CRISC Questions Bank

The best way to mitigate the risk associated with infrastructure updates is to implement a change control process. A change control process is a set of procedures that ensures that any changes to the infrastructure are planned, approved, tested, implemented, and documented in a consistent and controlled manner. A change control process helps to reduce the risk of errors, conflicts, disruptions, or security breaches that could result from infrastructure updates. A change control process also helps to monitor and evaluate the impact and effectiveness of the changes, and to ensure that they align with the enterprise’s objectives and requirements. References = Risk and Information Systems Control Study Manual, 7th Edition, Chapter 3, Section 3.3.1, page 1391

Fraudulent transactions are those that involve deception, manipulation, or misrepresentation of information or data to obtain an unauthorized or improper benefit or advantage1. Fraudulent transactions can pose significant risks and losses for an organization, such as financial damages, legal liabilities, reputational damages, or operational disruptions2.

Enterprise resource planning (ERP) systems are integrated software applications that support the core business processes and functions of an organization, such as accounting, finance, human resources, supply chain, inventory, or customer relationship management3. ERP systems can facilitate the efficiency, accuracy, and security of business transactions, but they can also be vulnerable to fraudulent transactions, such as:

Creating fake vendors or customers and processing false invoices or payments

Manipulating or falsifying financial or accounting data or reports

Changing or deleting critical or sensitive information or records

Abusing or misusing access privileges or credentials

Bypassing or compromising the system controls or security measures4

The design of procedures to prevent fraudulent transactions within an ERP system should be based on the control environment. The control environment is the set of standards, processes, and structures that provide the basis for carrying out internal control across the organization. The control environment comprises the following elements:

The tone at the top, which reflects the leadership’s commitment and attitude towards internal control and ethical conduct

The organizational structure, which defines the roles and responsibilities, reporting lines, and authority levels for internal control

The human resource policies and practices, which ensure that the staff have the appropriate skills, competencies, and incentives for internal control

The risk assessment process, which identifies and evaluates the potential risks and threats to the organization’s objectives and transactions

The control activities, which are the specific policies, procedures, and mechanisms that prevent, detect, or correct errors or fraud in transactions

The information and communication systems, which provide reliable and timely data and information for internal control and decision-making

The monitoring and evaluation activities, which measure and report the performance and effectiveness of internal control and ensure continuous improvement

By basing the design of procedures to prevent fraudulent transactions within an ERP system on the control environment, the organization can:

Ensure that the procedures are aligned with the organization’s objectives, values, and expectations regarding internal control and fraud prevention

Provide clear and consistent guidance and instructions for the staff and stakeholders involved in the transactions and the ERP system

Implement adequate and appropriate controls and safeguards to mitigate the risks and vulnerabilities of the transactions and the ERP system

Monitor and evaluate the compliance and effectiveness of the procedures and the ERP system, and identify and address any issues or gaps

References = What is Fraud?, Fraud Risk Management - AICPA, What is ERP?, ERP Fraud: How to Prevent It - ERP Focus, [COSO – Control Environment - Deloitte], [How to use COSO to assess IT controls - Journal of Accountancy]

The three lines of defense model is a framework that defines the roles and responsibilities of different functions in an organization for managing risks and ensuring effective internal control1. The three lines of defense are:

The first line of defense: the operational management and staff who are responsible for implementing and maintaining the internal control system and managing the risks within their areas of activity

The second line of defense: the oversight functions, such as risk management, compliance, and quality assurance, who provide guidance, support, and monitoring to the first line of defense and ensure that the internal control system is designed and operating effectively

The third line of defense: the internal audit function, who provides independent and objective assurance to the board and senior management on the adequacy and effectiveness of the internal control system and the performance of the first and second lines of defense2

The three lines of defense model facilitates a completely independent review of test results for evaluating control effectiveness, because it ensures that the internal audit function, as the third line of defense, has the authority, independence, and competence to conduct objective and unbiased assessments of the internal control system and report its findings and recommendations to the board and senior management3. The internal audit function can also use the test results from the first and second lines of defense as inputs for its own audit planning and testing, and verify their validity and reliability4.

References = The Three Lines of Defense in Effective Risk Management and Control - IIA, The Three Lines Model - IIA, The Role of Internal Audit in the Three Lines of Defense - IIA, Evaluating and Improving Internal Control in Organizations - IFAC

 Discussing and managing risk as a team is the greatest benefit for an organization with a strong risk awareness culture, as it enables the organization to share and communicate the risk information and knowledge among all the stakeholders, and to collaborate and coordinate the risk management activities and responsibilities. Discussing and managing risk as a team can also help to foster a positive and proactive attitude toward risk, and to align the risk management process with the organization’s strategy and objectives. Discussing and managing risk as a team can also enhance the risk governance and accountability, and support the risk learning and improvement. References = Most Asked CRISC Exam Questions and Answers. CRISC: Certified in Risk & Information Systems Control Sample Questions, Question 252. ISACA Certified in Risk and Information Systems Control (CRISC) Certification Exam Question and Answers, Question 252. CRISC by Isaca Actual Free Exam Q&As, Question 9.