Corporate Governance - Rights, Duties, Responsibilities, Authority, Ethics of Directors, Officers - Enterprise Risk Management (Including COSO or Similar Framework)

Question 1

Residual risk

Answer 1

The risk that remains after management reacts to the risk, such as by instituting appropriate internal controls.

Question 2

Detection risk

Answer 2

The risk that auditors fail to detect a material misstatement in financial statements.

Question 3

Inherent risk

Answer 3

The likelihood there are material misstatements before considering internal controls.

Question 4

The four categories of entity objectives in the enterprise risk management framework are:

Answer 4

strategic (high-level goals, aligned with and supporting the entity’s mission),

operations (effective and efficient use of its resources),

reporting (reliability of reporting), and

compliance (compliance with applicable laws and regulations).

Question 5

Risk reduction

Answer 5

helps to lower costs and correct issues within a corporation

Question 6

Risk sharing

Answer 6

involves working with another organization to spread the risk between the two entities

Question 7

Risk acceptance

Answer 7

the assumption of all risk because it is determined to be acceptable

Question 8

Prospect theory

Answer 8

behavioral economic theory that describes the way people choose between alternatives that involve risk and where the probabilities of the outcomes are known.