ARM 400 Segment B

Question 1

Organizations use key risk indicators (KRIs) to plan for and respond to

Select one:
A. Failure.
B. Emergencies.
C. Questions.
D. Risk.

Answer 1

D. Risk

Question 2

Which one of the following is a main characteristic of effective key risk indicators (KRIs)?

Select one:
A. They define the boundaries of risk tolerance.
B. They are based on quantifiable information.
C. They are lagging in nature.
D. They measure progress toward achieving objectives.

Answer 2

B. They are based on quantifiable information.

Question 3

Which one of the following measures the progress an organization has made toward attaining its goals within a specific amount of time?

Select one:
A. Key risk indicator
B. Critical success factor
C. Key performance indicator
D. Risk tolerance level

Answer 3

C. Key performance indicator

Question 4

Key risk indicators (KRIs) help organizations identify issues that can lead to losses. Effective KRIs are based on a company’s

Select one:
A. Sales volume.
B. Strategic objectives.
C. Product or industry.
D. Organizational structure.

Answer 4

B. Strategic objectives.

Effective KRIs are founded on an organization’s objectives. Management identifies areas of potential risk for each objective and then defines the information needed to measure and monitor the risks as they emerge or change.

Question 5

Successful organizations have goals and objectives. A financial or nonfinancial measurement that defines how successfully an organization is progressing toward its long-term goals is referred to as

Select one:
A. An operating standard (OS).
B. A critical success factor (CSF).
C. An objective gauge (OG).
D. A key performance indicator (KPI).

Answer 5

D. A key performance indicator (KPI).

A key performance indicator (KPI) is a financial or nonfinancial measurement that defines how successfully an organization is progressing toward its long-term goals.

Question 6

Which one of the following statements is true regarding the business process management (BPM) life cycle model?

Select one:
A. The model is driven by the collaboration of human and technological input.
B. The model is designed to review one business process at a time.
C. The model is ineffective unless all five steps are completed on a continuous basis.
D. The model is primarily used by organizations in the manufacturing sector.

Answer 6

A. The model is driven by the collaboration of human and technological input.

Question 7

Which one of the following terms refers to information used as a basis for measuring the significance of a risk?

Select one:
A. Risk tolerance
B. Risk criteria
C. Risk appetite
D. Risk threshold

Answer 7

B. Risk criteria

Question 8

The service representatives for Tauton Insurance will be eligible for a bonus only if the customer retention rate is increased by 5%. This is an example of which one of the following standards?

Select one:
A. A critical success factor derived from a strategic objective
B. A corrective measure linked with an identified tolerance level
C. A key performance indicator based on financial ratios
D. A severe risk tolerance level

Answer 8

B. A corrective measure linked with an identified tolerance level

Question 9

Which one of the following answers the question, “What shows we are a success?”

Select one:
A. Strategic objective
B. Risk tolerance level
C. Critical success factor
D. Key performance indicator

Answer 9

D. Key performance indicator

Question 10

The business process management (BPM) life cycle incorporates five steps. Which one of the following best describes the first step in the BPM process?

Select one:
A. Processes are modeled to identify the organization’s response to what-if scenarios.
B. Processes are designed or redesigned by considering workflows and affected personnel.
C. Processes are tracked so that statistics on their performance can be gathered.
D. Critical processes that support achievement of the organization’s goals are selected for analysis.

Answer 10

B. Processes are designed or redesigned by considering workflows and affected personnel.

Question 11

Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which one of the following statements is correct with respect to KRIs?

Select one:
A. KRIs are effective internal indicators of changes such as budget variances; however they are not effective external indicators.
B. Risk criteria relating to an organization’s strategic risks generally do not serve as the bases for KRIs, which tend to be operational in focus.
C. An organization’s risk criteria, predefined tolerance ranges that measure variances from expected outcomes, are based on risk thresholds.
D. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk.

Answer 11

D. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk.

Question 12

An organization’s goals and objectives are met by establishing and attaining measurable standards for the many activities it pursues. Which one of the following statements is correct with respect to those standards?

