3-Governance Flashcards
Define governance.
Governance is the combination of processes and structures implemented by the board to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives.
Give examples of (1) internal and (2) external mechanisms that influence corporate governance.
Internal mechanisms External mechanisms
Corporate charters Laws
Bylaws Regulations
Board of directors Government regulators
Internal audit functions
What are the two major components of governance?
Strategic direction
Oversight
Compare the responsibilities of (1) the board, (2) management, and (3) internal audit activity regarding governance.
Party Responsibility regarding governance
The board Oversight of governance
Management Day-to-day governance functions
Internal audit activity Assessment and improvement of governance processes
_____________ is primarily responsible for establishing and maintaining an organizational culture.
Senior management.
Compare the emphasis of the internal audit activity in a (1) less mature, and (1) more mature governance system.
Maturity of governance system Emphasis of internal audit activity
Less mature Compliance with policies, procedures, laws
More mature Optimization of structures and practices
What is the responsibility of the internal audit activity in an assurance engagement for ethics-related matters?
The internal audit activity must evaluate the design, implementation, and effectiveness of the organization’s ethics-related objectives, programs, and activities.
The __________ (1) and __________ (2) are responsible for the design and implementation of governance processes.
Board
Management
Give examples of the areas for which the internal audit activity must assess and make recommendations to improve the organization’s governance processes.
Making strategic and operational decisions
Overseeing risk management and control
Promoting appropriate ethics and values within the organization
Ensuring effective organizational performance management and accountability
Communicating risk and control information to appropriate areas of the organization
Coordinating the activities of, and communicating information among, the board, external and internal auditors, other assurance providers, and management
Corporate social responsibility (CSR) refers to __________ (1), __________ (2), __________ (3).
Social responsibility
Sustainable development
Corporate citizenship
List the four responsibilities an organization must fulfill to be considered socially responsible.
Economic responsibility
Legal responsibility
Ethical responsibility
Philanthropic responsibility
List and compare the two major corporate social responsibility (CSR) frameworks.
Framework Emphasis
Global Reporting Initiative (GRI) Reporting
ISO 26000 How to implement and manage a CSR initiative
Compare the responsibilities of (1) the board, (2) management, and (3) internal audit activity regarding corporate social responsibility (CSR).
Party Responsibility
The board Overseeing CSR
Management Establishing CSR objectives
Assessing and managing risks
Measuring performance
Monitoring and reporting activities
Internal audit activity Evaluating whether controls over CSR are adequate to achieve CSR objectives
List and describe the four alternative corporate social responsibility (CSR) strategies.
Strategy Description
Reaction The organization denies responsibility and tries to maintain the status quo.
Defense The organization uses legal action or public relations efforts to avoid additional responsibilities.
Accommodation The organization assumes additional responsibilities only when pressured.
Proaction The organization takes the initiative in implementing a CSR program that serves as an example
for the industry.
Regarding corporate social responsibility (CSR), when are the internal audit activity’s independence and objectivity not impaired?
Independence and objectivity are not impaired when the internal audit activity:
Provides advice on the design and implementation of CSR programs or
Facilitates a management self-assessment of CSR controls and results
List and describe the two approaches to audit corporate social responsibility (CSR).
Auditing approach Description
Auditing by element Separate audits of each element (e.g., governance, environment, ethics) are performed
Auditing by stakeholder group Separate audits of CSR programs related to each significant stakeholder group (e.g.,
employees, environment, suppliers) are performed that consider compliance with laws,
regulations, and contracts
Methods of reporting corporate social responsibility (CSR) include
Providing a standalone CSR reporting,
Integrating the CSR report with the annual financial report, and
Providing CSR information booklets on special topics.
What are the Three Lines of Defense?
First Line: Operational Management
Second Line: Risk Management and Compliance Functions
Third Line: Internal Audit
