A bank uses a risk analysis matrix to quantify the relative risk of auditable entities. The analysis involves rating auditable entities on risk factors using a scale of 1 to 10, with 10 representing the greatest risk. A partial list of risk factors and the ratings given to three of the bank's departments is provided below:
Which of the following statements regarding risk in the department is true?
The relative ranking of the departments in order of their risk can be determined by summing the numerical ratings given to each department for all risk factors. For Department A, the total rating is 20 (9 + 2 + 6 + 3). For Department B, the total rating is 22 (5 + 7 + 6 + 4). For Department C, the total rating is 32 (7 + 9 + 8 + 8). Based on these total ratings, the ranking in order of their risk, from greatest to least risk, is: C (32), B (22), and A (20).
Since the risks in the nature of assets and complexity of transactions in Dept A are kind of low, there may be no need to have a strong control structure. Since there is no strong control structure, the risk is high in dept A regarding control structure.
The relationship seems logical. Assets are less risky and therefore less controlled, therefore control risk is important.
Could someone explain the answer?
what are they trying to test here??
Why cannot similarly-complex questions be presented in this manner -- like the next one, #23 ??
please explain
In answer C, are we referring to risks or risk factors?