Select one:
A. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable.
B. Organizations with key performance indicators (KPIs) established for critical success factors (CSFs) will typically achieve organizational goals.
C. A key performance indicator (KPI) answers the question, “What will make our organization a success?”
D. Generally, an organization’s risk tolerance has little impact on its critical success factors (CSFs) and key performance indicators (KPIs).

Answer 12

A. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable.

Question 13

North American Furnishings is using business process management to help it identify risks that threaten its processes. Which one of the following risks would be considered an internal risk?

Select one:
A. The rise in the cost of materials due to new forestry regulations
B. The loss of available materials due to tornadoes
C. The drop in demand due to rising interest rates
D. The loss of skilled craftspeople due to retirement

Answer 13

D. The loss of skilled craftspeople due to retirement

Question 14

An organization’s goals and objectives are met by establishing and attaining measurable standards for the many activities it pursues. Which one of the following statements is correct with respect to those standards?

Select one:
A. Organizations with key performance indicators (KPIs) established for critical success factors (CSFs) will typically achieve organizational goals.
B. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable.
C. A key performance indicator (KPI) answers the question, “What will make our organization a success?”
D. Generally, an organization’s risk tolerance has little impact on its critical success factors (CSFs) and key performance indicators (KPIs).

Answer 14

B. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable.

Question 15

For an organization, a key performance indicator (KPI) measures the performance of a specific activity at a predetermined level or amount. Which one of the following is an example of a KPI based on a ratio?

Select one:
A. Inventory turnover
B. High employee morale
C. Customer-focused website
D. Safe transport of customer goods

Answer 15

A. Inventory turnover

Question 16

Key risk indicators (KRIs) help organizations identify issues that can lead to losses. Effective KRIs are based on a company’s

Select one:
A. Sales volume.
B. Organizational structure.
C. Strategic objectives.
D. Product or industry.

Answer 16

C. Strategic objectives.

Question 17

Which one of the following is an example of an external key risk indicator (KRI) that a manufacturer might monitor?

Select one:
A. Number of employee injuries
B. Amount of budget variances
C. Cost of raw materials
D. Age of accounts payable

Answer 17

C. Cost of raw materials

Question 18

Successful organizations have goals and objectives. A financial or nonfinancial measurement that defines how successfully an organization is progressing toward its long-term goals is referred to as

Select one:
A. A critical success factor (CSF).
B. An objective gauge (OG).
C. A key performance indicator (KPI).
D. An operating standard (OS).

Answer 18

C. A key performance indicator (KPI).

Question 19

Carbon Manufacturing Company just hired a new chief risk officer (CRO) and one of his first tasks was to recommend updated key risk indicators (KRIs) to the chief executive officer (CEO). The CEO was especially interested in KRIs measuring the company’s profitability. One area of measurement that the new CRO might want to use is

Select one:
A. Personnel changes.
B. Customer orders.
C. Aged accounts receivable.
D. Customer invoices.

Answer 19

C. Aged accounts receivable.

Question 20

Which one of the following answers the question, “What shows we are a success?”

Select one:
A. Critical success factor
B. Strategic objective
C. Risk tolerance level
D. Key performance indicator

Answer 20

D. Key performance indicator

Question 21

Key risk indicators (KRIs) can be established for various levels within an organization. Which one of the following levels of an organization usually has the most detailed KRIs?

Select one:
A. Senior management level
B. Business-unit level
C. Board of director level
D. Department level

Answer 21

D. Department level

Question 22

North American Furnishings is using business process management to help it identify risks that threaten its processes. Which one of the following risks would be considered an internal risk?

Select one:
A. The drop in demand due to rising interest rates
B. The loss of available materials due to tornadoes
C. The loss of skilled craftspeople due to retirement
D. The rise in the cost of materials due to new forestry regulations

Answer 22

C. The loss of skilled craftspeople due to retirement

Question 23

Which one of the following terms refers to information used as a basis for measuring the significance of a risk?

Select one:
A. Risk criteria
B. Risk tolerance
C. Risk appetite
D. Risk threshold

Answer 23

A. Risk criteria

Question 24

Which one of the following answers the question, “What shows we are a success?”

