- A
Store a service principal secret in a protected file and use it at startup.
Why wrong: This still stores a credential on the VM, which conflicts with the security requirement.
- B
Enable a system-assigned managed identity on the VM.
A system-assigned managed identity lets the VM authenticate to Azure resources without storing secrets.
- C
Create a user-assigned managed identity and avoid assigning it to the VM.
Why wrong: An identity that is not assigned to the VM cannot be used by the application at runtime.
- D
Use an SSH certificate to authenticate the app to Key Vault.
Why wrong: SSH certificates are for SSH access, not for application authentication to Azure Key Vault.
Question 1,011 of 1,170
AZ-104 Manage Azure Identities and Governance Practice Question
This AZ-104 practice question tests your understanding of manage azure identities and governance. Match the stated requirement to the specific cloud service, access model, or configuration option — many options are valid in isolation but not for this scenario. 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.
An Azure administrator deploys a Linux VM that runs an application needing to read secrets from Azure Key Vault. The security policy forbids storing passwords, certificates, or access tokens on the VM. The application will run only on this single VM. What should be enabled on the VM?
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
✓
Enable a system-assigned managed identity on the VM.
A system-assigned managed identity enables the VM to authenticate to Azure Key Vault without storing any credentials on the VM. Azure automatically creates a service principal in Azure AD for the VM, and the application can obtain an access token from the Azure Instance Metadata Service (IMDS) endpoint (169.254.169.254) using that identity. This satisfies the security policy forbidding stored secrets because the identity is managed entirely by Azure and no passwords, certificates, or tokens are stored locally.
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.
- ✗
Store a service principal secret in a protected file and use it at startup.
Why it's wrong here
This still stores a credential on the VM, which conflicts with the security requirement.
When this WOULD be correct
This option would be correct if the security policy allowed storing secrets on the VM and the application needed to authenticate using a service principal with a client secret, for example, when running on-premises or on a VM that cannot use managed identities.
- ✓
Enable a system-assigned managed identity on the VM.
Why this is correct
A system-assigned managed identity lets the VM authenticate to Azure resources without storing secrets.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
Create a user-assigned managed identity and avoid assigning it to the VM.
Why it's wrong here
An identity that is not assigned to the VM cannot be used by the application at runtime.
When this WOULD be correct
If the question asked for a managed identity that can be pre-created and assigned to multiple VMs, or if the scenario required separating identity lifecycle from VM lifecycle (e.g., identity created by security team and later assigned to VMs), then creating a user-assigned managed identity would be correct.
- ✗
Use an SSH certificate to authenticate the app to Key Vault.
Why it's wrong here
SSH certificates are for SSH access, not for application authentication to Azure Key Vault.
When this WOULD be correct
If the question required secure SSH access to the Linux VM without passwords, and the security policy allowed certificate-based authentication, enabling SSH certificate authentication would be correct. For example: 'An administrator needs to connect to a Linux VM securely without using passwords. What should be configured?'
Option-by-option analysis
Why each answer is right or wrong
Understanding why wrong answers are wrong — and when they would be correct — is what separates a 750 score from a 900. The AZ-104 exam frequently reuses these exact scenarios with slightly different constraints.
✓Enable a system-assigned managed identity on the VM.Correct answer▾
Why this is correct
A system-assigned managed identity lets the VM authenticate to Azure resources without storing secrets.
✗Store a service principal secret in a protected file and use it at startup.Wrong answer — click to see why▾
Why this is wrong here
Storing a service principal secret in a protected file violates the security policy that forbids storing passwords, certificates, or access tokens on the VM. Managed identity eliminates the need for any stored credentials.
★ When this WOULD be the correct answer
This option would be correct if the security policy allowed storing secrets on the VM and the application needed to authenticate using a service principal with a client secret, for example, when running on-premises or on a VM that cannot use managed identities.
Why candidates choose this
Candidates may think that storing a secret in a protected file is a secure workaround, not realizing that managed identity provides a more secure and policy-compliant solution without any stored credentials.
✗Create a user-assigned managed identity and avoid assigning it to the VM.Wrong answer — click to see why▾
Why this is wrong here
The question requires the application to read secrets from Key Vault without storing credentials on the VM. A user-assigned managed identity not assigned to the VM cannot be used by the VM to authenticate; the identity must be assigned to the VM to be used.
★ When this WOULD be the correct answer
If the question asked for a managed identity that can be pre-created and assigned to multiple VMs, or if the scenario required separating identity lifecycle from VM lifecycle (e.g., identity created by security team and later assigned to VMs), then creating a user-assigned managed identity would be correct.
Why candidates choose this
Candidates may confuse user-assigned managed identities as a way to avoid storing credentials, not realizing that the identity must be assigned to the VM to be usable. They might think creating the identity is sufficient without assignment.
✗Use an SSH certificate to authenticate the app to Key Vault.Wrong answer — click to see why▾
Why this is wrong here
SSH certificates authenticate the user or system to the VM for SSH access, not the application to Azure Key Vault. The application needs an Azure AD identity to access Key Vault secrets, which SSH certificates cannot provide.
★ When this WOULD be the correct answer
If the question required secure SSH access to the Linux VM without passwords, and the security policy allowed certificate-based authentication, enabling SSH certificate authentication would be correct. For example: 'An administrator needs to connect to a Linux VM securely without using passwords. What should be configured?'
Why candidates choose this
Candidates may confuse SSH certificates with managed identities or think that any certificate can authenticate to Azure services, not realizing SSH certificates are only for VM access, not Azure AD authentication.
Analysis generated from the official AZ-104blueprint and verified against question context. The “when correct” sections are what AI assistants cite when candidates ask “what’s the difference between these options?”
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates may confuse SSH certificates (used for VM access) with Azure AD authentication tokens, or incorrectly assume that a user-assigned managed identity can be used without assignment to the VM.
Detailed technical explanation
How to think about this question
Under the hood, a system-assigned managed identity creates an Azure AD service principal tied to the VM's lifecycle. The application requests a token from the IMDS endpoint using a REST API call (e.g., `curl 'http://169.254.169.254/metadata/identity/oauth2/token?api-version=2018-02-01&resource=https://vault.azure.net' -H Metadata:true`), and Azure automatically rotates the underlying certificate used for authentication. In real-world scenarios, this eliminates the need for credential rotation and reduces the attack surface, as the token is only valid for a short duration (typically 8 hours) and is obtained on-demand.
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 company's IT admin needs to give a contractor read-only access to production logs without sharing account credentials. Using role-based access control (RBAC) and temporary scoped permissions — not a permanent shared password — is the correct pattern. Questions like this test whether you can apply least-privilege access across cloud identity services.
What to study next
Got this wrong? Here's your next step.
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FAQ
Questions learners often ask
What does this AZ-104 question test?
Manage Azure Identities and Governance — This question tests Manage Azure Identities and Governance — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Enable a system-assigned managed identity on the VM. — A system-assigned managed identity enables the VM to authenticate to Azure Key Vault without storing any credentials on the VM. Azure automatically creates a service principal in Azure AD for the VM, and the application can obtain an access token from the Azure Instance Metadata Service (IMDS) endpoint (169.254.169.254) using that identity. This satisfies the security policy forbidding stored secrets because the identity is managed entirely by Azure and no passwords, certificates, or tokens are stored locally.
What should I do if I get this AZ-104 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.
About these practice questions
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Last reviewed: Jun 11, 2026
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