Flashcards in Deck 1 Deck (20):
Principle of Obtain and Use information
Applied when the organization obtains or generates and uses relevant, high-quality information to support the functioning of the control
Matters affecting the achievement of financial reporting should be communicated with outside parties
The Treadway Commission (COSO) was established by
Private sponsoring organizations
Inherent risk vs. residual risk
Inherent: Risk to an entity in the absence of any actions taken by management; Residual: risk that remains after management responds to the risk
Risk appetite has generally been exceeded when
The likelihood and impact of negative events significantly exceeds residual risk
What supports the mission of an organization?
Strategic objectives that are implemented via various strategies and related objectives
Compliance objectives include
Adherence to the laws, rules, and regulations associated with operations
Four categories of ERM entity objectives
1) Strategic, 2) Operations, 3) Reporting, and 4) Compliance
Who provides ERM oversight?
Board of Directors
Who selects and removes corporate officers?
The board of directors
Definition of COSO framework
Issued to assist organizations in developing comprehensive assessments of internal control effectiveness
Three major objectives of the COSO framework and what is its main focus?
1) Operations; 2) Reporting; and 3) Compliance; Focus is on reporting objectives
Five components of internal control (CRIME)
Control environment, Risk Assessment, Information and Communication, Monitoring, Existing control activities
Ongoing and/or separate evaluations; communicating deficiencies
Is ERM or COSO broader in scope?
Enterprise Risk Management (ERM)
Components of Enterprise Risk Management (IS EAR AIM)
Internal Environment, Setting objectives, Event Identification, Assessment of Risk, Risk Response, Control activities, Info and communication, Monitoring
Definition of productivity
Measure of the ratio of outputs achieved to the inputs of production
Total Factor Productivity Ratio
Quantity of all output/costs of all inputs used
Partial Factor Productivity Ratio
Quantity of output produced relative to a specific quantity of inputs used