Chp 6: Risk management and internal control

Question 1

What are the five responsibilities of the Treasury function?

Answer 1

1. Relationship with banks
2. Liquidity management
3. Borrowing activities
4. Funding arrangements
5. Currency management

Question 2

What are the five categories of control activities?

Answer 2

1. Authorisation - transactions approved by an appropriate person
2. Information processing - general IT contorls and application controls
3. Performance review
4. Physical controls - physical security for prevention of theft
5. Segregation of duties - no one person has overall control

Question 3

What are the five limitations to internal control?

Answer 3

1. Costs - which can outweigh benefits
2. Human error or fraud
3. Management override - either legitamately or fraudulently
4. Non-routine events that the system wasn’t set up to manage
5. Change of any sort that the system can’t control

Question 4

What are Hopwoods three management styles that can cause dysfunctional behaviour?

Answer 4

1. Budget-constrained - needs to meet budget constraints, short term, manipulation of data to achieve goals
2. Profit-concious - assessed only in terms of profit, no matter how it’s done
3. Non-accounting - budgets not important, qualitiative factors used

Question 5

What are the dysfunctional behaviours: Tunnel vision, Myopia, Measure fixation, Misrepresentation, Ossification?

Answer 5

• Tunnel vision - focus on stated performance measures only
• Myopia - short termism
• Measure fixation - trying to achieve specific performance indicators only, which may not be effective
• Misrepresentation - creative reporting, manipulation
• Ossification - unwilling to change a performance measure

Question 6

What are the following types of information systems?
Office Automation Systems
Transaction processing systems
Knowledge work systems
Management information systems
Enterprise resource planning systems

Answer 6

• Office Automation Systems - email, spreadsheet etc.
• Transaction processing systems - collects data about each business transaction
• Knowledge work systems - allows new knowledge creation
• Management information systems - draws information from transaction processing and presents it to managers for decision making
• Enterprise resource planning systems - captures data about the whole organisation so that custom reports can be produced

Question 7

What are the following types of information systems?
Strategic enterprise management system
Decision support system
Executive information system
Expert system
Data centres

Answer 7

• Strategic enterprise management system - Makes high-level decisions using tools like ABM
• Decision support system - Data analysis that can be used to model scenarios
• Executive information system - Data presented to senior managers with ‘drill down’ option
• Expert system - stores information and applies rules to make simple decisions
• Data centres - computer servers holding large amounts of data

Question 8

What are the five stages of the Systems development life cycle (SLDC)?

Answer 8

1. Feasibility study - review the exisiting system and identify alternatives
2. Systems investigation - identify current needs
3. Systems analysis - why current method used, identify better alternatives
4. Systems design - prepare a detailed specification
5. Systems implementation - acquire new system and use it

Question 9

What are Firican’s 10 V’s of Big Data?

Answer 9

1. Volume
2. Velocity
3. Variety
4. Variability
5. Veracity
6. Validity
7. Vulnerability
8. Volatility
9. Visualisation
10. Value