COSO

Question 1

Residual Risk

Answer 1

Risk that remains even after management’s initial response is residual risk

Question 2

Inherent Risk

Answer 2

Inherent risk is the risk when management has not taken action to reduce the effect or likelihood of an adverse event. Thus, it is risk in the absence of a risk response.

Question 3

Enterprise risk management

Answer 3

Enterprise risk management involves the identification of events with negative impacts on organizational objectives.

Question 4

Limitations of ERM

Answer 4

Limitations of ERM arise from the possibility of (1) faulty human judgment, (2) cost-benefit considerations, (3) simple errors or mistakes, (4) collusion, and (5) management override of ERM decisions.

Question 5

Enterprise risk management (ERM) helps management

Answer 5

Enterprise risk management (ERM) helps management
Reach objectives
Prevent loss of reputation and resources
Report effectively
Comply with laws and regulations

Question 6

Relationship between raising an interest rate with currency

Answer 6

If a country raises its interest rates, its currency will appreciate.

Question 7

Payable denominated in a foreign currency

Answer 7

Firm wants that currency depreciate by the settlement date because it would require fewer units of its domestic currency to pay off the debt.

Question 8

A supply of a currency increases

Answer 8

The value of that currency will decrease

Question 9

What happens if a foreign customer want to increase purchase of UST product?

Answer 9

It will increase the demand for the dollars necessary to pay for those products