R01 Senior management, compliance support and auditors: free practice questions

1. Question 1 of 5

   A firm hires an external compliance consultant. If the FCA later finds inadequate controls, who is responsible?

   Option A: Responsibility is shared equally by contractOption B: The consultantOption C: The FCA, for approving the consultantOption D: The firm

   Show answer

   The answer is D: The firm

   Compliance is always the authorised firm's responsibility. It can get help, but can't contract out its regulatory obligations; the FCA acts against the firm.

   Why the other options are wrong

   A

   A firm can't contract out its regulatory responsibility.

   B

   The consultant isn't responsible for the firm's compliance.

   C

   The FCA doesn't approve consultants.

2. Question 2 of 5

   What does the FCA expect when a compliance consultant makes a serious recommendation?

   Option A: The firm can simply ignore it if it disagreesOption B: The consultant must carry it out on the firm's behalfOption C: The firm should act on it if it judges it appropriateOption D: The FCA must approve the recommendation first

   Show answer

   The answer is C: The firm should act on it if it judges it appropriate

   The FCA expects firms to implement appropriate recommendations and is more likely to act against firms that have failed to act on previous consultant recommendations.

   Why the other options are wrong

   A

   Ignoring serious recommendations increases enforcement risk.

   B

   Implementation is the firm's responsibility.

   D

   FCA approval isn't needed.

3. Question 3 of 5

   Why should senior managers collect and monitor management information (MI)?

   Option A: To share performance data with competitors in the marketOption B: To meet reporting duties and spot trends, such as unfair treatmentOption C: Only to calculate staff bonuses at the end of each yearOption D: To replace the need for a separate compliance function in the firm

   Show answer

   The answer is B: To meet reporting duties and spot trends, such as unfair treatment

   MI helps meet regulatory reporting, track sales, costs and complaints, and show whether customers are treated fairly, so problems can be identified and resolved.

   Why the other options are wrong

   A

   MI is internal management information.

   C

   MI has much wider uses than bonus calculations.

   D

   MI supports the compliance function; it doesn't replace it.

4. Question 4 of 5

   What does the FCA mean when it says a firm's systems and controls should be 'appropriate to its business'?

   Option A: Designed by the FCA individually for each firm it authorisesOption B: Proportionate to the firm's nature, size and risks, and reviewedOption C: Required only for firms with more than 50 members of staffOption D: Identical for every firm, regardless of its size or business

   Show answer

   The answer is B: Proportionate to the firm's nature, size and risks, and reviewed

   Systems and controls should reflect the firm's nature, complexity, size and risks, and be reviewed regularly to stay proportionate.

   Why the other options are wrong

   A

   Firms design their own systems.

   C

   All firms need appropriate systems and controls.

   D

   Controls should vary with the firm's business.

5. Question 5 of 5

   A sole trader adviser has permission to hold client assets. What is the audit position?

   Option A: No audit is ever required for unincorporated firmsOption B: It must have its annual accounts auditedOption C: Only the FCA can audit itOption D: An audit is required only if it has more than ten clients

   Show answer

   The answer is B: It must have its annual accounts audited

   Unincorporated firms without permission to hold client assets needn't have audited accounts, but those with such permission must have their annual accounts audited.

   Why the other options are wrong

   A

   Holding client asset permission brings an audit requirement.

   C

   Audits are carried out by external auditors, not the FCA.

   D

   The trigger is the permission, not client numbers.

R0 Exam Prep is an independent revision tool. It is not produced, endorsed by or affiliated with the Chartered Insurance Institute (CII). Questions and explanations are original. Use it alongside the official study text. About R0 Exam Prep