CFA Internal Control Evaluation 3

Question 1

Which control technique is specifically designed to detect unauthorized changes to a computer program after it is deployed to production?

Accepted Answer

Change management logs and version control comparison

Answer

Change management logs and version control allow auditors to compare current code against approved baselines, detecting unauthorized modifications.

Question 2

A fraud examiner assesses the risk that management override of controls could occur. This risk is considered unique because:

Accepted Answer

Management has the authority and access to circumvent controls they themselves designed

Answer

Management override is uniquely dangerous because those with authority to design controls also have the ability to bypass them, making standard controls ineffective against it.

Question 3

In reviewing an accounts receivable process, which red flag suggests that receivables may be overstated to conceal a cash misappropriation scheme?

Accepted Answer

Increasing days sales outstanding (DSO) with a growing number of disputed accounts

Answer

Rising DSO and disputed accounts may indicate that cash collected from customers is being pocketed while fictitious or inflated receivables are recorded to cover the theft.

Question 4

Which COSO Internal Control component directly addresses the process of identifying and analyzing risks to achieving objectives?

Accepted Answer

Risk Assessment

Answer

Risk Assessment is the COSO component where organizations identify, analyze, and respond to risks relevant to achieving their objectives.

Question 5

An employee is able to create new employee records in the HR system AND approve payroll runs. This control gap most directly enables which fraud scheme?

Accepted Answer

Ghost employee fraud

Answer

The ability to add fictitious employees and then approve payroll disbursements enables ghost employee fraud, where paychecks are issued to non-existent workers.

CFA Practice Test

CFA Practice Test

CFA Internal Control Evaluation 3