Certified Internal Auditor Risk Assessment & Management

Question 1

What is the COSO Internal Control Framework?

Accepted Answer

A framework defining five components of internal control: control environment, risk assessment, control activities, information/communication, and monitoring

Answer

The COSO framework provides a comprehensive model for internal controls with five interrelated components that help organizations achieve objectives related to operations, reporting, and compliance.

Question 2

What is inherent risk versus residual risk?

Accepted Answer

Inherent risk exists before controls; residual risk remains after controls are applied

Answer

Inherent risk is the level of risk present before any controls are implemented, while residual risk is the risk remaining after management applies controls and mitigation measures.

Question 3

What is a risk-based audit plan?

Accepted Answer

An audit plan prioritized by the organization's most significant risks rather than auditing everything equally

Answer

A risk-based audit plan allocates audit resources to areas of highest risk, ensuring the most significant threats to organizational objectives receive audit attention first.

Question 4

What is the three lines of defense model in risk management?

Accepted Answer

First line: operational management; Second line: risk/compliance functions; Third line: internal audit

Answer

The three lines model assigns risk management roles: operational management owns and manages risk (1st), risk and compliance functions provide oversight (2nd), and internal audit provides independent assurance (3rd).

Question 5

How should internal auditors assess fraud risk?

Accepted Answer

By evaluating the fraud triangle elements: opportunity, pressure/incentive, and rationalization

Answer

Internal auditors assess fraud risk by evaluating the three elements of the fraud triangle — opportunity (weak controls), pressure (financial or personal), and rationalization (justification) — during all engagements.

Certified Internal Auditor Practice Test

Certified Internal Auditor Practice Test

Certified Internal Auditor Risk Assessment & Management