QUESTION 1 (25 marks)

APPLY RISK MANAGEMENT MUNICIPALITIES

1. The world is going through a difficult time with Covid-19 and to minimize the risk of infections, certain measures are taken. State which of the following options best describes the procedures, in chronological order, that you will go through at security upon entry to building during Covid-19 pandemic.
   1. 1. Mask on, 2. Sanitize, 3. Temperature taken, 4. Practise social distancing
   2. 1. Wash hands 2. Social distancing 3. Temperature taken 4. No mask on
   3. 1. Spray sanitizer 2. Avoid contact 3. Mask on 4. Temperature if available
   4. None of the above
   5. All of the above
2. As the Chief Risk Officer of your municipality, you are confronted with attending to only one risk category due to limited resources. Based on severity and probability Which one of the following risks will you prioritize:?
   1. Low likelihood Low Magnitude
   2. Low likelihood High magnitude
   3. High Likelihood Low Magnitude
   4. High Likelihood High Magnitude
   5. None of the above
   6. Rationing of the limited resourced to proportionately cover a portion of each of the above
3. The Auditor-General (AG) has come up with a formula that is prevalent whenever there is corruption in local government, where C = Corruption formula; M = Monopoly over resources; D = Discretion over what should happen at the municipality and A = Accountability. Which of the following is the CORRECT formula according to the AG?:
   1. C = M -D - A
   2. M = C + D +A
   3. C = M + D A
   4. A = D +A - C
   5. There is no one set formula

4. One of the quickest ways an auditor can perform their audit tests is through a procedure called Analytical Review. In relation to Payroll, which of the following will pass as Analytical Review Procedures?
   1. Thoroughly test all payroll payments for 12 months of the financial year
   2. Obtain 12 payroll payments (Rand-value) and the attendant staff compliment (number) for the year. Divide each of the payroll payments by its relevant staff compliment to obtain a composite. Analyse month to month changes in the composite, obtain reasons for variances and conclude on reasonableness of payroll.
   3. Obtain a sample of employees and test all their information from the time the job was advertised to appointment letters, orientation, payslips through to the salary paid into their bank accounts for validity and completeness.
   4. For a selected sample of employees, test their employment contracts and nett pay to ensure that the correct amounts are paid as wages and salaries every month
   5. None of the above tests qualify as Analytical Review Procedures
5. In relation to materiality, which of the following statements holds TRUE?
   1. Materiality is the significance of an amount or item that, if known to an average person (man in the street) would sway their decision on the fairness of the financial statements.
   2. Materiality measures the amount of material things procured by the municipality on an annual basis
   3. Materiality only relates to non-financial matters like compliance with the law and has nothing to do with quantifiable items
   4. There is no such concept as materiality in auditing financial statements, compliance and performance objectives of the municipality
   5. None of the above items relate to materiality
6. The acronym, Pestel analysis, is used in managing risks in the process of setting goals and objectives of the municipality. Choose one which best describes what each letter stands for in the Pestel analysis:
   1. Practical, Energetic, Sustainable, Trustworthy, Economic and Local
   2. Present, Efficient, Systematic, Trustworthy, Economic and Legislative
   3. Political, Environmental, Sustainable, Technical, Economic and Legislative
   4. Political, Environmental, Social, Technical and Local
   5. None of the above
7. The acronym, SWOT Analysis is normally used in breaking down a strategy and coming up with action plans to execute it. In relation to a municipality, which of the following examples best describe the SWOT analysis in chronological order?
   1. S - Legislation and grants, W - Lack of compliance, collection and law enforcement, O -Increasing revenue via compartmentalised bins that separate waste, T - Strikes, indigent residents and businesses
   2. S - Great Staff attitude, W - Low staff morale, O - Addressing the community on pressing issues, T - Dwindling number of residents and businesses that pay rates and services regularly.
   3. All of the above
   4. None of the above
   5. One of the above
8. The following statements refer. You are required to choose the correct one(s).
   1. Saving Putting money away for a rainy day ie postponement of consumption. Little or no return
   2. Investing Commitment of money based on fundamental research, to real financial assets for a given period in order to accumulate wealth over the long term.
   3. Speculation - Commitment of money in a hope to make extraordinary (super) profits over a short term (up to 1 week) based on high risks & possible high returns
   4. Gambling - Betting on an uncertain outcome and accepting the risk for the sake of enjoyment or with the unrealistic expectation that a miracle will happen and you will win big.
   5. The terms Saving, Investing, Speculation and Gabling all mean the same thing and are thus used interchangeably
   6. Options (a) up to (d) only

9. Choose the option that best describes the 3-tier Assurance Model in chronological order
   1. 1. Internal Audit 2. External Audit (AG) 3. Management
   2. 1. Management 2. Internal Audit 3. External Audit (AG)
   3. 1. External Audit (AG) 2. Internal Audit 3. Management
   4. 1. Internal Audit 2. Management 3. External Audit (AG)
   5. None of the above

10. Which of the following statements about risk is correct?
    1. Managing risk at home - Take out Household insurance
    2. Managing risk on the road Obey traffic regulations, Keep left pass right, Dont drink and drive
    3. Safeguarding Municipality assets Buildings are access controlled, locked at night and cars parked in garages; Take out building and car insurance
    4. In relation to investments - Accepting more risk should come with demanding a higher return
    5. All of the above