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:

Deviance

Behaviors or actions that deviate from societal norms or expectations, often leading to negative judgement.

Persistence

The quality of continuing steadfastly or firmly in some state, purpose, or course of action, despite difficulties or opposition.

Occupational Status

The position or rank of an individual's job within the hierarchy of a profession or society.

Alcoholism

A chronic disease characterized by uncontrolled drinking and preoccupation with alcohol, negatively affecting social and health aspects.