CMA (Certified Management Accountant) Practice Questions — All Questions

Segregation of duties is an internal control that:

• a.Increases fraud risk
• b.Speeds up all transactions
• c.Prevents one person from controlling all parts of a transaction✓
• d.Eliminates the need for audits

Separating authorization, recording, and custody reduces fraud and error risk.

The primary purpose of internal controls is to:

• a.Replace management judgment
• b.Maximize revenue
• c.Provide reasonable assurance about reliable reporting and asset safeguarding✓
• d.Guarantee zero fraud

Internal controls give reasonable (not absolute) assurance over reporting and assets.

A preventive control is designed to:

• a.Correct past errors
• b.Report to regulators
• c.Detect errors after they occur
• d.Stop errors or fraud before they happen✓

Preventive controls aim to stop problems before they occur.

Requiring a manager's approval before large purchases is an example of:

• a.A corrective control
• b.A compensating control
• c.An authorization (preventive) control✓
• d.A detective control

Approval requirements are preventive authorization controls.