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Joe's BEC > B1 > Flashcards

B1 Flashcards

M1 M2

1
Q

___ considers the manner in which management monitors and authorizes changes to a variety of information technology matters

A

Change control

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2
Q

which COSO framework component is designated to ensure internal controls operate effectively

A

Monitoring

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3
Q

Common risks identified using the COSO framework

A
  1. Material omission
  2. Fraud
  3. Mgt. Override of controls
  4. Illegal acts
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4
Q

How to develop Value under ERM

A

CPER

  1. Value Creation: Benefits > resource costs
  2. V. Preservation: Sustainable operating profits - ongoing
  3. V. Erosion: Costs > Benefits
  4. V. Realization: Dividends/SP > Cost “capital gain”
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5
Q

5 components of Enterprise risk management

A

GO PRO

  1. Governance and Culture: tone at the top
  2. Strategy and Objective setting: Mission/vision & defining risk appetite
  3. Performance: Evaluate ID & Respond to risk using ARTS
  4. Review and Revision - assess substantial changes, pursue improvements
  5. Information communication and reporting (ongoing)
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6
Q

Principles of Governance and Culture Component of ERM

A

DOVES (similar to control environment as it sets tone at the top)

  1. Defines Desired Culture - how conservative/aggressive do we want to be
  2. Exercise Board Oversight -
  3. Demonstrates commitment to core Values - adopt code of conduct
  4. Attracts, Develops, and retains capable individuals (employees)
  5. Establishes operating structute
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7
Q

Principles of Strategy and Objective Setting Component of ERM

A

SOAR

  1. Evaluate alternative strategies - what is the vision
  2. formulates business objectives - why do we exist (mission)
  3. Analyzes business context
  4. defines risk appeitite
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8
Q

Principles of Performance Component of ERM

A

VAPIR (Similar to R in risk assessment) all about

  1. Develops portfolio view
  2. Assesses severity of risk
  3. Prioritizes risk - interest rate risk, currency risk, competition
  4. Identifies risk
  5. Implements risk responses -ARTS
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9
Q

Principles of Review and Revision component of ERM

A

SIR

  1. Assess substantial change - internally w/ officers external with substitute products
  2. Pursues improvements in ERM
  3. Reviews risk and performance - how did we do with managing risk? was the hedge successful
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10
Q

Principles of Info, communication and reporting (Ongoing) component of ERM

A

TIP

  1. Leverages info and tech - think OIE & FACT
  2. Communications risk info - MDA
  3. reports on risk culture and Performance - MDA
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11
Q

the risk to an entity in the absence of any direct or focused actions by management to alter its severity

A

inherent risk

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12
Q

amount of risk that an entity prefers to assume in the pursuit of its strategy

A

target residual risk

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13
Q

the risk remaining after management has taken action

A

actual residual risk

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14
Q

Title III of SOX is

A

corporate responsibility. establishes audit committee and CEO/CFO representations

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15
Q

title IV of SOX

A

enhanced financial disclosures for internal controls and audit committee

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16
Q

title VIII SOX

A

Corporate and criminal fraud accountability

17
Q

if an investors certainty equivalent is less than the expected rate of return then they are what

A

risk averse (they seek higher returns fir more risk)

18
Q

investors certainty equivalent is equal to the expected return on the investment

A

risk indifferent

19
Q

if an investors certainty equivalent exceeds return on an investment then

A

they are risk seeking (they are seeking lower return for higher risk)

20
Q

risk that represents the risk associated with unique circumstances of a particular company

A

business risk

21
Q

__ risk is the exposure of lenders to the failure of borrowers to repay principal and interest on debt

A

financial risk

22
Q

what are the risk adjustments to find the required rate fo return

A
  1. maturity risk / premium (risk increases with term of matuirty)
  2. Purchasing power risk or inflation premium
  3. Liquidity risk premium
  4. Default risk premium

Joe's BEC (6 decks)

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