B1 Corp Governance and Financial Risk Management

Question 1

Objectives of COSO

Answer 1

“ORC”
Operations
Reporting
Compliance

Question 2

Components of COSO

Answer 2

"CRIME"
Control Environment (EBOCA)
Risk Assessment (SAFR)
Info and Communication (OIE)
Monitoring Activities (SOD)
Existing Control Activities (CAT P)

Question 3

Principles of Control Environment (C)

Answer 3

"EBOCA"
Ethics and Integrity
Board Independence
Organizational Structure
Commitment to Competence
Accountability

Question 4

Principles of Risk Assessment (R)

Answer 4

"SAFR"
Specify Objectives
Assess Changes
Fraud Potential
Risk Analysis

Question 5

Info and Communication (I)

Answer 5

“OIE”
Obtain/Use Info
Internally Communicate
Externally Communicate

Question 6

Monitoring Activities (M)

Answer 6

“SOD”
Separate Ongoing Activities
Deficiency Reporting

Question 7

“Existing” Control Activities (E)

Answer 7

“CAT P”
Control select Activities
Technology controls
Policies and Procedures deployment

Question 8

What type of risks cannot be eliminated by a portfolio?

Answer 8

Diversifiable

Question 9

Managers that anticipate a greater return for greater risk are called ???

Answer 9

Risk Averse

Question 10

Managers that do not expect a greater return for greater risk are called ???

Answer 10

Risk-Indifferent

Question 11

Managers that anticipate a lower return for greater risk are called ???

Answer 11

Risk-Seeking

Question 12

What type of risk only uses equity financing?

Answer 12

Business Risk

Question 13

What type of debt is an unsecured, ST debt instrument that is issued by a corporation that matures in 270 days or less and must be used to finance Current Assets?

Answer 13

Commercial Paper

Question 14

What type of debt represents an unsecured obligation of the issuing company, and if the company defaults the holder of this obligation has the status of a creditor?

Answer 14

Debentures

Question 15

What type of debt is an unsecured bond issuance that ranks behind senior creditors (and as a result has a higher interest rate)?

Answer 15

Subordinated Debentures

Question 16

What type of debt only pays interest upon the achievement of target income levels?

Answer 16

Income Bonds

Question 17

What type of debt is characterized by high default risk and high return, sometimes classified as “noninvestment grade”. It’s mainly used for acquisitions or leveraged buyouts.

Answer 17

Junk Bonds

Question 18

What type of debt is a loan secured by residential or commercial real property.

Answer 18

Mortgage Assets

Question 19

What is the risk to an entity in the absence of a response from management?

Answer 19

Inherent Risk

Question 20

What is the risk to an entity in the following a response from management!

Answer 20

Residual Risk

Question 21

Insuring against losses or entering into joint ventures to address risk is known as ???

Answer 21

Risk Sharing