CRISC Risk and Control Monitoring and Reporting Practice Question
This CRISC practice question tests your understanding of risk and control monitoring and reporting. Examine the command output carefully: the correct answer depends on what the output actually shows, not on general recall alone. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
Exhibit
Risk Control Matrix (RCM) Extract - Control Test Results
Date: 2024-11-20
Process: Order-to-Cash
Test ID: OTC-001
Control Description: Segregation of duties between order entry and credit approval.
Test Result: FAIL
Finding: User ID 'jdoe' performed both order entry and credit approval on transaction ID 78965.
Test ID: OTC-002
Control Description: Automatic validation of credit limit within ERP.
Test Result: PASS
Test ID: OTC-003
Control Description: Monthly reconciliation of accounts receivable.
Test Result: NOT TESTED
Refer to the exhibit. Based on the control test results, which of the following is the most immediate risk?
Risk Control Matrix (RCM) Extract - Control Test Results
Date: 2024-11-20
Process: Order-to-Cash
Test ID: OTC-001
Control Description: Segregation of duties between order entry and credit approval.
Test Result: FAIL
Finding: User ID 'jdoe' performed both order entry and credit approval on transaction ID 78965.
Test ID: OTC-002
Control Description: Automatic validation of credit limit within ERP.
Test Result: PASS
Test ID: OTC-003
Control Description: Monthly reconciliation of accounts receivable.
Test Result: NOT TESTED
A
Material misstatement in financial statements
Why wrong: While possible, the immediate risk is the breakdown in segregation of duties leading to potential fraud, not necessarily a misstatement.
B
Non-compliance with credit policy
Why wrong: The failed control is about segregation of duties, not specifically about credit policy compliance.
C
Inefficient order processing
Why wrong: Inefficiency is not directly indicated; the risk is more about control weakness.
D
Fraud due to lack of segregation of duties
The failed control directly indicates that a user can both enter and approve orders, increasing the risk of fraudulent transactions.
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Fraud due to lack of segregation of duties
The control test results show that the same individual can both create purchase orders and approve invoices, which violates segregation of duties. This lack of segregation creates an immediate risk of fraud because the employee could create fictitious orders and approve payments to themselves or accomplices without detection.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
✗
Material misstatement in financial statements
Why it's wrong here
While possible, the immediate risk is the breakdown in segregation of duties leading to potential fraud, not necessarily a misstatement.
✗
Non-compliance with credit policy
Why it's wrong here
The failed control is about segregation of duties, not specifically about credit policy compliance.
✗
Inefficient order processing
Why it's wrong here
Inefficiency is not directly indicated; the risk is more about control weakness.
✓
Fraud due to lack of segregation of duties
Why this is correct
The failed control directly indicates that a user can both enter and approve orders, increasing the risk of fraudulent transactions.
Related concept
Read the scenario before looking for a memorised answer.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates often focus on the financial reporting impact (Option A) as the most immediate risk, but CRISC emphasizes that the control deficiency itself—the lack of segregation of duties—creates an immediate fraud exposure before any financial misstatement can occur.
Detailed technical explanation
How to think about this question
Segregation of duties in procurement requires that the roles of requisitioning, ordering, receiving, and invoice approval be assigned to different individuals. When one person controls both ordering and approval, they can exploit the three-way matching process (purchase order, receiving report, invoice) by creating a fake purchase order and approving a fraudulent invoice, bypassing the control that ensures goods were actually received. In real-world ERP systems like SAP or Oracle, this is enforced through role-based access controls and approval workflows that prevent the same user ID from appearing in both transaction steps.
KKey Concepts to Remember
Read the scenario before looking for a memorised answer.
Find the constraint that changes the correct option.
Eliminate answers that are true in general but not in this case.
TExam Day Tips
→Watch for words such as best, first, most likely and least administrative effort.
→Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A practitioner preparing for the CRISC exam encounters this exact type of scenario on the job. The correct answer here is not the most general option — it is the best answer for the specific constraint described. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Real exam questions reward reading the full scenario before eliminating options, because the constraint defines which answer fits.
What to study next
Got this wrong? Here's your next step.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Risk and Control Monitoring and Reporting — This question tests Risk and Control Monitoring and Reporting — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Fraud due to lack of segregation of duties — The control test results show that the same individual can both create purchase orders and approve invoices, which violates segregation of duties. This lack of segregation creates an immediate risk of fraud because the employee could create fictitious orders and approve payments to themselves or accomplices without detection.
What should I do if I get this CRISC question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
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Question Discussion
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