Certified Public Accountant Risk Assessment & Management 4

Question 1

Which of the following best describes 'risk appetite' in the context of enterprise risk management?

Accepted Answer

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

Answer

Risk appetite is the broad amount of risk an entity is willing to accept in pursuit of value, established by the board and senior management.

Question 2

A control that detects errors after they have already occurred is classified as a:

Accepted Answer

Detective control

Answer

Detective controls are designed to identify errors or irregularities that have already occurred, such as account reconciliations or exception reports.

Question 3

Which scenario best illustrates the risk of 'concentration risk'?

Accepted Answer

A manufacturer sources 90% of a critical component from a single supplier

Answer

Concentration risk arises when a company is overly dependent on a single source, customer, supplier, or geography, increasing vulnerability to disruption.

Question 4

Under AU-C Section 315, when must an auditor perform risk assessment procedures?

Accepted Answer

Throughout the planning phase and early fieldwork

Answer

AU-C 315 requires auditors to perform risk assessment procedures during planning to obtain an understanding of the entity and its environment, including internal controls.

Question 5

A company discovers that its fraud risk assessments did not consider the risk of management override of controls. This represents a gap in which COSO Internal Control component?

Accepted Answer

Risk Assessment

Answer

Risk Assessment in the COSO framework requires identifying and analyzing risks to achieving objectives, including the risk of management override and fraud.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Risk Assessment & Management 4