Select one:
A. Critical success factor
B. Risk tolerance level
C. Key performance indicator
D. Strategic objective

Answer 24

C. Key performance indicator

Question 25

Organizations use key risk indicators (KRIs) to plan for and respond to

Select one:
A. Emergencies.
B. Failure.
C. Questions.
D. Risk.

Answer 25

D. Risk.

Question 26

Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which one of the following statements is correct with respect to KRIs?

Select one:
A. Risk criteria relating to an organization’s strategic risks generally do not serve as the bases for KRIs, which tend to be operational in focus.
B. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk.
C. KRIs are effective internal indicators of changes such as budget variances; however they are not effective external indicators.
D. An organization’s risk criteria, predefined tolerance ranges that measure variances from expected outcomes, are based on risk thresholds.

Answer 26

B. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk.

Question 27

Which one of the following measures the progress an organization has made toward attaining its goals within a specific amount of time?

Select one:
A. Critical success factor
B. Key risk indicator
C. Key performance indicator
D. Risk tolerance level

Answer 27

C. Key performance indicator

Question 28

An organization’s goals and objectives are met by establishing and attaining measurable standards for the many activities it pursues. Which one of the following statements is correct with respect to those standards?

Select one:
A. Generally, an organization’s risk tolerance has little impact on its critical success factors (CSFs) and key performance indicators (KPIs).
B. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable.
C. A key performance indicator (KPI) answers the question, “What will make our organization a success?”
D. Organizations with key performance indicators (KPIs) established for critical success factors (CSFs) will typically achieve organizational goals.

Answer 28

B. For each key performance indicator (KPI), there is a tolerance level for how much deviation from the standard established in the KPI will be acceptable.

Question 29

Which one of the following measures the progress an organization has made toward attaining its goals within a specific amount of time?

Select one:
A. Critical success factor
B. Key risk indicator
C. Key performance indicator
D. Risk tolerance level

Answer 29

C. Key performance indicator

Question 30

Organizations use key risk indicators (KRIs) to plan for and respond to risk. Which one of the following statements is correct with respect to KRIs?

Select one:
A. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk.
B. An organization’s risk criteria, predefined tolerance ranges that measure variances from expected outcomes, are based on risk thresholds.
C. KRIs are effective internal indicators of changes such as budget variances; however they are not effective external indicators.
D. Risk criteria relating to an organization’s strategic risks generally do not serve as the bases for KRIs, which tend to be operational in focus.

Answer 30

A. A KRI can reveal an upward trend in the level of a risk that, if it continues, will exceed the designated risk threshold for that risk.

Question 31

Which one of the following is a main characteristic of effective key risk indicators (KRIs)?

Select one:
A. They are based on quantifiable information.
B. They measure progress toward achieving objectives.
C. They are lagging in nature.
D. They define the boundaries of risk tolerance.

Answer 31

A. They are based on quantifiable information.

Question 32

Which one of the following is the term used for a person—usually a manager—who advocates for and supports a specific aspect of the risk management process in an organization?

Select one:
A. Chief risk officer (CRO)
B. Internal auditor
C. Risk manager
D. Risk champion

Answer 32

D. Risk champion

Question 33

Some best practices models call for the formation of a risk committee with a risk management focus at the organization’s executive management level. Which one of the following statements best describes one of the responsibilities of an executive-level risk committee?

Select one:
A. To monitor the organization’s compliance with established risk limits and how noncompliance is addressed
B. To oversee exposures of the organization’s critical risks and advise the board on risk strategy.
C. To approve the organization’s risk management strategies, including their design and implementation.
D. To assist the board in establishing the organization’s risk appetite and risk tolerance levels

Answer 33

C. To approve the organization’s risk management strategies, including their design and implementation.

Question 34

All of the following are true regarding the composition of boards of directors, EXCEPT:

Select one:
A. Corporate boards are uniform in size with 13 directors.
B. Boards include both inside directors and outside directors.
C. Directors elect the chairman of the board.
D. Outside directors serve on the compensation committee.

Answer 34

A. Corporate boards are uniform in size with 13 directors committee.

Question 35

Organizations are increasingly creating chief risk officer (CRO) positions. Which one of the following statements is correct with respect to CROs?

