Fraud Risk Assessment Flashcards
7 cards from real ACFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fraud Risk Assessment flashcards as text
Which of the following best describes the concept of 'inherent risk' in a fraud risk assessment?
Answer: The risk of fraud that exists before considering any controls
Inherent risk is the exposure to fraud that exists in the absence of any mitigating controls.
A fraud risk assessment team discovers that management routinely overrides system-generated purchase order approvals. This finding is best classified as:
Answer: A fraud risk indicator related to management override of controls
Management override of controls is a classic fraud risk indicator that can enable financial statement fraud or asset misappropriation.
When prioritizing fraud risks identified during an assessment, which factor is typically used alongside likelihood to determine overall risk rating?
Answer: Impact or significance
Fraud risks are typically rated by combining the likelihood of occurrence with the potential impact or significance of the fraud.
The 'fraud risk universe' in an organization's fraud risk assessment refers to:
Answer: All conceivable fraud schemes the organization could face
The fraud risk universe encompasses all potential fraud schemes and scenarios that could affect an organization, regardless of whether they have occurred.
Which COSO component is most directly addressed when an organization identifies fraud risk as part of its enterprise risk management process?
Answer: Risk assessment
COSO's ERM framework places fraud risk identification within the Risk Assessment component, which involves identifying and analyzing risks to achieving objectives.
During a fraud risk assessment, an interviewer asks employees whether they are aware of any pressure to meet financial targets through questionable methods. This technique primarily assesses which fraud triangle element?
Answer: Pressure/Incentive
Questions about pressure to meet financial targets directly probe the Pressure/Incentive leg of the fraud triangle.
A residual fraud risk is best defined as:
Answer: The fraud risk remaining after management's response and controls are applied
Residual risk is what remains after controls and other mitigating responses have been implemented to address inherent risk.