FAC Internal Controls & Risk Assessment 3

Question 1

Under the COSO framework, which component ensures that relevant information is captured and shared in a timely manner?

Accepted Answer

Information & Communication

Answer

Information & Communication is the COSO component focused on capturing and sharing information needed to support internal control functions.

Question 2

Residual risk is:

Accepted Answer

The risk remaining after controls are applied

Answer

Residual risk is the level of risk that remains after management has implemented controls to mitigate inherent risk.

Question 3

Which of the following best represents a compensating control?

Accepted Answer

Requiring two approvals when a normal segregation of duties is not feasible

Answer

Compensating controls substitute for primary controls that cannot be implemented, such as dual approvals when duties cannot be fully segregated.

Question 4

An organization's risk appetite is best described as:

Accepted Answer

The amount of risk management is willing to accept in pursuit of objectives

Answer

Risk appetite defines how much risk an organization is willing to take on while pursuing its strategic goals.

Question 5

Which audit technique tests whether controls are operating effectively over a period of time?

Accepted Answer

Test of controls

Answer

Tests of controls evaluate whether internal controls are designed and operating effectively throughout the audit period.

(FAC) Finance and Accounting Certification Practice Test