Select one:
A. A 2012 survey indicated that, in companies with annual revenue greater than $20 billion, fewer than 20% had created a CRO position.
B. The CRO’s rank and importance to the board of directors are equal to those of the organization’s other executive officers.
C. CROs’ roles are relatively standardized from industry to industry; they focus primarily on measuring and controlling risk.
D. Typically, a CRO analyzes, measures, and monitors risk; compiles reports; and facilitates risk workshops without the need for staff.

Answer 35

B. The CRO’s rank and importance to the board of directors are equal to those of the organization’s other executive officers.

Question 35

Which of the following statements best describes the risk governance role and responsibility of a corporate board of directors?

Select one:
A. To convert strategy into operational objectives and to identify and assess the impact of risks on the achievement of the objectives.
B. To establish risk management policies, to define risk management roles and responsibilities, and to set risk management implementation goals.
C. To assign risk management procedures for day-to-day functions and internal controls.
D. To set the organization’s risk appetite and to stay informed of the most significant risks to the organization and management’s responses.

Answer 35

D. To set the organization’s risk appetite and to stay informed of the most significant risks to the organization and management’s responses.

Question 36

An evolving tenet of corporate governance is that control and oversight be separated at the board level. In a board context, this separation is often achieved by requiring that most directors be

Select one:
A. Executives.
B. Inside directors.
C. Outside directors.
D. Unpaid directors.

Answer 36

C. Outside directors.

Question 37

The board of directors must use a thorough understanding of the organization’s overall risk philosophy to determine the amount of risk the organization is willing to seek or accept in the pursuit of long-term objectives. This amount of risk is called the organization’s

Select one:
A. Maximum possible loss.
B. Retention level.
C. Probable maximum loss.
D. Risk appetite.

Answer 37

D. Risk appetite.

Question 38

Humongous Corporation has announced that it seeks strategic growth through acquisition. It is carefully eyeing a smaller company, Tiny Corporation. Tiny Corporation is aware of such scrutiny and interest. Within Tiny Corporation, a market force that can help align interests of its corporate decision makers and shareholders is which one of the following?

Select one:
A. Regulatory action
B. Takeover threats
C. Merger opportunities
D. Quarterly earnings announcements

Answer 38

B. Takeover threats

Question 39

Corporations do not always internalize the costs of their decisions. Some costs are not borne by the corporation but are a result of their decisions. One example of this is

Select one:
A. Corporate philanthropy.
B. Pollution costs.
C. Payments to offshore subsidiaries.
D. Corporate compliance costs.

Answer 39

B. Pollution costs.

Question 40

Corporate governance is evolving towards the separation of oversight and control for boards of directors. This separation may be accomplished by

Select one:
A. Requiring the audit committee to be comprised of inside directors.
B. Requiring the majority of the directors to be outside directors.
C. Using company-appointed board members rather than shareholder-elected board members.
D. Requiring a company executive to chair each board committee.

Answer 40

B. Requiring the majority of the directors to be outside directors.

Question 41

While most shareholders are passive, which one of the following parties has more operational involvement in a corporation’s day to day activities?

Select one:
A. Regulators
B. Proxies
C. Managers
D. Directors

Answer 41

C. Managers

Question 42

Karen Williams, a retired chief financial officer of a bank, was invited to join the board of directors of ABC Property and Liability Insurance Company. She was asked to serve on the Audit Committee and the Risk Committee of the ABC board. Which of the following statements is true regarding Karen’s service on the ABC board of directors?

Select one:
A. As a board member, Karen is expected to be a disinterested party, only questioning the management team when new corporate initiatives fail.
B. The work of Karen’s Risk Committee is limited to a review of the insurance company’s underwriting results and the company’s investment portfolio.
C. Karen’s Audit Committee takes precedence over the board of directors with regard to oversight responsibility.
D. The entire board retains oversight responsibility over risks that are assigned to Karen’s Audit Committee.

Answer 42

C. Karen’s Audit Committee takes precedence over the board of directors with regard to oversight responsibility.

Question 43

A corporate board of director’s chair person is elected by

Select one:
A. The board of directors.
B. The shareholders.
C. Executive management.
D. Proxies.

