Corp Gov, Int Control, ERM

Question 1

Incentives to defeat Agency Problem

Answer 1

• Base Salary and Profit - based on acct measures

- Stock Options - Align SH and mgmt interest in increasing share prices

Question 2

COSO: Internal Control Integrated Framework

Answer 2

Process, effected by the entity’s BOD, mgmt, and other personnel design to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.

Question 3

5 COSO Components

Answer 3

1. ) Control Environment
2. ) Control Activities
3. ) Monitoring
4. ) Risk Assessment
5. ) Information and Communication Systems

Question 4

Control Baseline

Answer 4

Establishing a starting point that includes a supported understanding of existing control system

Question 5

Control Identification

Answer 5

Identifying through monitoring changes in internal control that are either necessary because of changes in operating environment or have already taken place

Question 6

Change in Management

Answer 6

Evaluating the design and implementation of change, and establishing new baseline

Question 7

Control revalidation/update

Answer 7

Periodically revalidating control operation when no known changes have occurred.

Question 8

Enterprise Risk Management (ERM) 8 Components

Answer 8

1. ) Internal Environment (tone of org)
2. ) Objective Setting
3. ) Event Identification
4. ) Risk Assessment
5. ) Risk Responses
6. ) Control Activities
7. ) Information and communication throughout organization
8. ) Monitoring

Question 9

ERM LImitations

Answer 9

Future is uncertain
No absolute Assurances
-Human failure
-System breakdown
-Collusion across ERM
-Management override

Question 10

Risks of IT

Answer 10

• Overreliance
• Access
• Changes in programs
• Failure to change
• Manual intervention
• Loss of data

Question 11

System Design Process Improvement - PADDTIM 7 Steps

Answer 11

1. ) Planning
2. ) Analysis
3. ) Design
4. ) Development
5. ) Testing
6. ) Implementation - Several strategies
7. ) Maintenance