GOVBUDSMAN – ACTIVITY RISKS
ANSWER THE FOLLOWING .
1. The risk that financial statement are likely to be misstated materially
without regard to the effectiveness of internal control in the
a. Inherent risk
b. Audit risk
c. Client risk
d. Control risk
2.
a.
b.
c.
d.
The risk of material misstatement refers to
Control risk and acceptable audit risk
Inherent risk
The combination of inherent risk and control risk
Inherent risk and audit risk
3.
a.
b.
c.
d.
As the risk of material misstatement increases, detection risk should
Increase
Decrease
Stay the same
Increase or decrease depending on materiality level
4.
a.
b.
c.
d.
Inherent risk and control risk
Are inversely related to each other
Are inversely related to detection risk
Are directly related to detection risk
Are directly related to audit risk
5.
a.
b.
c.
d.
Relationship between control risk and detection risk is ordinarily
Parallel
Direct
Inverse
Equal
6. Which of the following conditions support an increase in detection
risk?
a. Internal control over cash receipts is excellent .
b. Application of analytical procedures reveals a significant increase in
sales revenue in December, the last month of the fiscal year
c. Internal control over shipping , billing, and recording of sales
revenue is weak
d. Study of the business reveals that the client recently acquired a new
company in an unrelated industry
7. Which of the following is not a primary consideration when assessing
inherent risk?
a.
b.
c.
d.
Nature of clients business
Existence of related parties
Degree of separation of duties
Susceptibility to defalcation
8. The risk that refers to uncertainty about the rate of return caused by
the nature of business is
a. Default risk
b. Business risk
c. Liquidity risk
d. Financial risk
9. The risk associated with the uncertainty created b y the inability to
turn investment quickly for cash
a. Interest rate risk
b. Business risk
c. Liquidity risk
d. Default risk
10.
The risk that the real rate of return will be lesser than the
nominal or stated rate of return due to inflation is referred to as
a. Purchasing power risk
b. Liquidity risk
c. Default risk
d. Business risk
11.
Operations risk is manifested in all of the following except
a. Interest rates volatility
b. Process stoppage
c. Technological obsolescence
d. Management fraud
12.
Financial risk is associated with financial institution include the
following except
a. Liquidity risks
b. Credit risks
c. Market liquidity risks
d. Environment risks
13.
Non financial risks associated with financial institutions include
the following except
a.
b.
c.
d.
Derivative risk
Integrity risk
Leadership risk
Regulatory risk
14.
The technique of eliminating or reducing risk which could mean
losing out on the potential gain is called
a. Risk sharing
b. Risk retention
c. Risk avoidance
d. Risk reduction
15.
------------involves accepting the loss or benefit of gain from a
risk when it occurs .
a. Risk avoidance
b. Risk reduction
c. Risk sharing
d. Risk retention