Finance for Non-Finance Managers Risk Management and Internal Controls 2

Question 1

Liquidity risk for a business primarily refers to the risk that the company:

Accepted Answer

Will not be able to meet its short-term financial obligations when they come due

Answer

Will experience a decline in its stock price

Answer

Will lose market share to a competitor

Answer

Will fail to comply with tax regulations

Question 2

The COSO framework is widely used in risk management and internal controls. What does COSO stand for?

Accepted Answer

Committee of Sponsoring Organizations of the Treadway Commission

Answer

Corporate Oversight Standards Organization

Answer

Compliance and Operations Standards Office

Answer

Central Organization for Systematic Oversight

Question 3

Which of the following best describes a 'key risk indicator' (KRI)?

Accepted Answer

A forward-looking metric that signals the potential for increased risk exposure

Answer

A measure of past financial losses recorded in the annual report

Answer

A legal document outlining the company's risk policies

Answer

The total number of insurance claims filed in a year

Question 4

Operational risk in a business is best described as the risk arising from:

Accepted Answer

Failures in internal processes, people, systems, or external events

Answer

Changes in interest rates affecting loan costs

Answer

Declining product demand in the marketplace

Answer

Currency exchange rate fluctuations

Question 5

What is the role of an internal audit function within a company?

Accepted Answer

To independently assess the effectiveness of internal controls and risk management

Answer

To prepare the company's external financial statements

Answer

To collect taxes on behalf of the government

Answer

To manage the company's investment portfolio

Question 6

Hedging is a risk management technique best described as:

Accepted Answer

Taking an offsetting financial position to reduce the impact of adverse price movements

Answer

Avoiding all financial market transactions to prevent losses

Answer

Diversifying a portfolio by investing in unrelated industries

Answer

Setting aside cash reserves to cover unexpected expenses

Question 7

Which fraud prevention control requires that two authorized individuals must both approve significant transactions before they are processed?

Accepted Answer

Dual authorization (four-eyes principle)

Answer

Rotation of duties

Answer

Reconciliation

Answer

Background checks