Module 2 (Ch 2-3) Flashcards
Because wiring from suppliers does not meet specifications, it will be necessary to return the wiring to the suppliers for a refund. Business process and business function?
Purchases and Payments; Purchasing
Because working conditions for employees in the factory are not safe, there may be legal consequences like compensation for lost wages, medical bills, and production delays in the event of accidents. Business process and business function?
Conversion; Production Operations
Because of sales staff members lacking knowledge about the features and benefits of a new service the company is selling, prospective customers are confused and don’t subscribe to the service, resulting in decreased sales revenues. Business process and business function?
Sales and Collections; Sales
Because of poor strategic planning, the business may not meet its earnings forecasts and may therefore suffer financial losses, reputational loss, and a decrease in its stock price. Business process and business function?
Impacts all Business Processes; Board of Directors / All Functional Areas
If product reliability test failures exceed 5%, the resulting schedule delay to fix failures would exceed two weeks, causing increased cost and customer dissatisfaction.
Production operations
Poor short-term financial forecasts may result in cash flow issues, negatively impacting the company’s credit rating and its ability to borrow at a reasonable cost.
Purchases and Payments; Treasury Management
Customer data theft caused by defective system changes could result in significant financial fraud losses due to fines, loss of customers, and regulatory sanctions.
Purchases and Payments; Information Technology
Returns by customers in a superstore are at risk of being diverted, with the returned goods never reaching the warehouse, resulting in inventory shrinkage.
Sales and Collections; Customer Service
Because of inadequate background checks, an employee with a criminal background may be hired, with the potential for losses from fraud or theft in the workplace.
Purchases and Payments; Human Resources
Because of inadequate timekeeping, employees could be paid for time not worked, resulting in fictitious costs and reduced profits.
Purchases and Payments; Payroll
IIA’s Three Lines Model: A=
Board of Directors
IIA’s Three Lines Model: C=
Managing Risk, First Line of Defense, Provision of products & services to clients
IIA’s Three Lines Model: B=
Management
IIA’s Three Lines Model: D=
Second Line of Defense, expertise, monitoring, challenging on risk-related matters
IIA’s Three Lines Model: E=
Internal audit, independent assurance
IIA’s Three Lines Model: F=
Third Line of Defense, independent/objective advice, all matters related to achievement of objectives
IIA’s Three Lines Model: G=
External Assurance Providers
Statement that summarizes a potential problem that needs to be addressed
Risk Statement
Organization committed to fighting corporate fraud. Five private organizations
COSO: AAA, AICPA, FEI, IMA, IIA
What does COSO stand for?
Committee of Sponsoring Organizations of the Treadway Commission
What does SOX protect against?
Protects investors from fraud by improving reliability and accuracy of financial statements.
End-user software
Application
ERM
Enterprise Risk Management: Process of identifying, categorizing, prioritizing, and responding to risks.
A view of risk that considers risk at granular level
Profile View
Estimation of damage that could be caused if risk occurs.
Impact
Independent function in a company that rests internal controls to provide assurance of their effectiveness to executive management and board of directors.
Internal Audit
