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Governance Business Ethics, Risk Mgt., and Internal Control > midterm quiz > Flashcards

midterm quiz Flashcards

1
Q

Is concerned with the responsibilities and obligations of businesses to people.

A

Corporate Social Responsibility

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2
Q

The application of ethical principles and standards in a business environment.

A

Business ethics

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3
Q

Arises when an officer or employee of the employing organization takes advantage of their position to improperly obtain an unjust advantage over the interest of the employing organization.

A

Conflict of Interest

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4
Q

> Non payment of taxes
Deliberate understatement of taxable income
Failure to register one’s business with BIR

A

Tax evasion

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5
Q

> Paying employee wages below the minimum wage rate
Failure to pay for employee’s social security premiums

A

Violation of labor and social security laws

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6
Q

> Corporate officers buy and sell company shares by taking advantage of information that I snot yet disclosed to the public
Violation of Securities Regulation Code that governs trading of shares

A

Insider Trading

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7
Q

> Making and selling a product that is patented by another company (without having a paid franchise fee)

A

Patent infringement

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8
Q

> Concealing and converting money obtained from illegal source in order to show that it was generated legally

A

Money-laundering

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9
Q

> Not implementing anti-pollution devices
Letting factory and other wastes flow into bodies of water

A

Violation of environmental laws

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10
Q

> Obtaining sensitive information including passwords about a person without their consent.
Using said information to make unauthorized bank transactions such as cash withdrawals and money transfers.

A

Cybercrimes

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11
Q

Modes of communicating the ethical code

A
  1. Employee orientation program
  2. Posting in the company website
  3. Newsletters and publications
  4. Bulletins
  5. Official memoranda
  6. Employee manual
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12
Q

Major contents of code of ethical conduct

A
  1. Company profile
  2. Objectives of the code of ethical conduct
  3. Ethical principles adapted by the company
  4. List of instances of unethical acts
  5. Process for identifying the threats or risks of unethical acts
  6. Process for determining whether the threats are significant
  7. Resolving ethical conflicts
  8. Reporting of ethical issues and concerns
  9. Sanctions for violations of the code of ethical conduct
  10. Approval of the code of ethical conduct
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13
Q

Resolution of Ethical Issues in the field of Accounting

A
  1. Identify the Facts
  2. Identify the ethical issue
  3. Analyze the alternative courses of action
  4. Make a decision
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14
Q

The likelihood that an event will occur.

A

Risk

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15
Q

What does COSO stand for?

A

Committee of Sponsoring Organizations of the Treadway Commission

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16
Q

What are the types of risk?

A
  1. Financial Risks
  2. Non-financial Risks
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17
Q

The likelihood that a company might incur a financial loss, or suffer a decline in profit, capital, investments, or cash flows, on account of the occurrence of events or transactions

A

Financial Risks

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18
Q

Types of Financial risks

A
  1. Credit risk
  2. Liquidity risk
  3. Market risk
    > Interest rate risk
    > Foreign currency risk
    > Price risk
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19
Q

The risk that a counter-party such as customer or a borrower might fail to pay its account in the due date.

A

Credit risk

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20
Q

The risk that the business will be unable to meet its financial obligations as they fall due because of insufficient cash, inability to liquidate assets, or obtain adequate funding given a short period of time.

A

Liquidity risk

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21
Q

The risk of volatility in the market brought about factors of interest rate, foreign currency, and market prices.

A

Market risk

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22
Q

The potential decline in earnings and capital arising from changes in interest rates in the market.

A

Interest rate risk

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23
Q

The risk that fluctuations in exchange rates could affect the profit of the business.

A

Foreign currency risk

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24
Q

Risk that changes in specific prices (stock, price of other investments) could affect the profit or cash flows of the business

A

Price risk

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25
Q

Possibility that the business may not be able to generate sufficient revenue, or an increase in production and increased operating costs might occur

A

Business risk

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26
Q

Types of nonfinancial risks

A
  1. Operational risk
  2. Legal or Compliance risk
  3. Health and safety risk
  4. Environmental risk
  5. Strategic risk
  6. Reputation risk
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27
Q

The risk that business operations will be disrupted due to inadequate or failed systems, processes, people, breached in internal controls, or other unforeseen catastrophes

A

Operational risk

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28
Q

The risk that the company might fail to comply with applicable laws and regulations such as tax laws, labor laws, anti-money laundering laws, and environmental laws among others

A

Legal or Compliance risk

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29
Q

Risk that unforeseen events could result to injuries, illnesses, or even loss of lives

A

Health and Safety risk

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30
Q

Risk that the company may fail to control or minimize factory wastes, emissions, and other pollutants arising from its business activities.

A

Environmental risk

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31
Q

Risk of selecting an inappropriate corporate strategy or the failure of implementing an appropriate one

A

Strategic risk

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32
Q

Risk that reputation or image of the company will be damaged due to reasons such as improper acts of corporate officers, poor financial performance, and bad news about the company among others

A

Reputation risk

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33
Q

2 risks in the work of professional accountants

A
  1. Financial reporting risk
  2. Fraud risk
34
Q

The possibility that the financial statements of the company will be incorrect due to errors, lapses, or failure to apply accounting standards such as the IFRS

A

Financial reporting risk

35
Q

The risk arising from deceptive and intentional acts that result to loss of company assets, resources, and reputation.

A

Fraud risk

36
Q

Is a process, effected by an entity’s board of directors, management, and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events, that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.

A

Enterprise risk management

37
Q

Roles in the risk management process

A
  1. Board of Directors
  2. Management
  3. Internal auditors
  4. Other personnel
38
Q

Conducts oversight of the effectiveness of the company’s risk management process.

