Free COSO-FRM sample questions

Correct answer: The presence of intentional deception resulting in a loss to the victim or gain to the perpetrator.

According to the practical definition used in the COSO Fraud Risk Management Guide, fraud is distinguished from error primarily by intent. Fraud is any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain. Errors, regardless of their financial impact or the organizational level at which they occur, lack this intentional element of deception.

Correct answer: True

This is True. Principle 8 of the COSO 2013 Internal Control - Integrated Framework specifically states that 'The organization considers the potential for fraud in assessing risks to the achievement of objectives.' This serves as the foundational bridge between general internal controls and specific fraud risk management.

Correct answer: Position ERM as the broadest framework addressing strategy and performance, with IC as an integral subset of ERM, and apply the FRMG comprehensively across both to address intentional deception risks.

The COSO guidelines establish that ERM is broader than internal control, focusing on risk responses in all aspects of business strategy and performance. Internal control is a subset and integral part of ERM. The FRMG is complementary to both, as fraud risk can impact all areas of accounting, financial, and non-financial operations. Therefore, the FRMG should be applied holistically across both the ERM and IC frameworks to address intentional deception. graph TD A[Enterprise Risk Management] --> B[Internal Control] A --> C[Strategy & Performance] B --> D[Financial Reporting] B --> E[Operations] F[Fraud Risk Management] -.->|Overlays & Complements| A F -.->|Overlays & Complements| B

Correct answers: Arrogance; Competence

The Fraud Pentagon expands the traditional Fraud Triangle (Pressure/Incentive, Opportunity, Rationalization) by adding Arrogance and Competence. Arrogance reflects an attitude of entitlement where the perpetrator believes anti-fraud measures do not apply to them.

The Fraud Pentagon expands the traditional Fraud Triangle by adding Arrogance and Competence. Competence refers to the perpetrator's ability to conceal their wrongdoing, override controls, and control the social situation to facilitate the scheme.