B1-1 Corporate Governance

Question 1

According to COSO, which components of ERM addresses the entity’s assignment of authority and responsibility?

Answer 1

Internal environment

It is the component of the ERM framework includes foundation elements such as organizational structure, assignment of authority and responsibility, integrity and ethical values.

Question 2

According to COSO, which component of ERM addresses an entity’s reporting deficiencies?

Answer 2

Monitoring

The MONITORING component of the enterprise risk management (ERM) framework includes key elements that relate to the ongoing management activities or separate evaluation of the ERM approach by the entity, including addressing reporting deficiencies.

Question 3

Duties of board of directors

Answer 3

Election, removal, and supervision of officers (directors generally review the conduct of officers and may remove an officer with or without cause), adoption, amendment, repeal by-laws, fixing management compensation and initiating fundamental changes to corporate structure.

Question 4

What is COSO?

Answer 4

The Committee on Sponsoring Organization (COSO), an independent private sector initiative, was initially established in the mid1980’s to study the factors that lead to fraudulent financial reporting.

Sometimes referred to as Treadway Commission.

Question 5

Components of internal control

Answer 5

CRIME

C  control environment 
R  Risk assessment 
I    Information and communication
M  monitoring
E   Existing control activities

Question 6

7 principles of control environment

Answer 6

Tone at the top is often PHRASED

P. Philosophy & operating style of management

H.  Human resources
R.   Reporting competences 
A.   Authority and responsibility
S.   structure (organizational)
E.   ethical values (& integrity)
D.   Directors

Question 7

COSO’s ERM

Answer 7

Enterprise risk management is a process, effected by an entity’s board I’d directors, management and other personnel, applied in strategy setting and across the enterprise design to identify potential events that may affect the entity, manage risk to be with in its risk appetite, to provide reasonable assurance regarding the achievement of the entity objectives.

Question 8

ERM framework

Answer 8

1. Align risk appetite & strategy
2. Enhancing risk response decision
3. Reducing operational surprises and losses
4. Identifying and managing multiple and cross-enterprise risks
5. Seizing opportunities
6. Improving deployment of capital

Question 9

ERM objectives

Answer 9

SORC

S. strategic
O. Operations
R. Reporting
C. Compliance

Question 10

Component of ERM

Answer 10

IS EAR AIM

I. Internal environment
S. setting objectives

E. event identification
A. Assessment of risk
R. Risk response

A. Activities (control)
I. Information and communication
M. Monitoring