Answer 43

A. The board of directors.

Question 44

Which one of the following statements is correct with respect to the role of a board of directors in risk oversight?

Select one:
A. Increasing pressure on boards of directors to provide greater enterprise-wide risk oversight comes from sources such as investors, rating agencies, and regulators.
B. Financial services organizations are far less subject to regulatory pressure for increased transparency and risk oversight than are corporations in nonfinancial business sectors.
C. A board’s risk management strategy and broad objectives typically have little effect in setting the tone for risk management across the entire organization.
D. A 2012 survey of executives revealed that practically all boards have formally assigned risk oversight responsibility to a board committee.

Answer 44

A. Increasing pressure on boards of directors to provide greater enterprise-wide risk oversight comes from sources such as investors, rating agencies, and regulators.

Question 45

The managers and executives at Oakes Corporation feel pressure to improve quarterly financial results because they have become the laughingstock of their competitive niche. They wish to change this and restore the excellent light in which competitors once viewed them. Such concerns on the part of Oakes’ leadership reflect concern for

Select one:
A. Management reputation.
B. Takeover threats.
C. Shareholder reputation.
D. Legal liability.

Answer 45

A. Management reputation.

Question 46

Rufus owns 1500 shares in the ARM Corporation. Recently, ARM has shouldered significant liabilities due to pollution problems. Generally, Rufus’ liability as a shareholder would be limited to which one of the following?

Select one:
A. The amount of insurance coverage they have
B. The amount of assets they have
C. Treble damages
D. The value of their shares

Answer 46

D. the value of their shares.

Question 47

Though various parties incur costs in monitoring corporate decision-makers, most monitoring costs are shouldered by which one of the following?

Select one:
A. Insurers
B. Shareholders
C. Managers
D. Directors

Answer 47

B. Shareholders

Question 48

Which one of the following statements regarding corporate governance and risk oversight is true?

Select one:
A. Corporate governance and risk oversight have no impact on the value of the organization.
B. Nonfinancial organizations are subject to greater regulatory pressure for transparency and astute risk management than financial organizations.
C. Some board of directors delegate risk oversight tasks to board committees, such as the audit committee, risk committee, and compensation committee.
D. Board oversight should be limited to past history and current conditions, and should avoid consideration of uncertain future events.

Answer 48

C. Some board of directors delegate risk oversight tasks to board committees, such as the audit committee, risk committee, and compensation committee.

Question 49

Which one of the following statements regarding the structure and role of a board of directors is true?

Select one:
A. Members of the board elect a director to be chairman of the board.
B. The board of directors must be comprised of ten directors, with an equal number of inside and outside directors.
C. Members of the board are appointed by the president of the company.
D. The board is responsible for the day-to-day decisions at a corporation.

Answer 49

A. Members of the board elect a director to be chairman of the board.

Question 50

Which one of the following statements is true regarding the roles of a risk champion and a chief risk officer?

Select one:
A. A chief risk officer reports to a risk champion, who in turn interacts with the company executives and the board of directors.
B. A chief risk officer usually has less influence on corporate decision making than a risk champion.
C. A chief risk officer is more likely to have a dedicated staff to assist with the responsibilities of his or her job.
D. A risk champion is a member of the board of directors who has been selected to concentrate his or her efforts on assessing the risks faced by an organization.

Answer 50

C. A chief risk officer is more likely to have a dedicated staff to assist with the responsibilities of his or her job.

Question 51

Corporate governance is defined as

Select one:
A. A diagram of reporting relationships and levels of authority within an organization.
B. The reporting chain of command within an organization.
C. A body of law that specifies how corporations are legally formed and chartered.
D. The mechanisms and procedures that determine how corporations are run.

Answer 51

D. The mechanisms and procedures that determine how corporations are run.

Question 52

Which one of the following categories of agency costs is assumed by managers?

Select one:
A. Advertising costs
B. Bonding costs
C. Incentive alignment costs
D. Monitoring costs

Answer 52

B. Bonding costs

Question 52

Which one of the following statements regarding corporate governance and risk oversight is true?

