Chapter 01 - Internal Control FW

Question 1

What is IC - 3 objective

Answer 1

designed and implemented by an organization BOD and other employees to provide reasonable assurance that the organization will achieve
1. Operation
2. Reporting
3. Compliance

Question 2

Five Internal Control Componets

Answer 2

C - Control Environment
R- Risk Assessment
I - Information and Communication
M - Monitoring Activities
E - Control Activities

Question 3

Control Environment

Answer 3

Processes, structures, standards, foundations. tone at the top
1. Commitment to Ethics and integrity
2. Board Independence and oversight
3. Organizational structure
4. Commitment to Competence
5. Accountability

Question 4

Risk Assessment

Answer 4

1. Specify Objectives - identify and asses risk
2. Identify and Analyze Risk - how the risks should be managed
3. Consider Potential for Fraud - pressures - opportunities, attitude, realization
4. Identify an assess changes: assessing changes in external environment, business model and leadership

Question 5

Information and Communication

Answer 5

Obtain and use information
Internally Communicate Information - the organization communicates information necessary to support IC objectives and responsibilities.
External Communication

Question 6

Monitoring Activites

Answer 6

Ongoing and Or separate evaluation - whether the components of internal control are present and functioning
Communicate defiencies.

Question 7

Control ( Existing) Activities

Answer 7

Entities policy and procedures, to mitigate risk
1. Develop Control Activities - mitigation of risk
2. Technology Control - technology to support achievement and objective
3.Policy and Procedures - put policy into action

Question 8

Internal Control Limitations

Answer 8

does not prevent bad decision or eliminate all external events that may prevent the achievement of the entitys operational goal.

human failure
faulty or biased judgement
external events
collusion
management over ride

Question 9

ERM

Answer 9

Governance and Culture
Strategy and Objective
Performance
Review and Revision
Information and Communication and Rerporting

Question 10

Governance and Culture

Answer 10

D - Desire Culture
O - Board Oversight
V - Value - tone at top
E - Employee - attracts develops retains
S - Establishes operating structure

Question 11

Strategy and Objective

Answer 11

S - Alternative strategy - more equity less debt
O - Business Objective - why do we exist - business mission
A - Analyze Business Context -
R - Define Risk Appetite - Goal based how critical - ranges

Question 12

Performance

Answer 12

V - Portfolio view
A- Assessment of severity of risk
P- Prioritize Risk
I - Identify risk events.
R - Implement risk response

Question 13

Review revision

Answer 13

S- Substantial change
I - Improvement in ERM
R - Review risk and performance

Question 14

Information and Communication and Reporting

Answer 14

T - Leverage information and technology
I - Communicate risk information
P - Report on risk, culture and performance

Question 15

Risk Assessment - Inherent - VAPIR

Answer 15

in the absence of any direct or focused action by management to alter severity

Question 16

Risk Assessment - Target Residual - VAPIR

Answer 16

Entity prefers to assume in the pursuit of it strategy implemented or has implemented

Question 17

Actual Residual Risk - VAPIR

Answer 17

after management has taken action

Question 18

Implement Risk Response - Accept

Answer 18

No action

Question 19

Implement risk - Avoid

Answer 19

leaving line of business

Question 20

Pursue

Answer 20

management understands the nature and extent of any changes

Question 21

Reduce

Answer 21

action to reduce the risk - hedge

Question 22

SHare

Answer 22

Transfer - buy insurance

Question 23

Qualifications as financial expert is judgement issue is typically made by ?

Answer 23

BOD