CTP Treasury Operations and Controls 3 — Questions and Answers
Question 1: A treasury department uses a 'positive pay' service with its bank. What does this control prevent?
- Unauthorized wire transfers
- Check fraud through altered or counterfeit checks (Correct answer)
- ACH return items
- Overdraft fees
Correct answer: Check fraud through altered or counterfeit checks
Positive pay requires the company to transmit issued check data to the bank, which rejects checks not matching the file.
Question 2: Under the CTP exam framework, which document governs how treasury interacts with subsidiaries for intercompany transactions?
- External audit report
- Intercompany loan agreement or transfer pricing policy (Correct answer)
- Marketing budget
- Employee handbook
Correct answer: Intercompany loan agreement or transfer pricing policy
Intercompany loan agreements or transfer pricing policies establish terms and rates for intercompany treasury transactions.
Question 3: Which risk is MOST directly mitigated by implementing a bank account rationalization program?
- Interest rate risk
- Operational risk from managing too many idle or redundant accounts (Correct answer)
- Commodity price risk
- Equity market risk
Correct answer: Operational risk from managing too many idle or redundant accounts
Bank account rationalization reduces operational complexity and fraud exposure by eliminating unnecessary accounts.
Question 4: What is the key operational difference between a concentration account and a zero-balance account (ZBA)?
- Concentration accounts earn no interest; ZBAs do
- A ZBA automatically sweeps its balance to a master account at day-end, while a concentration account collects funds manually (Correct answer)
- ZBAs are only used for payroll
- Concentration accounts are only for foreign currency
Correct answer: A ZBA automatically sweeps its balance to a master account at day-end, while a concentration account collects funds manually
ZBAs automatically transfer all end-of-day balances to a master concentration account, optimizing cash pooling.
Question 5: Which of the following is an example of a preventive control in treasury operations?
- Monthly bank statement reconciliation
- Post-transaction audit review
- Requiring dual authorization before releasing a wire payment (Correct answer)
- Investigating a fraudulent transaction after it occurs
Correct answer: Requiring dual authorization before releasing a wire payment
Requiring dual authorization before releasing payments prevents unauthorized transactions from occurring.
Question 6: When a company implements an in-house bank (IHB), what primary operational benefit does it provide?
- Eliminates the need for external banking relationships entirely
- Centralizes intercompany payments and cash management to reduce external banking costs (Correct answer)
- Automatically hedges all currency exposures
- Replaces the need for a treasury management system
Correct answer: Centralizes intercompany payments and cash management to reduce external banking costs
An IHB centralizes intercompany flows, netting transactions and reducing the number and cost of external bank transactions.
Question 7: A company's treasury policy sets a maximum single-counterparty exposure of $10 million. This limit is BEST described as a:
- Liquidity buffer
- Credit limit or counterparty risk limit (Correct answer)
- Capital adequacy requirement
- Regulatory reserve
Correct answer: Credit limit or counterparty risk limit
A counterparty risk limit caps the total financial exposure a company will accept with any single counterparty.
CTP Treasury Operations and Controls 3
A treasury department uses a 'positive pay' service with its bank.
What does this control prevent?