Corporate Governance Flashcards
What are the rights, duties, responsibilities & authority of the Board of Directors?
- Election, removal & supervision of officers
- Adoption, amendment & repeal of bylaws
- Reacquire treasuary stock (authorized, issued but not outstanding)
- Declare dividends
* Officer may also serve as directors *
What are 5 components of COSO?
CRIME
- Control Evironment
- Risk Assessment
- Information & Communications
- Monitoring
- Existing Control Activities
What are principles associated with control environment component of COSO?
CHOPPER
- Commitment of Competence
- Human resource policies & procedures
- Organizational structure
- Philosophy & Operating style of Management
- Participation of Board of directors or audit committee
- Ethical & Integrity values
- Responsibility & Authority Assignment
What are 4 principles associated with risk assessment?
- Specify objectives
- Identify & analyze risks
- Accesses fraud risk
- Identify & analyzes significant changes
What are 3 principles associated with (existing) control activities?
- Select & develop control activities
- Select & develop technology controls
- Deploy through policies & procedures
What are the types of control activities?
PIPS
- Performance review: Actual vs budget, P/Y, financial to non-financial
- Information processing: General vs Application controls (input, processing, and output controls)
- Physical controls: Access to assets
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Segregation of duties: ARCC
- Authorization of transactions
- Recording (posting) of transactions
- Custody of assets
- Comparisons, Reconciliation
What are 3 principles associated with information & communication?
- Obtain & use information
- Internally communicate information
- Communicate with external parties
What are 2 principles associated with monitoring?
- Ongoing & separate evaluations
- Communication of deficiencies
What are sequence activities of monitoring?
- Control baseline
- Change identification
- Change management
- Control revalidation/update
What are the limitations of COSO?
- Collusion
- Override by management
- Competence: errors or mistakes, poor human judgment
- Cost/benefit constraints
- Obsolescence: change in co’s operations or size
Name & describe 3 objectives within COSO?
ORC
- Operating: effectiveness & efficiency of entity’s operations
- Reporting: reliabiltiy, timeliness & transparency of financial & non-financial r
- Compliance: complying with applicable laws & regulations
What are components of COSO- ERM?
IS EAR AIM
- Internal Control Environment
- Objective Setting
- Event Identfication
- Risk Assessment
- Risk Response
- Control Activities
- Information & Communication
- Monitoring
What are principles of objective setting component of COSO- ERM?
- Strategic Obj
- Related Obj: Operation, Reporting, Compliance
- Selected Obj
- Risk Appetite
- Risk Tolerances
What are principles of risk response component of COSO- ERM?
- Avoidance: Terminate risk like discontinue products
- Reduction: Reduce/mitigate risk like invest in inventory technology, relocating
- Sharing: Reduce risk by transferring risk like insurance or bonds
- Acceptance: NO action
What’s control baseline?
Developing the initial understanding of the control system
What’s change identification?
Identify & address changes in the effectiveness of I/C to initiate changes to controls
What’s change management?
Evaulates the design & implementation of changes and establishing a new baseline
What’s control revalidation/update?
Revalidating the understanding periodically
Which COSO component includes the goal of proper measurement of transactions?
Information & Communication
What are the requirements for financial expert?
- Experience with internal accounting controls
- Experience with preparation or auditing of F/S
- Understanding GAAS
Which entity is best for ERM process?
Manager within the deparment
Describe EMR
Manages risks and seizes opportunities to achieve the goals of the organization
Who is ultimately responsible for the implementation and development of the ERM?
- Management
- Notes: Board of directors is responsible for oversight
What are the examples of risk sharing?
- Insurance
- Hedging
- Fidelity bonds
