AI-102 Implement an agentic solution Practice Question
You are developing an agentic solution that uses Azure AI Agent Service with a custom function calling tool. The agent needs to call a function that requires authentication to an external API. How should you securely pass the API key to the function?
⚠ Common exam trap
Many candidates choose environment variables (Option C) because they seem 'secure enough' in local development, but Azure explicitly tests that environment variables are not considered secure for production secrets in cloud-native solutions, especially when audit trails and fine-grained access control are required.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Use Azure Key Vault to store the API key and reference it in the function
Azure Key Vault provides a secure, centralized service for storing and managing secrets like API keys. In Azure AI Agent Service, you can configure the function to retrieve the API key at runtime from Key Vault using managed identities, ensuring the key is never exposed in code, configuration, or prompts. This follows the principle of least privilege and aligns with Azure's security best practices for agentic solutions.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Hardcode the API key in the function code
Why it's wrong here
Hardcoding embeds the secret in source control and deployment artefacts, exposing it to anyone with repository or code access and preventing rotation without redeployment. It is tempting for quick local testing, yet production secrets belong in Azure Key Vault, retrieved at runtime via managed identity rather than committed to code.
- ✓
Use Azure Key Vault to store the API key and reference it in the function
Why this is correct
Storing the key in Azure Key Vault keeps the secret out of code and prompt context, satisfying the secure-authentication constraint. The function retrieves it at runtime via its managed identity, so credentials are never exposed in the agent definition or logs.
- ✗
Store the API key in an environment variable
Why it's wrong here
Environment variables are readable by any process or code running in that host context and are exposed in crash dumps and deployment configuration, so they do not provide the secret isolation this scenario requires. They are tempting for simplicity, but Azure Key Vault with managed identity is the supported secure retrieval mechanism.
- ✗
Pass the API key as part of the agent's system prompt
Why it's wrong here
System prompts are logged, echoed in conversation history and visible to the model, so placing a secret there leaks it to anyone reading transcripts. It is tempting because the agent can then reference the key directly, but prompt content is not a secret store; use Azure Key Vault with managed identity instead.
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JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This AI-102 practice question is part of Courseiva's free Microsoft certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the AI-102 exam.