Podcast
Questions and Answers
Which of the following is NOT a limitation of internal control?
Which of the following is NOT a limitation of internal control?
- Collusion
- Management Override
- Excessive documentation (correct)
- Cost-benefit analysis
What is the primary objective of risk management?
What is the primary objective of risk management?
- To avoid all human errors
- To predict financial losses accurately
- To eliminate all risks
- To provide reasonable assurance regarding the achievement of the organization's objectives (correct)
What does risk assessment primarily involve?
What does risk assessment primarily involve?
- Cost-benefit analysis of internal controls
- Identification, measurement, and analysis of relevant risks (correct)
- Implementation of strategies to avoid errors
- Management override of controls
Which of the following factors does NOT influence risk management?
Which of the following factors does NOT influence risk management?
What is a key aspect of risk identification in risk assessment?
What is a key aspect of risk identification in risk assessment?
What is the primary purpose of a Risk Portfolio 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?
Which of the following is a common internal constraint within an organization?
What does the Risk Matrix primarily help to record and analyze?
What does the Risk Matrix primarily help to record and analyze?
Which of the following actions might be determined after evaluating risks?
Which of the following actions might be determined after evaluating risks?
What does 'reasonable assurance' refer to in operational risk management?
What does 'reasonable assurance' refer to in operational risk management?
What skill is important for assessing likelihood of occurrence in risk assessment?
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 is a key component of effective risk assessment according to the content?
What does 'monitor' refer to in the context of operational risk management?
What does 'monitor' refer to in the context of operational risk management?
Study Notes
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
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Description
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.
