- A
System-assigned managed identity
Correct. A system-assigned managed identity is automatically managed by Azure and can be granted precise Key Vault permissions, meeting least privilege.
- B
User-assigned managed identity
Why wrong: Incorrect. While it works, a user-assigned identity adds unnecessary complexity when only one resource needs access. It is not the simplest least-privilege choice.
- C
Service principal
Why wrong: Incorrect. Service principals require creating and managing credentials (client secret/certificate), which contradicts the goal of storing secrets in Key Vault without managing credentials.
- D
Access policy on the Key Vault
Why wrong: Incorrect. An access policy defines permissions for an identity; it is not an identity itself. The resource still needs an identity (e.g., managed identity) to attach the policy to.
AZ-204 Implement Azure security Practice Question
This AZ-204 practice question tests your understanding of implement azure security. 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.
Your company stores API keys and connection strings in Azure Key Vault. You need to grant an Azure Function read access to these secrets using the principle of least privilege. Which identity type should you assign to the Function App?
Clue words in this question
Noticing these words before you look at the options changes how you read each choice.
Clue:
"least"Why it matters: You want the option with minimum overhead, fewest steps, or lowest impact — not the most feature-rich or comprehensive answer.
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
System-assigned managed identity
A system-assigned managed identity is the correct choice because it is directly tied to the lifecycle of the Azure Function, automatically managed by Azure, and requires no manual credential rotation. It provides the most restrictive scope (only that specific Function App) and adheres to the principle of least privilege by granting access only to the identity that needs it, without the overhead of managing a separate identity or service principal.
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.
- ✓
System-assigned managed identity
Why this is correct
Correct. A system-assigned managed identity is automatically managed by Azure and can be granted precise Key Vault permissions, meeting least privilege.
Clue confirmation
The clue word "least" in the question point toward this answer.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
User-assigned managed identity
Why it's wrong here
Incorrect. While it works, a user-assigned identity adds unnecessary complexity when only one resource needs access. It is not the simplest least-privilege choice.
- ✗
Service principal
Why it's wrong here
Incorrect. Service principals require creating and managing credentials (client secret/certificate), which contradicts the goal of storing secrets in Key Vault without managing credentials.
- ✗
Access policy on the Key Vault
Why it's wrong here
Incorrect. An access policy defines permissions for an identity; it is not an identity itself. The resource still needs an identity (e.g., managed identity) to attach the policy to.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates often confuse 'access policy' (a permission assignment) with an 'identity type,' or they incorrectly assume a user-assigned managed identity is always more flexible and thus better, overlooking that a system-assigned identity is more restrictive and simpler for a single-resource scenario.
Detailed technical explanation
How to think about this question
Under the hood, a system-assigned managed identity creates a service principal in Azure AD automatically when the Function App is provisioned, and this principal is used to obtain Azure AD tokens via the Azure Instance Metadata Service (IMDS) endpoint at 169.254.169.254. The token is then presented to Key Vault using the OAuth 2.0 client credentials grant flow, allowing the Function App to authenticate without storing any secrets in code or configuration. In a real-world scenario, if the Function App is deleted, the associated system-assigned managed identity is also automatically removed, preventing orphaned identities from accumulating.
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.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
- →
Implement Azure security — study guide chapter
Learn the concepts, then practise the questions
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Implement Azure security practice questions
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FAQ
Questions learners often ask
What does this AZ-204 question test?
Implement Azure security — This question tests Implement Azure security — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: System-assigned managed identity — A system-assigned managed identity is the correct choice because it is directly tied to the lifecycle of the Azure Function, automatically managed by Azure, and requires no manual credential rotation. It provides the most restrictive scope (only that specific Function App) and adheres to the principle of least privilege by granting access only to the identity that needs it, without the overhead of managing a separate identity or service principal.
What should I do if I get this AZ-204 question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Are there clue words in this question I should notice?
Yes — watch for: "least". You want the option with minimum overhead, fewest steps, or lowest impact — not the most feature-rich or comprehensive answer.
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
This AZ-204 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 AZ-204 exam.
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