ACCA Strategic Business Leader (SBL) Practice Exam

What does risk assessment in internal control focus on?

1. Identifying potential threats to the entity’s objectives

2. Training employees to reduce risks

3. Developing marketing strategies

4. Evaluating supplier reliability

The correct answer is: Identifying potential threats to the entity’s objectives

Risk assessment in internal control is fundamentally about identifying potential threats that could impede an organization's ability to achieve its objectives. This process involves recognizing and analyzing risks that may affect achieving strategic goals, compliance with laws and regulations, and reliability of financial reporting. By focusing on identifying these risks, management can understand the nature and extent of challenges the organization might face. This knowledge enables them to implement appropriate controls to mitigate these risks, ultimately supporting the entity in safeguarding its resources and enhancing its overall operational effectiveness. In contrast, training employees to reduce risks (the second option) is an important aspect of risk management but is a part of the broader strategy that comes after the risk assessment has identified what needs to be addressed. Developing marketing strategies (the third option) and evaluating supplier reliability (the fourth option) may be relevant business activities but are not directly related to the core function of risk assessment within internal control frameworks.