CRMA Knowledge

Question 1

Which of the following best defines the term "risk appetite" in the context of risk management?

Accepted Answer

The overall effect risks that an organization is ready to bear in order to achieve its goals.

Answer

The quantitative assessment of risk in financial terms.

Answer

The maximum level of danger that an organization can tolerate.

Answer

An organization's documented risk-management plan.

Question 2

What is the major responsibility of leadership in creating a risk-aware culture in an organization?

Accepted Answer

Leading by example and exhibiting risk-aware conduct

Answer

Reduced transparency in risk management practices

Answer

Assigning all risk management responsibilities to subordinates

Answer

Discourages candid communication regarding hazards

Question 3

An internal auditor for a multinational retail chain thinks that a shop manager has been skimming money from cash sales by recording the transactions as accounts receivable and then writing down the accounts as bad debts. Which of the following anomalies is the most likely source of the auditor's concern?

Accepted Answer

Bad debt expenditure is substantially greater as a percentage of sales than at comparable retailers.

Answer

A significantly greater rate of past-due accounts receivable than in comparable establishments.

Answer

A significantly larger percentage of past-due accounts receivable than in prior years.

Answer

Bad debt expenditure is substantially greater as a proportion of sales than in prior years.

Question 4

Which of the following circumstances represents a possible internal control weakness?

Accepted Answer

The employee who makes bank deposits also produces the monthly bank reconciliation.

Answer

The same person who restrictively approves consumer checks also creates the bank's check deposit slips.

Answer

The same person that accepts cash from consumers creates a prelisting of cash receipts.

Answer

The same individual who enters cash received into the accounts receivable subsidiary ledger ensures that the information is immediately updated.

Question 5

An organization has introduced a new automated payroll system that includes a table of pay rates based on employee job categories. Which control should an internal auditor recommend to guarantee that the table is accurately updated and only utilized for legitimate pay changes?

Accepted Answer

Any employee compensation modifications must be authorized and signed off on by a manager who is independent of the system and is unable to modify the table.

Answer

A supervisor in the department who has the capacity to update the table must compare the modifications to a signed management authorization.

Answer

Restrict data-table access to management and line supervisors with the power to set pay rates.

Answer

Ensure that the automated system includes enough edit and reasonableness checks.

Question 6

An organization's chief audit executive (CAE) finds that the internal audit personnel lacks the necessary expertise to undertake a financial derivatives audit. Which of the following is the best line of action for the CAE to take?

Accepted Answer

Employ a financial derivatives specialist to consult on the project, and reinforce the consultation with a financial derivatives seminar held locally.

Answer

Determine the necessary expertise and receive appropriate auditor training, even if the training would severely delay the project's timeline as set by the audit committee.

Answer

Notify the audit committee of the concern, and appoint the most qualified auditors on staff to conduct the audit engagement.

Answer

Outsource the audit engagement to a qualified external auditing firm to avoid burdening the audit committee with the choice.

Question 7

Which of the following controls is unsuitable for sales in a manufacturing organization?

Accepted Answer

For credit sales transactions, the sales department must approve them.

Answer

Customers' orders are processed quickly.

Answer

Goods sent are matched to valid client orders.

Answer

The receiving department inspects returned goods for damage to ensure correct disposal.

Question 8

A manufacturing company realizes that the waste water discharged does not match permissible standards. Which control function will be the least successful in resolving the issue?

Accepted Answer

Pollutants are diluted by cleansing sinks and floor drains with significant amounts of clean water on a daily basis.

Answer

Prior to disposal, do a chemical analysis of the water for the permit-specified components.

Answer

Developing a preventative maintenance plan for the pretreatment system.

Answer

Posting signs informing staff about which chemicals can be disposed of through sinks and floor drains in the facility.

Question 9

A computer system will automatically lock a user's account after three unsuccessful login attempts. What kind of control does this circumstance represent?

Accepted Answer

Preventive control

Answer

Compensating control

Answer

Detective control

Answer

Corrective control

Question 10

Which of the following behaviors demonstrates a lack of proper professional care by an internal auditor auditing a store's cash function?

Accepted Answer

After concluding that the cash function's internal controls were effective, the audit report satisfied top management that no fraud had occurred.

Answer

The auditor found a suspected fraud case and quickly reported it to management, but did not notify authorities outside the firm.

Answer

The audit report contained a well-supported suggestion for staff reductions, despite the fact that such reductions might have a negative impact on morale.

Answer

The auditor evaluated transaction samples to see how the cash function's process flows worked.