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Internal Audit > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

POSSIBILITY THAT AN EVENT WILL OCCUR AND ADVERSELY AFFECT THE ACHIEVEMENT OBJECTIVES

THREAT

A

RISK

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2
Q

THE POSSIBILITY THAT AN EVENT WILL OCCUR AND POSITIVELY AFFECT THE ACHIEVEMENT OF OBJECTIVES

POSITIVE

A

OPPORTUNITY

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3
Q

WHAT ARE THE 4 FUNDAMENTAL RISKS

A
  1. RISK BEGINS WITH STRATEGY SETTING AND OBJECTIVE SETTING (NO OBJECTIVES - NO RISK)
  2. RISK ISN’T A SINGLE POINT ESTIMATE, IT’S A RANGE OF OUTCOMES
  3. RISK MAY BE PREVENTING BAD THINGS FROM HAPPENING OR FAILING TO ENSURE GOOD THINGS HAPPEN
  4. RISKS ARE INHERENT - WHEN THERE ARE UNCERTAINTIES, THERE ARE RISKS
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4
Q

9 FUNDAMENTAL ASPECTS OF ERM ACCORDING TO COSO

A
  1. PROCESS IS ONGOING AND FLOWS THROUGHOUT THE ORG
  2. EFFECTED BY PEOPLE AT EVERY LEVEL
  3. APPLIED WHEN SETTING STRAT
  4. APPLIED ACROSS THE ORG AT EVERY LEVEL
  5. FOCUS ON TAKING ENTRY LEVEL PORTFOLIO VIEW OF RISK
  6. DESIGNED TO IDENTIFY POTENTIAL EVENTS THAT, IF THEY OCCUR, CAN AFFECT THE ORG
  7. ENABLE MGMT OF RISK WITHIN AN ORG’S RISK APPETITE
  8. PROVIDES ASSURANCE TO ORG’S MGMT AND BOD
  9. GEARED TOWARD ACHIEVEMENT OF OBJECTIVE IN ONE OR MORE SEPARATE BUT OVERLAPPING CATEOGIRES
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5
Q

4 TYPES OF COSO ERM OBJECTIVES

A
  1. STRATEGIC
  2. OPERATIONS
  3. REPORTING
  4. COMPLIANCE
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6
Q

8 COMPONENTS OF ERM

A
  1. INTERNAL ENVIRONMENT
  2. OBJECTIVE SETTING
  3. EVENT IDENTIFICATION
  4. RISK ASSESSMENT
  5. RISK RESPONSE
  6. CONTROL ACTIVITIES
  7. INFORMATION AND COMMUNICATION
  8. MONITORING
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7
Q

HIGH LEVEL GOALS THAT ARE ALIGNED WITH AND SUPPORT THE ORG’S MISSION

A

STRATEGIC OBJECTIVES

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8
Q

BROAD GOALS PROMOTING EFFECTIVE AND EFFICIENT USE OF RESOURCES

A

OPERATIONS OBECTIVES

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9
Q

GOALS FOCUSING ON THE RELIABILITY OF REPORTING

A

REPORTING OBJECTIVES

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10
Q

GOALS ENFORCING COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS

A

COMPLIANCE OBJECTIVES

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11
Q

COSO COMPONENT THAT ENCOMPASSES THE TONE OF AN ORG AND SETS THE BASIS FOR HOW RISK AND CONTROL ARE VIEWED AND ADDRESS BY ENTITY’S PEOPLE

A

INTERNAL ENVIRONMENT

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12
Q

COSO COMPONENT THAT ESTABLISHES A BASIS FOR OPERATIONS, REPORTING, AND COMPLIANCE OBJECTIVES

A

OBJECTIVE SETTING

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13
Q

COSO EXTERNAL RISK FACTORS IN EVENT ID

A

ECONOMIC EVENTS, NATURAL EVENTS, POLITICAL EVENTS, SOCIAL EVENTS, AND TECH EVENTS

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14
Q

COSO INTERNAL RISK FACTORS IN EVENT ID

A

INFRASTRUCTURE FACTORS, PERSONNEL FACTORS, PROCESS FACTORS, TECH FACTORS

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15
Q

WHAT IS THE RISK FORMULA

A

INHERENT RISK - MGMT MITIGATION = RESIDUAL RISK

RESIDUAL RISK SHOULD BE WITHIN THE RISK APPETITE

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16
Q

4 COSO RISK RESPONSES

A
  1. AVOIDANCE
  2. REDUCTION
  3. SHARING
  4. ACCEPTANCE
17
Q

EXITING OR DIVESTING OF THE ACTIVITIES GIVING RISE TO RISK

A

AVOIDANCE

18
Q

ACTION TAKEN TO REDUCE RISK LIKELIHOOD OR IMPACT

A

REDUCTION

19
Q

REDUCING RISK BY TRANSFERRING OR OTHERWISE SHARING A PORTION OF THE RISK

A

SHARING

INSURANCE

20
Q

NO ACTION IS TAKE TO AFFECT RISK LIKELIHOOD OR IMPACT

A

ACCEPTANCE

21
Q

6 COSO CONTROL ACTIVITES

A
  1. TOP LEVEL REVIEWS
  2. DIRECT FUNCTIONAL OR ACTIVITY MGMT
  3. INFO PROCESSING CONTROLS
  4. PHYSICAL CONTROLS
  5. PERFORMANCE INDICATORS
  6. SEGREGATION OF DUTIES
22
Q

CONTROL TYPICALLY EXECUTED AT THE ENTITY LEVEL, SUCH AS PERFORMANCE AGAINST BUDGET, UPDATED FCST, MONITORING OF COMPETITOR ACTIONS, OR COST CONTAINMENT INITIATIVES

A

TOP-LEVEL REVIEWS

23
Q

CONTROLS EXECUTED BY MANAGERS RUNNING SPECIFIC FUNCTIONS OR ACTIVITIES

A

DIRECT FUNCTIONAL OR ACTIVITY MGMT

24
Q

WHAT ARE ONGOING MONITORING ACTIVITIES

A

OCCUR IN THE NORMAL COURSE OF DAY-TO-DAY MGMT ACTIVITIES

25
Q

WHAT ARE SEPARATE EVALUATIONS

A

DEPEND ON MGMT’S ASSESSMENT OF UNDERLYING RISKS AND THE EFFECTIVENESS OF EXISTING ONGOING MONITORING PROCEDURES

26
Q

6 ROLES IA FUNCITON SHOULD NOT TAKE IN THE

A
  1. SETTING THE RISK APPETITE
  2. IMPOSING RISK MGMT PROCESS
  3. PERFORM MGMT ROLE IN ERM
  4. TAKE/MAKE DECISIONS ON RISK RESPONSES
  5. IMPLEMENT RISK RESPONSE ON MGMT BEHALF
  6. ACCOUNTABILITY FOR RISK MGMT

Internal Audit (7 decks)

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