COSO and Risk Management Overview

Which of the following is NOT a limitation of internal control?

What is the primary objective of risk management?

What does risk assessment primarily involve?

Which of the following factors does NOT influence risk management?

What is a key aspect of risk identification in risk assessment?

What is the primary purpose of a Risk Portfolio in risk assessment?

Which of the following is a common internal constraint within an organization?

What does the Risk Matrix primarily help to record and analyze?

Which of the following actions might be determined after evaluating risks?

What does 'reasonable assurance' refer to in operational risk management?

What skill is important for assessing likelihood of occurrence in risk assessment?

What is a key component of effective risk assessment according to the content?

What does 'monitor' refer to in the context of operational risk management?

COSO

Established to research causes of fraudulent financial reporting

Limitations of Internal Control

Collusion
Management Override
Cost-benefit
Human Error: Mistakes, lapses in judgment, carelessness, distraction, fatigue

Risk

Possibility of an event occurring that will impact the achievement of objectives
Measured in terms of impact and likelihood

Risk Management

A process to identify, assess, manage, and control potential events or situations
Provides assurance regarding the achievement of organizational objectives

Risk Assessment Process

Identifies, measures, and analyzes risks
Systematic, iterative, and subject to quantitative and qualitative input

Risk Assessment Steps

Identification of Risks:
- Form of a list of potential risks
- Can come from existing lists
- Purpose: To find, recognize, and describe risks that help or prevent an organization from achieving objectives

Operational Risk Types

Accountable To
Report To/ Accountable To
Appoint & Monitor
Manages
Operates
Monitor
Provide Reasonable Assurance

Internal and External Constraints in Organizations

Equipment: Types and manner of usage
People: Lack of skilled and motivated workers
Policies: Written and unwritten policies

Measurement of Risks

Estimate the significance or impact
Assess the likelihood of occurrence
An exercise of judgment

Risk Portfolio

A list or inventory of risks

Risk Matrix

A tool to record and analyze objectives, risks, and controls in the program or process being audited
Used for risk-based audits
Layout varies by organizations

Evaluation of Risks

Determines where additional action is required
Leads to a decision to
- Do nothing further
- Consider risk treatment options
- Undertake further analysis to better understand the risk

This quiz explores the COSO framework established for understanding the causes of fraudulent financial reporting. It covers limitations of internal control, the risk management process, and the assessment of operational risks. Test your knowledge of risk identification, measurement, and analysis.