Select one:
A. Corporate governance and risk oversight have no impact on the value of the organization.
B. Nonfinancial organizations are subject to greater regulatory pressure for transparency and astute risk management than financial organizations.
C. Some board of directors delegate risk oversight tasks to board committees, such as the audit committee, risk committee, and compensation committee.
D. Board oversight should be limited to past history and current conditions, and should avoid consideration of uncertain future events.

Answer 52

C. Some board of directors delegate risk oversight tasks to board committees, such as the audit committee, risk committee, and compensation committee.

Question 53

One corporate governance issue is accountability of directors. One method to increase accountability of directors is to

Select one:
A. Include more inside directors.
B. Decrease the independence of audit and compensation committees.
C. Conduct regular meetings of outside directors without management being present.
D. Ensure that the chief executive officer serves as board chairman.

Answer 53

C. Conduct regular meetings of outside directors without management being present.

Question 54

Which of the following statements best describes the risk governance role and responsibility of a corporate board of directors?

Select one:
A. To establish risk management policies, to define risk management roles and responsibilities, and to set risk management implementation goals.
B. To set the organization’s risk appetite and to stay informed of the most significant risks to the organization and management’s responses.
C. To assign risk management procedures for day-to-day functions and internal controls.
D. To convert strategy into operational objectives and to identify and assess the impact of risks on the achievement of the objectives.

Answer 54

B. To set the organization’s risk appetite and to stay informed of the most significant risks to the organization and management’s responses.

Question 55

While corporate governance is concerned with separating ownership and control, it is also concerned with separating control from

Select one:
A. Management.
B. Shareholding.
C. Compliance.
D. Oversight.

Answer 55

D. Oversight.

Question 56

Which one of the following is the term used for a person—usually a manager—who advocates for and supports a specific aspect of the risk management process in an organization?

Select one:
A. Risk champion
B. Internal auditor
C. Chief risk officer (CRO)
D. Risk manager

Answer 56

A. Risk champion

Question 57

Which one of the following statements regarding the structure and role of a board of directors is true?

Select one:
A. Members of the board are appointed by the president of the company.
B. The board is responsible for the day-to-day decisions at a corporation.
C. The board of directors must be comprised of ten directors, with an equal number of inside and outside directors.
D. Members of the board elect a director to be chairman of the board.

Answer 57

D. Members of the board elect a director to be chairman of the board.

Question 58

One of the categories of agency costs associated with managing the relationship between management and shareholders is

Select one:
A. Implementation costs.
B. Monitoring costs.
C. Acquisition costs.
D. Commission costs.

Answer 58

B. Monitoring costs.

Question 59

Some best practices models call for the formation of a risk committee with a risk management focus at the organization’s executive management level. Which one of the following statements best describes one of the responsibilities of an executive-level risk committee?

Select one:
A. To monitor the organization’s compliance with established risk limits and how noncompliance is addressed
B. To approve the organization’s risk management strategies, including their design and implementation.
C. To oversee exposures of the organization’s critical risks and advise the board on risk strategy.
D. To assist the board in establishing the organization’s risk appetite and risk tolerance levels.

Answer 59

D. To assist the board in establishing the organization’s risk appetite and risk tolerance levels.

Question 60

Corporate governance is evolving towards the separation of oversight and control for boards of directors. This separation may be accomplished by

Select one:
A. Using company-appointed board members rather than shareholder-elected board members.
B. Requiring the audit committee to be comprised of inside directors.
C. Requiring a company executive to chair each board committee.
D. Requiring the majority of the directors to be outside directors.

Answer 60

D. Requiring the majority of the directors to be outside directors.

Question 61

As a market force to help align manager and shareholder interests, takeover threats are

Select one:
A. Less likely now than in the past because of statutory changes.
B. Easily and quickly implemented and are highly effective.
C. Only effective when the employment market for managers is increasing.
D. Only effective for directors and officers and have no effect on managers.

