M2 Enterprise Risk Management Framework

Question 1

MCQ-06480
According to the Committee of Sponsoring Organizations (COSO) of the Treadway
Commission, which of the following components of enterprise risk management addresses
an entity’s commitment to core values?

Answer 1

Governance and Culture

Question 2

MCQ-06754
Able Corporation owns numerous businesses along the coast of Florida. The company’s
management has identified business interruption events as a potential risk resulting from
storm damage caused by hurricanes. The company elects to not only insure its properties
but to “buy down” standard deductibles with additional premium. Able’s response to
potential risks is known as:

Answer 2

Sharing

Question 3

MCQ-06253
The successful and profitable launch of a new product line by an entity represents:

Answer 3

Value CREATION

Question 4

MCQ-06254
A company’s ability to maintain market share with high customer satisfaction and sustained
profitability is an example of:

Answer 4

Value PRESERVATION

Question 5

MCQ-06256
Baker Corp. paid a dividend to its shareholders following the achievement of record
products. Dividend distributions represent:

Answer 5

Value REALIZATION

Question 6

MCQ-06255
Arbor Fashions launched a line of accessories to accompany its successful line of blouses
and slacks. The company’s accessory line was unsuccessful and was discontinued six
months after launch. The failure of Arbor’s new product line represents:

Answer 6

Value EROSION

Question 7

MCQ-06450
Which of the following is not a goal of an Enterprise Risk Management framework (ERM)?

Answer 7

Avoid adverse publicity and damage to the entity’s reputation.

Question 8

MCQ-06251
The core values of an entity most closely correlate with its:

Answer 8

Culture

Question 9

MCQ-06252
The mission and vision of an organization most closely correlate with an entity’s:

Answer 9

Strategy.

Question 10

MCQ-08361
The Enterprise Risk Management−Integrated Framework of the Committee of Sponsoring
Organizations (COSO) is best defined as:

Answer 10

The culture, capabilities, and practices, integrated with strategy-setting and performance, that organizations rely on to manage risk in creating, preserving, and realizing value.

Question 11

MCQ-12465
According to the COSO Enterprise Risk Management—Integrated Framework, uncertainty
in enterprise risk management refers to:

Answer 11

The state of not knowing how or if potential events may manifest.

Question 12

MCQ-06992
Each of the following is a limitation of enterprise risk management (ERM), except

Answer 12

ERM can provide ABSOLUTE ASSURANCE with respect to objective categories

Question 13

MCQ-06262
The ability of an entity to withstand the impact of large-scale events refers to:

Answer 13

ORGANIZATIONAL SUSTAINABILITY

Organizational sustainability is the ability of an entity to withstand
the impact of large-scale events.

Question 14

MCQ-09005
COSO’s enterprise risk management framework encompasses each of the following,
except:

Answer 14

Decreasing inherent risk appetite.

Question 15

MCQ-06263
Which of the following items is one of the five components of COSO’s Enterprise Risk
Management framework?

Answer 15

Performance

Question 16

MCQ-06490
The Enterprise Risk Management Integrated Framework states that an organization must
identify events, both positive and negative, as part of its risk management program. Which
of the following is true with regard to events?

Answer 16

Event identification occurs AFTER the development of objectives

Question 17

MCQ-06257
The governance and culture component of COSO’s Enterprise Risk Management
framework is supported by all of the following principles except:

Answer 17

Analyzes business context.

Question 18

MCQ-06259
As an organization commits to attracting, developing, and retaining capable individuals, it is
supporting which of the following component of COSO’s Enterprise Risk Management
framework?

Answer 18

Governance and culture

Question 19

MCQ-05002
According to COSO, which of the following identifies the group directly responsible for the
implementation and developMENT of the enterprise risk management framework?

Answer 19

Management

Question 20

MCQ-04308
According to COSO’s Enterprise Risk Management Framework, which of the following is
an essential element of the governance and culture?

Answer 20

Commitment to core values

Question 21

MCQ-04309
An internal auditor is considering a client’s organizational structure as it affects the
ethical climate established by company management. Each of the following considerations
is valid in this regard, except:

Answer 21

A company that is highly centralized will have a more diverse ethical culture than
a company that is decentralized.

