FAC Internal Controls & Risk Assessment 2

Question 1

Which COSO component focuses on a company's processes for identifying, assessing, and responding to risk?

Accepted Answer

Risk Assessment

Answer

Risk Assessment is the COSO component dedicated to identifying and analyzing relevant risks that may prevent achievement of objectives.

Question 2

A control that prevents an error from occurring in the first place is classified as:

Accepted Answer

Preventive control

Answer

Preventive controls are designed to stop errors or fraud before they occur, unlike detective controls that identify them after the fact.

Question 3

Inherent risk is best defined as:

Accepted Answer

Risk before considering any mitigating controls

Answer

Inherent risk is the level of risk present in the absence of any internal controls or mitigating factors.

Question 4

Which document maps specific risks to the controls designed to address them?

Accepted Answer

Risk control matrix

Answer

A risk control matrix links identified risks to the specific controls implemented to mitigate each risk.

Question 5

The 'tone at the top' concept in internal controls refers to:

Accepted Answer

Management's attitude and commitment to ethical behavior and controls

Answer

Tone at the top describes how senior leadership's values and actions shape the organization's overall control environment.

(FAC) Finance and Accounting Certification Practice Test