Companies can set predefined thresholds for the number of certain types of errors that will be allowed before the activity is considered suspicious. The threshold is a baseline for violation activities that may be normal for a user to commit before alarms are raised. This baseline is referred to as a clipping level.

The following are incorrect answers:

Clipping levels enable a security administrator to customize the audit trail to record only those violations which are deemed to be security relevant. This is not the best answer, you would not record ONLY security relevant violations, all violations would be recorded as well as all actions performed by authorized users which may not trigger a violation. This could allow you to indentify abnormal activities or fraud after the fact.

Clipping levels enable the security administrator to customize the audit trail to record only actions for users with access to user accounts with a privileged status. It could record all security violations whether the user is a normal user or a privileged user.

Clipping levels enable a security administrator to view all reductions in security levels which have been made to user accounts which have incurred violations. The keyword "ALL" makes this question wrong. It may detect SOME but not all of violations. For example, application level attacks may not be detected.

Reference(s) used for this question:

Harris, Shon (2012-10-18). CISSP All-in-One Exam Guide, 6th Edition (p. 1239). McGraw-Hill. Kindle Edition.

and

TIPTON, Hal, (ISC)2, Introduction to the CISSP Exam presentation.