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

Liquidity risk is the danger that a company cannot convert assets into cash quickly enough to meet its immediate financial obligations.

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

COSO stands for the Committee of Sponsoring Organizations of the Treadway Commission, which developed the widely adopted internal control and enterprise risk management frameworks.

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

KRIs are forward-looking metrics that provide early warning signals of increasing risk exposure, allowing management to take proactive action.

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

Operational risk stems from breakdowns in internal processes, human error, system failures, or external disruptions that impact business operations.

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

Internal audit provides an independent, objective assessment of whether the company's risk management and internal control systems are effective.

Finance for Non-Finance Managers Practice Test

Finance for Non-Finance Managers Practice Test

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