Answer 61

A. Less likely now than in the past because of statutory changes.

Question 62

Mechanisms that can be used to align a corporation’s managerial and shareholders’ interests include all of the following, EXCEPT:

Select one:
A. Incentive compensation
B. Management reputation
C. Takeover threat
D. Risk-averse behavior

Answer 62

D. Risk-averse behavior

Question 63

As a category of agency costs, bonding costs include

Select one:
A. Cash compensation.
B. Stock options and restricted stock.
C. Fees paid to outside auditors.
D. Fees paid to outside directors.

Answer 63

B. Stock options and restricted stock.

Question 64

A data governance committee (DGC)

Select one:
A. Cleanses big data.
B. Is cross-functional.
C. Is comprised of IT architects.
D. Reports to risk management.

Answer 64

B. Is cross-functional.

Question 65

Donna’s Dog Treats has been very successful in the Boston area and would like to expand to new cities. Donna knows that she cannot make this decision based on customer advice and blind faith. She has collected internal financial and operational data as well as external data from reliable sources. Donna has hired an analyst to review the data quality. The analyst is reviewing the data to see if it includes the demographics for each target city that Donna is considering. Which one of the following data-quality principles is being evaluated?

Select one:
A. Comprehensiveness
B. Appropriateness
C. Reasonableness
D. Validity

Answer 65

A. Comprehensiveness

Question 66

Cyber extortion is another name for

Select one:
A. Social engineering.
B. Ransomware.
C. Bitcoin
D. Phishing.

Answer 66

B. Ransomware, a type of malware, is used to shut down a business’ systems, holding data hostage until a ransom is paid.

Question 67

Sound risk management decisions are predicated on

Select one:
A. Regulations and compliance.
B. Effective decision-making.
C. Quality data.
D. Operational efficiencies.

Answer 67

C. Quality data, is critical to making sound risk management decisions. For example, up-to-date financial data may influence whether an organization decides to expand its product offerings.

Question 68

Which one of the following data governance tools allows the data governance committee to look at data relationships and interdependencies across the organization?

Select one:
A. External compliance guidelines
B. Internal coding procedures
C. Enterprise data models
D. Project management programs

Answer 68

C. Enterprise data models

Question 69

Internal data entry processes that capture accounting transactions, customer data or other operational transactions are called

Select one:
A. Data capture.
B. Data governance.
C. Data integration.
D. Data quality.

Answer 69

A. Data capture, including data preparation, are a business’ day to day transactions.

Question 70

In terms of data governance, IT employees hold the role of

Select one:
A. Data stewards.
B. Compliance regulators.
C. Rule developers.
D. Data custodians.

Answer 70

D. Data custodians.

Question 71

Which one of the following is a basic process in any data security program?

Select one:
A. Develop and enforce stronger password protocols.
B. Perform random sampling of data for accuracy.
C. Establish metrics for timeliness of data refresh in systems.
D. Establish a data governance committee (DGC).

Answer 71

A. Develop and enforce stronger password protocols is a critical first step in protecting a business’ data from unwanted intrusions.

Question 72

Ensuring quality data requires a

Select one:
A. Systematic and purpose-driven review process.
B. Business Analyst.
C. Data governance committee
D. More efficient deployment of resources.

Answer 72

A. Systematic and purpose-driven review process.

Question 73

A privacy impact assessment (PIA) is

Select one:
A. An example of metadata that defines key data attributes.
B. A tool used to identify and assess privacy risks.
C. A collaborative tool that facilitates workflows.
D. Proprietary software used to detect malware.

Answer 73

B. A tool used to identify and assess privacy risks as well as identify whether information collected complies with legal and regulatory privacy requirements.

Question 74

There are two types of associated risk for data privacy, individual and general risk. General data privacy risk

Select one:
A. Involves legal and regulatory requirements.
B. Can be categorized operational or reputational.
C. Varies by the type of business or industry.
D. Is of specific concern to the European Union.

Answer 74

B. Can be categorized operational or reputational.

Question 75

The data quality principle of reasonability refers to

Select one:
A. The comprehensive nature of data.
B. The systematic process of tracing data.
C. The materiality or relevance of data.
D. The appropriateness of current data.

Answer 75

C. The materiality or relevance of data, testing whether the information provided is pertinent to the business objective at hand.

