BUS 1 Corp Gov (1)

Question 1

Components of COSO Enterprise Risk Management (IS EAR AIM)?

Answer 1

1. Internal environment (PHRASED C)
   a. Philosophy risk management
   b. Human resource standards
   c. Risk appetite
   d. Accountability
   e. Structure
   f. Ethical Values
   g. Directors oversight
   h. Commitment to competence
2. objective Setting
   a. Strategic objectives
   b. Related objectives
   c. Selected objectives
   d. Risk appetite
   e. Risk tolerance
3. Event identification
   a. Events
   b. influencing factors
   c. Event ident techniques
   d. Event interdependencies
   e. Event categories
   f. Distinguishing risks and opportunities
4. Accountability
   a. Inherent residual risk
   b. Establishing likelihood / impact
   c. Data sources
   d. Assessment techniques
   e. Event relationships
5. risk Response
   a. Evaluating possible responses
   b. Selected responses
   c. Portfolio view
6. control Activities
   a. Integration w/ risk response
   b. Types of control activities
   c. Controls over info systems
   d. Entity specific controls
7. Information and communication
   a. Info
   b. Communication
8. Monitoring
   a. Ongoing monitoring activities
   b. Separate Evals
   c. Reporting deficiencies

Question 2

What Are the SOX (6) Disclosures in Periodic Reports?

Answer 2

1. Adjusting Entries Identified
2. Financials disclose all material off balance sheet transactions (Opp Leases, Contingent Obligations, Relationships Undisclosed Subsidiaries)
3. Pro forma financial statements include relevant Info

Question 3

Necessary of COSO framework to create an effective internal control environment?

Answer 3

1. Present
2. Functioning

*All components working together

Question 4

Benefit of ERM is?

Answer 4

Alignment of management risk w/ shareholder risk appetite

Question 5

Specific NYSE and NASDAQ rules that make a director not independent include?

Answer 5

1. Employee of the corporation or an affiliate
2. Family member has been an officer of the corporation
3. Former partner or employee of the corporation’s external auditor
4. Family member in the last 3 years received more than $120,000 (for a twelve-month period) in payments from the corporation other than for director compensation.
5. Executive of another entity that receives significant amounts of revenue from the corporation.

Question 6

Define the following:

1. Control baseline
2. Change identification
3. Change management
4. Control revalidation/update

Answer 6

1. Control baseline—establishing a starting point that includes a supported understanding of the existing internal control system.
2. Change identification—identifying through monitoring changes in internal control that are either necessary because of changes in the operating environment or have already taken place.
3. Change management—evaluating the design and implementation of the changes, and establishing a new baseline. Hire consultant
4. Control revalidation/update—periodically revalidating control operation when no known changes have occurred.

Question 7

Risk Classes:

1. Inherent
2. Residual
3. Event
4. Detection

Answer 7

1. Inherent: Risk before management
2. Residual: After managements response
3. Event: Risk from a particular event
4. Detection: Related to ERM (DR down CR up)

Question 8

*SOX Focus means what?

*COSO helps?

*What is ERM for?

Answer 8

* Financial reporting, ethical behavior, adequacy of internal controls

*COSO help businesses assess internal control

*ERM more operations

Question 9

What are the 5 components and 17 principles?

Answer 9

1. Control Environment - integrity, ethical values, authority assignment, HR
   a. Commit Ethics/Integrity
   b. Board Indep/Oversight
   c. Organizational Structure
   d. Competence
   e. Accountability
   f. Financial Report Competencies
2. Risk Assessment - identification, analysis, management of business risks
   a. Specify Objectives
   b. Identify/Analyze Risks
   c. Potential For Fraud
   d. Identify/Assess Changes
3. Info and Communication - identify/record valid transactions, transactions/related disclosures properly recorded in fs
   a. Obtain Info
   b. Communicate Info
   c. Communicate w/ External Parties
4. Monitoring - evaluations, internal audit functions
   a. Evaluations
   b. Deficiencies
5. Existing Control Activities - PAID TIPS, policies and procedures estb to ensure manage meet objectives, prenumbering of documents, authorization of transactions, performance reviews, segregation of duties
   a. Select/Develop Control Activities
   b. Select/Develop Technology Controls
   c. Deploy Through Policies/Procedures

Question 10

*Title 3

*Title 4

*Title 8

*Title 9

*Title 11

Answer 10

*(3)Audit Committee, Financial Reports, Improper Influence, Forfeiture Bonuses and Profits

*(4)Enhanced Financial Disclosures

*(8)Criminal Penalties-altering docs, statue of limitations, whistle blower protection, securities fraud

*(9)White Collar Crimes-attempt/conspiracy, failure to certify reports

*(11)Corporate Fraud-tampering docs 20, temp freeze of authority, profit officers by SEC, retaliation 10