A

Board of Directors

39
Q

Implements specific risk mitigation and control procedures in managing the various types of risks affecting the company

A

Management

40
Q

Conducts examination of the risk management process for the purpose of determining its effectiveness over time

A

Internal auditor

41
Q

Implements specific tasks and duties pertaining to the processes within the their departments.

A

Other personnel

42
Q

The level of risk that the company can accept in pursuit of its objectives

A

Risk appetite

43
Q

Steps in Risk Management process

A
  1. Setting of Business objectives
  2. Identify the risks
  3. Assess the risks
  4. Respond to the assessed risks
  5. Implement the risk response
  6. Monitor the risk management process
44
Q

Kinds of business objectives:

A
  1. Strategic objectives
  2. Operational objectives
  3. Reporting objectives
  4. Compliance objectives
45
Q

High-level goals aligned with and support the organization’s mission and long-term vision

A

Strategic objectives

46
Q

Are goals that are related to the effective and efficient use of corporate resources

A

Operational resources

47
Q

Goals relating to the reliability and transparency of corporate resources

A

Reporting objetcives

48
Q

Goals relating to compliance and conformity with applicable laws and regulatory requirements.

A

Compliance objectives

49
Q

After setting the various objectives of the business, the risks or threats to the achievement of those objectives are identified.

A

Risk identification

50
Q

Produce a comprehensive listing of all risks affecting the company.

A

Risk matrix

51
Q

Two dimensions of risk

A
  1. Likelihood
  2. Impact
52
Q

The significance or magnitude of the negative effect of the risk to the company

53
Q

The probability that the event will occur

A

Likelihood

54
Q

Analyzing the risk in terms of “likelihood” and “impact is called…

A

Risk assessment

55
Q

Possible responses to assessed risks:

A
  1. Accept
  2. Reduce
  3. Share
  4. Avoid
56
Q

Tolerating or accepting the risk is permissible only if it is of minor effect to the business.

57
Q

Risks that are likely to happen or those that are expected to have a significant impact on the business cannot simply be accepted.

58
Q

Sharing or transfer the risks to some other entity such as an insurance company

59
Q

The right response when management thinks that mere reducing it is not enough

60
Q

Risk Management frameworks

A
  1. ISO 31000 Risk Management
  2. COSO (ERM)
61
Q

Who formulated ISO 31000 Risk Management?

A

International Organization for Standardization

62
Q

Provides a set of principles and guidelines for the design, implementation, and evaluation of the risk management process for companies across industries.

A

ISO 31000 Risk Management

63
Q

Steps under ISO 31000 Risk Management

A
  1. Identification of all risks that could prevent the company from achieving its business objectives
  2. Analysis of risks including an understanding of its causes and effects
  3. Determination of whether identified risks are tolerable or not
  4. Treatment of significant risks by way of mitigating procedures and thereby reducing the impact and the likelihood of the risk
  5. Monitoring the risk management strategy and implementation to determine gaps that should be addressed
  6. Communication of information pertaining to the risk management process of the company
64
Q

8 components of COSO Enterprise Risk Management

A
  1. Internal environment
  2. Objective setting
  3. Event identification
  4. Risk assessment
  5. Risk response
  6. Control activities
  7. Information and communication
  8. Monitoring
65
Q

This component reflects the company’s risk management philosophy, risk appetite, board oversight, commitment to ethical values and competence of the human resource, and the assignment of authority
and responsibility.

A

Internal environment

66
Q

component of enterprise
risk management that
deals with what the entity
seeks to achieve.
Objective setting is a
prerequisite to the
identification and
assessment of risks.

A

Objective setting

67
Q

component of risk
management whereby
management identifies
potential events, internal
or external, which may
affect the company’s
ability to achieve its
strategic, operational,
reporting and compliance
objectives.

A

Event identification

68
Q

evaluation of the
identified risks through
assessing their
“likelihood” and impact”
to the company.

A

Risk assessment

69
Q

component of enterprise
risk management that
deals with what management plans to do
with the assessed risks.
Responses could be to
accept, mitigate, share, or avoid the risk

A

Risk response

70
Q

these are specific risk
management policies and
procedures throughout
the organization, at all
levels and in all functions,
to ensure that risk
responses are properly executed.

A

Control Activities

71
Q

component of enterprise
risk management that
identifies, captures, and
communicates pertinent
information from internal
and external sources to
enable personnel in
carrying out their
responsibilities.

A

Information and Communication

72
Q

ongoing activities and
separate evaluations that
aim to assess both the
existence and effective
functioning of the risk
management
components and the
quality of their performance overtime.

A

Monitoring

73
Q

Types of Risk Assessments

A
  1. Assigning risk ratings
  2. Assessment of likelihood
  3. Assessment of Impact
  4. Risk Maps
  5. Combined Assessments and Risk Response
74
Q

pertains to the probability of the occurrence of an event.

A

Likelihood

75
Q

pertains to the magnitude, significance, or consequence of the event or risk to the
company.

76
Q

a visual representation of
assessed risks whereby significant and
insignificant risks are distinguished through
color-coding.

77
Q

risk maps can be interpreted as:

A
  1. Low likelihood / Low impact
  2. High likelihood / High impact
  3. High likelihood / Low and High impact / Low likelihood
78
Q

If low likelihood / Low impact

A

Accept the risk

79
Q

If high likelihood / high impact

A

mitigate
share
avoid

80
Q

if high likelihood / low impact and high impact / low likelihood

81
Q

2 ways monitoring is done

A
  1. ongoing monitoring activities
  2. separate evaluations

Governance Business Ethics, Risk Mgt., and Internal Control (1 decks)

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