Etc. Flashcards
Residual risk
the risk after management’s response
Give an example of a lag variable that prevent the recovery or recession of the economy
chronic unemployment
Who should be responsible for evaluating internal control procedures of a large public corporation
internal audit staff who report to the BOD
What are the repsonsibilities of the audit committee?
Appoint the external auditor.
Determine the compensation of the external auditor.
Mediating differences of opinions regarding accounting matters between the auditors and mgmt.
Describe the control Environment
The set of standards, processes, and structures that provide the basis for carrying out internal control across the organization.
At what rate of interest is charged on a Treasury bill?
The risk-free rate plus the expected rate of inflation.
Dividend growth model
Dividend/ stock price + growth rate
What is a leader indicator of a future increase in GDP?
An increase in the avg hours worked per week of production workers
What type of firms can issue commerical paper?
Only very creditworthy firms
How do you calc the firm’s net cost of debt?
effective interest rate - (1- tax rate)
How do you calc the cost of common equity?
(next dividend / stock price) + expected growth rate in earnings
What does freely fluctuating exchange rates do?
Automatically correct a lack of equilibrium in the balance of payments
What types of reporting are encompassed in COSO’s internal control framework
External financial reporting objectives.
External non-financial reporting objectives.
internal financial and non financial reporting objectives.
What should the chief audit executive do according to the IIA internal standards?
Establish a risk-based approach to determine audit priorities
What does investment’s Beta measure?
the Investment’s systematic risk. It is the covariance of the asset’s returns with the returns of the overall portfolio.
