When management avoids a risk by eliminating an asset, what analysis must the fraud risk assessment team perform?

When management avoids a risk by eliminating an asset, what analysis must the fraud risk assessment team perform?

• A. Market analysis
• B. Cost-benefit analysis of the asset’s value vs. protection costs
• C. Sensitivity analysis
• D. ROI analysis

Answer: (B)

This item tests how to evaluate a decision to remove an asset as a way to avoid risk. When management eliminates an asset to reduce exposure, the fraud risk assessment team should perform a cost-benefit analysis that weighs the asset’s value against the costs of protecting it. In practice, this means quantifying what the asset is worth, what fraud losses it could prevent or what additional risks it would create if kept, and the expenses associated with protecting, replacing, or eliminating it. If the protection costs exceed the asset’s value or the risk reduction isn’t worth the cost, elimination can be economically justified. This approach directly captures whether the economic benefits of retaining or safeguarding the asset outweigh the costs, guiding a rational risk response. Market analysis, ROI, and sensitivity analysis don’t focus on this specific value-for-cost trade-off in the context of eliminating an asset to mitigate fraud risk.

This item tests how to evaluate a decision to remove an asset as a way to avoid risk. When management eliminates an asset to reduce exposure, the fraud risk assessment team should perform a cost-benefit analysis that weighs the asset’s value against the costs of protecting it. In practice, this means quantifying what the asset is worth, what fraud losses it could prevent or what additional risks it would create if kept, and the expenses associated with protecting, replacing, or eliminating it. If the protection costs exceed the asset’s value or the risk reduction isn’t worth the cost, elimination can be economically justified. This approach directly captures whether the economic benefits of retaining or safeguarding the asset outweigh the costs, guiding a rational risk response. Market analysis, ROI, and sensitivity analysis don’t focus on this specific value-for-cost trade-off in the context of eliminating an asset to mitigate fraud risk.