Question 76

Which one of the following defines individual risk?

Select one:
A. Individual risk may be categorized as operational.
B. Individual risk is defined by the data governance committee.
C. Individual risk is reputational in nature.
D. Individual risk varies according to the type of business.

Answer 76

D. Individual risk varies according to the type of business.

Question 77

Which one of the following is an element of a data security program?

Select one:
A. Installing agile project management.
B. Storing data back-ups off site.
C. Implementing a data governance program.
D. Increasing the overall efficiency of data systems.

Answer 77

B. Storing data back-ups off site.

Question 78

Encrypting data to block its use if stolen is an example of a

Select one:
A. Hardware-based security solution.
B. Incident response plan.
C. Software-based security solution.
D. Cyber-threat inventory approach.

Answer 78

C. Software-based security solution.

Question 79

Data governance provides

Select one:
A. A dynamic view of data without needing to move it between systems.
B. The internal data entry processes needed to capture accounting transactions.
C. Definitions, standards and procedures for how data is used.
D. A road map that details where data is located.

Answer 79

C. Definitions, standards and procedures for how data is used. Data governance is the starting point, or rule set for managing data.

Question 80

Metadata contains

Select one:
A. Information about data as well as rules about that data.
B. Accounting ledger entries as well as big data.
C. Both material limitations and sampling methodology.
D. A combination of structured and unstructured data.

Answer 80

A. Information about data as well as rules about that data. Metadata contains information about the data itself. It may include documentation about the database, or business rules for the data’s use.

Question 81

Which one of the following is a data governance committee (DGC) responsibility?

Select one:
A. A data governance committee both retrieves and prepares metadata for use by an organization.
B. A data governance committee plays a key role in project management for data projects.
C. A data governance committee ensures there are few conflicts or redundancies in data standards and practices.
D. A data governance committee is charged with monitoring the volume of big data within an organization.

Answer 81

C. A data governance committee ensures there are few conflicts or redundancies in data standards and practices.

Question 82

To gain a competitive advantage, maintain profitability, and satisfy customers an organization must

Select one:
A. Adopt current accounting rules.
B. Pay attention to the marketplace.
C. Have an effective risk management program.
D. Be able to trust its data.

Answer 82

D. Be able to trust its data.

Question 83

Which one of the following is an example of a data governance tool?

Select one:
A. External Policy
B. Metadata
C. Risk Management
D. Data integration

Answer 83

A. External Policy. Data governance is more than just physical tools or software applications. A data governance committee also uses internal policies, external policies, enterprise data models and collaborative tools such as agile project management to achieve its aims.

Question 84

Malware is defined as

Select one:
A. Software technology used to encrypt data.
B. A tool for managing data security.
C. Software designed to cause damage.
D. A hardware-based security breach.

Answer 84

C. Software designed to cause damage.

Question 85

Which one of the following defines the duties of a data steward?

Select one:
A. A data steward provides technological support.
B. A data steward measures data compliance.
C. A data steward is a project manager.
D. A data steward is an experienced business analyst.

Answer 85

D. A data steward is an experienced business analyst who views data as an organization’s asset. This person represents the business aspects of data governance while IT supplies the technological expertise.

Question 86

In terms of data quality principles, validity is defined as

Select one:
A. The true value of data relative to the business information being analyzed.
B. The extent that each dataset contains all elements necessary for business needs.
C. The accuracy of data within predefined and accepted parameters or values.
D. The process of tracing data from its source to its destination.

Answer 86

C. The accuracy of data within predefined and accepted parameters or values. Accuracy measures true value of data relative to the business information being analyzed.

Question 87

The data quality principle of reasonability refers to

Select one:
A. The systematic process of tracing data.
B. The materiality or relevance of data.
C. The comprehensive nature of data.
D. The appropriateness of current data.

Answer 87

B. The materiality or relevance of data.

Question 88

Which one of the following provides the frame of reference needed so data can be used appropriately for analysis and decision-making?

Select one:
A. Metadata
B. Data custodian
C. Data virtualization
D. Data lineage

Answer 88

A. Metadata provides the frame of reference needed so data can be used appropriately for analysis and decision-making.