NewBEC Flashcards
Most effective external monitoring institution?
External auditors. Bc SEC depends on external auditors to monitor corporations
Chief audit executive should report to
CEO not CFO
Who is ultimately responsible for ERM?
CEO should take ownership
Determines disaster and evaluates effect
risk analysis. backup analysis, vendor analysis and contingent analysis are done to react to risk analysis
SOX requires to publish what type of info?
scope and capabilities of the internal control system and include procedures for financial reporting
Internal auditors assess organization’s risk by determining
- objectives support and align with mission,
- significant risks are identified and assessed,
- risk responses are selected align with appetite,
- information is captured and communicated
Difference b/w bylaws and articles of incorporation
articles of incorporation = state law and regulations, bylaws= how things are done in corporation involving BOD and officers
Change management
evaluates the design and implementation of changes and establishes new baseline.
Who will be entitle w/ reward for whistle blowing? BOD, external auditor, internal auditor or customer?
customer’s that discovers violation will be given a reward
risk appetite, residual risk and risk tolerance
maximum willing to accept, after response, acceptable variation
probabilistic analysis
part of risk assessment not event identification
Characteristics of efficient mkts hypothesis
investors are knowledgeable, capital mkt price reflects underlying value, acct change doesn’t influence stk price.
In regression analysis, coefficient measures
goodness of fit
ethics program consider what type of objective?
compliance objective
unit elastic demand change in price
no effect on total revenues
Code of ethics framework includes
4 rules of conduct: integrity, objective, confidentiality and competence for internal services by individuals and entities
Is decreasing the cash conversion time good news for organizations?
yes, increases profit and less need for financing
Difference b/w EVA and accounting profit
EVA= residual income after all cost of capital been deducted. accounting profit= income w/o deducting cost of capital
Calculation of reorder point (EOQ) includes
daily use, delivery time and stk out cost
Examples of carrying cost
cost incurred to cargar w/ asset. storage, insurance for loss, obsolescence, shrinkage
Examples of unsecured obligations
revolving credit, bank acceptance, lines of credit and commercial paper. credit lien, chattering mortgage and factoring are consider secured.
Fair value is best presented as
principal mkt, if none, then most advantageous
Payback period can also be use for
internal rate of return if cash flow is stable
use of a cost (asset-based) approach is appropriate when
- the company is in liquidation.
- the company’s value related to the assets held.
- the company has no income in recent years.
- future benefit cannot be predicted
Theory of constraints measurements
throughput, investment and operating cost in order to focus on quicker manufacturing process
Business process supported by
approaches, techniques and measures
strategic planning vs operating planning
strategic is high level focused on long goals vs operating in budget data
steering committee
establishes policy and direction for an organization’s information system. not involved in the actual design, development, and direction of projects
Methods of allocating joint costs
sales value at split off, physical measures and NRV. unlike flexible budget not used to allocate joint cost
using a flexible budget, if production level changes,
FC per unit decreases and VC remain the same
Commercial paper
generally doesn’t have 2ndary mkt
required rate of return includes what risks?
default risk, maturity risk, purchase power risk. does not use credit risk
How are exchange rates are determined?
based on demand and supply just like prices are determined
risk margin
extra cushion for unexpected risks
NPV assumes cash flow reinvested @ what rate?
discount rate not risk free
top-down risk assessment focus on
material accounts, higher levels first
IT steering committee should consist of
mgmt. controller and other personnel
sensitivity analysis
analysis to use alternatives w/ expected inputs and changes options b4 making decision. calculates change in the result due to a potential change in a project
collusive pricing and predatory pricing
collusive, to increase price to externals/ predatory, to lower price so others go out of business
electronic vaulting
electronically storing backups at a remote data facility
rule of thumb
formula that cannot be use as method of valuation but use to compare w/ other method for support of results
using a company-wide cost of capital will
over invest in high risk divisions and under invest in low risk divisions
taxes on NPV calculations effect
decreases both benefits and costs
measures of ROEquity and profit margin
on equity measures effectiveness and profit measures operating efficiency
byproduct is
output of a joint production process, no profit is recognized
Treynor index
two components of risk:
- Risk produced by fluctuations in the market
- Risk produced by fluctuations of the individual stock
Personal income
all income received by individuals whether earned or unearned before any personal income taxes
real options approach
deals with uncertainty
inflation affects which type of rate
historical rate are not influenced by the change in current price
just in time inventory model makes EOQ
irrelevant since no inventory is needed. flexibility is not considered w/ EOQ.
Multiple regression differs from simple regression in that
has more independent variables
major concern with LANs
users responsible for capturing and processing data
Magnetic ink character recognition
most often used by banks to read the magnetic ink on checks and deposit slips
mutual interdependence
outcome of pricing decisions in an oligopoly is dependent upon the reactions of organization’s rivals
levels of interdependence in integrated planning
Three levels: Pooled/Sequential/Reciprocal
Imputed costs are
implied costs; not known with certainty and must be estimated
strategic information system
allows management to make decisions
