A Bank Uses a Risk Analysis Matrix to Quantify the Relative

question 263

Multiple Choice

A bank uses a risk analysis matrix to quantify the relative risk of auditable entities. The analysis involves rating auditable entities on risk factors using a scale of 1 to 10, with 10 representing the greatest risk. A partial list of risk factors and the ratings given to three of the bank's departments is provided below: Which of the following statements regarding risk in the department is true?

• A) As compared to departments A and C, department B has a stronger control system to compensate for the greater complexity of the department's transactions and dollar value of its assets.
• B) The internal audit activity should schedule audits of department B more often than audits of department C because of the relative control strength of department C as compared to department B.
• C) The nature of department A's control structure may be justified by the nature of the department's assets and the complexity of its transactions.
• D) The relative ranking of the departments in order of their risk, from greatest to least risk, is: A; C; B.

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Definitions:

Schachter

Stanley Schachter was a psychologist known for his development of the two-factor theory of emotion, which considers both physiological arousal and cognitive interpretation.

Singer

A singer is a person who uses their voice to produce musical sounds through modulation in tone and pitch, performing alone or with other musicians.

Process

A series of actions or steps taken in order to achieve a particular end.

Arousal Theory

Theory of motivation in which people are said to have an optimal (best or ideal) level of tension that they seek to maintain by increasing or decreasing stimulation.