Question 22

MCQ-06258
As an organization defines its risk APPETITE, it is supporting which of the following
components of COSO’s Enterprise Risk Management framework?

Answer 22

Strategy and objective-SETTING

Question 23

MCQ-06770
The Daphne Corporation evaluates employees with responsibilities for financial reporting
for fulfillment of those responsibilities for compensation and PROMOTION PURPOSES. The
company’s policies support the idea that:

Answer 23

HUMAN RESOURCES practices should be designed to facilitate effective internal
control over financial reporting.

Question 24

MCQ-06261
The strategy and objective-setting component of COSO’s Enterprise Risk Management
framework is supported by which of the following principles?

Answer 24

Analyzes BUSINESS CONTEXT

Question 25

MCQ-06149
Generally, an organization will not operate beyond the limits of its risk appetite. Risk
appetite has generally been exceeded when:

Answer 25

The likelihood and impact of negative events SIGNIFICANTLY EXCEED residual risks

Question 26

MCQ-06260
The performance component of COSO’s Enterprise Risk Management framework is
supported by which of the following principles?

Answer 26

Identifies risks

Question 27

MCQ-15782
A company’s performance guidelines sets a lower limit of 3 percent unfavorable material
usage variance for its production facility. In applying the COSO Enterprise Risk
Management framework, which of the following principles most closely aligns with the
establishment of this performance guideline?

Answer 27

Formulating business objectives.

Question 28

MCQ-14817
When risk is evaluated, which of the following risk responses is generally considered a
sharing response?

Answer 28

Entering into syndication agreements.

Question 29

MCQ-04328
According to COSO, the difference between inherent risk and residual risk arises because
of management’s:

Answer 29

Actions to reduce the INHERENT risk

Question 30

MCQ-06993
A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so
it decided to relocate its production facilities. According to COSO, this decision represents
which of the following responses to the risk?

Answer 30

Risk REDUCTION

Question 31

MCQ-06753
Able Corporation owns numerous businesses along the coast of Florida. The company’s
management has identified business interruption events as a potential risk resulting from
storm damage caused by hurricanes. Management is so fearful of the possibility of storm
damage that it elects to divest the company of virtually all properties on the Florida coast.
Able’s response to potential risks is known as:

Answer 31

AVOIDance.

Question 32

MCQ-06755
Able Corporation owns numerous businesses along the coast of Florida. The company’s
management has identified business interruption events as a potential risk resulting from
storm damage caused by hurricanes. The company elects to balance its portfolio of risk
with property investments on the coasts of other states and in Florida’s interior. Able’s
response to potential risks is known as:

Answer 32

Reduction

Question 33

MCQ-06756
Beta Corporation owns numerous businesses in California. The company’s management
has identified business interruption events as a potential risk resulting from damage caused
by earthquakes. The company elects to treat the potential damage from earthquakes as
part of its business model. Beta’s response to potential risks is known as:

Answer 33

ACCEPTance.

Question 34

MCQ-15752
Company management completes event identification and analyzes the associated risks.
The company wishes to assess its risk in the absence of any actions management might
take to alter either the risk’s likelihood or impact. According to COSO, which of the following
types of risk does this situation represent?

Answer 34

Inherent risk

Question 35

MCQ-08342
Company management completes event identification and analyzes the risks. The company
wishes to assess its risk after management’s response to the risk. According to COSO,
which of the following types of risk does this situation represent?

Answer 35

Residual risk

Question 36

MCQ-12447
According to the COSO Enterprise Risk Management—Integrated Framework, each of the
following is considered by management as part of a risk assessment, except:

Answer 36

UNKNOWN risk.

Question 37

MCQ-12462
A manufacturer actively monitors a foreign country’s political events whenever a supply
chain disruption occurs within the country that exceeds 90 days. According to the COSO
Enterprise Risk Management principles, the manufacturer is following which of the following
risk-response strategies?

Answer 37

ACCEPT

Question 38

MCQ-08362
According to COSO, the position or internal entity that is best suited, as part of the
enterprise risk management process, to devise and execute risk procedures for a particular
department is:

Answer 38

A MANAGER within the department.

Question 39

MCQ-04307
The internal auditor who works in enterprise risk management (ERM) performs each of
the following activities, except:

Answer 39

Setting the risk appetite of the organization.