer

Residual risk is the remaining exposure after management applies controls to the inherent risk of a process or activity.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Internal Controls 4