Corporate Governance

Question 1

5 Components of Internal Control

Answer 1

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

Question 2

Factors of Control Environment (CHOPPER)

Answer 2

1. Commitment to competence
2. Human resource policies and procedures
3. Organizational structure
4. Philosophy and operating style of management
5. Participation of the board of directors or audit committee
6. Ethical and integrity values
7. Responsibility and authority assignment

Question 3

Types of Control Activities (PIPS)

Answer 3

1. Performance reviews
2. Information processing
3. Physical Controls
4. Segregation of duties

Question 4

Segregation of Duties (ARCC)

Answer 4

1. Authorization of transactions
2. Recording of transactions
3. Custody of assets
4. Comparisons

Question 5

Monitoring - Sequence of Activities

Answer 5

1. Control Baseline
2. Change Identification
3. Change Management
4. Control Revalidation/Update

Question 6

Control Baseline

Answer 6

Development of an understanding of how the system of internal controls was designed and implemented

Question 7

Change Identification

Answer 7

Use of ongoing and separate evaluations t identify and address changes in the effectiveness of I/C to initiate changes to controls

Question 8

Change Management

Answer 8

Determination of when changes to I/C are needed and the types of changes that are likely to be effective

Question 9

Control Revalidation/Update

Answer 9

Development of a new baseline understanding of the revised system

Question 10

Limitations of Internal Controls (COCCO)

Answer 10

1. Collusion
2. Override by Management
3. Competence
4. Cost/Benefit Constraints
5. Obsolescence

Question 11

Purpose of ERM

Answer 11

Find the balance between minimizing or managing risk and maximizing the return and opportunities that can be provided to stakeholders

Question 12

8 Components of ERM

Answer 12

1. Internal Environment
2. Objective Setting
3. Event Identification
4. Risk Assessment
5. Risk Response
6. Control Activities
7. Information Communication
8. Monitoring

Question 13

ERM - Internal Environment

Answer 13

Tone at the top

Starts with Mission Statement

Question 14

ERM - Objective Setting

Answer 14

Objectives the companies set to meet its mission statement.
4 Types of Objectives
1. Strategic Objectives
2. Operational Objectives
3. Reporting Objectives
4. Compliance Objectives

Question 15

ERM - Event Identification

Answer 15

How to distinguish between events that are opportunities and threats and how to deal with them

Question 16

Risk Assessment

Answer 16

Evaluation of the extent of potential effects of identified events on the ability of the entity to achieve its objects

Question 17

3 Approaches to Risk Assessment

Answer 17

1. Balance Sheet Approach
2. Process Approach
3. Event Identification Approach

Question 18

ERM - Risk Response

Answer 18

Mgt.'s response to risk it is  exposed to.
4 Responses
1. Acceptance
2. Share
3. Reduce
4. Avoid

Question 19

3 Approaches to quantify risks

Answer 19

1. Benchmarking - compares expected outcomes to common measures
2. Probabilistic Models -uses probabilities of possible outcomes
3. Nonprobabilistic Models - uses subjective assumptions to measure possible outcomes

Question 20

ERM - Control Activities

Answer 20

Procedures to make sure decisions follow on how to respond to risk are carried out
Activities:
1. Top-level Reviews
2. Activity Management
3. Information processing
4. Physical Controls
5. Performance Indicators
6. Segregation of Duties (ARCC)