CTP Treasury Operations and Controls 4 — Questions and Answers
Question 1: What is the primary operational risk associated with relying on a single treasury management system vendor?
- Excessive transaction fees
- Vendor concentration risk and potential service disruption if the vendor fails (Correct answer)
- Over-hedging of currency positions
- Regulatory non-compliance with SEC rules
Correct answer: Vendor concentration risk and potential service disruption if the vendor fails
Dependence on a single TMS vendor creates concentration risk; a vendor failure or outage can disrupt all treasury operations.
Question 2: Which SWIFT messaging type is used for cross-border customer credit transfers between financial institutions?
- MT103 (Correct answer)
- MT202
- MT950
- MT700
Correct answer: MT103
MT103 is the standard SWIFT message for single customer credit transfers (cross-border wire payments).
Question 3: In treasury operations, 'nostro account reconciliation' refers to reconciling which accounts?
- A bank's accounts held at a correspondent bank in a foreign currency (Correct answer)
- The company's domestic payroll accounts
- Investment portfolio margin accounts
- Tax withholding escrow accounts
Correct answer: A bank's accounts held at a correspondent bank in a foreign currency
Nostro accounts are a bank's accounts held at foreign correspondent banks, used to facilitate international transactions.
Question 4: A company wants to ensure all treasury transactions are traceable from initiation to settlement. Which control framework element addresses this?
- Materiality threshold
- Audit trail and transaction logging (Correct answer)
- Mark-to-market valuation
- Yield curve modeling
Correct answer: Audit trail and transaction logging
A comprehensive audit trail logs every transaction step, enabling full traceability for compliance and fraud investigation.
Question 5: Under SOX Section 404, treasury departments at public companies must ensure their controls are:
- Designed and operating effectively and documented for management assessment (Correct answer)
- Outsourced to a third-party administrator
- Reviewed only by the CFO annually
- Exempt from internal control requirements
Correct answer: Designed and operating effectively and documented for management assessment
SOX 404 requires management to assess and document the design and operating effectiveness of internal controls over financial reporting.
Question 6: What is the main advantage of using electronic bank account management (eBAM) in treasury operations?
- It eliminates all bank fees
- It automates the process of opening, modifying, and closing bank accounts with digital documentation (Correct answer)
- It replaces the need for banking relationships
- It automatically invests idle cash balances
Correct answer: It automates the process of opening, modifying, and closing bank accounts with digital documentation
eBAM digitizes and automates bank account administration, reducing manual paperwork and processing time for account changes.
Question 7: A treasury analyst discovers that the same employee can both create a vendor in the payment system and approve payments to that vendor. This represents:
- Acceptable efficiency in a small treasury department
- A segregation of duties control deficiency (Correct answer)
- Best practice for payment speed
- A GAAP-required procedure
Correct answer: A segregation of duties control deficiency
Allowing one employee to create vendors and approve payments creates a fraud risk and violates segregation of duties.
CTP Treasury Operations and Controls 4
What is the primary operational risk associated with relying on a single treasury management system vendor?