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What is the primary objective of establishing internal controls within an organization?

  • To ensure compliance only with legal regulations
  • To create a complex system that deters audits
  • To eliminate all risks associated with management decisions
  • To provide reasonable assurance that objectives are achieved (correct)

    • What does continuous monitoring of internal controls entail according to management's responsibilities?

  • A one-time evaluation of control systems
  • Periodic assessments only once a year
  • Limiting reviews to financial controls only
  • Ongoing assessment and improvement of effectiveness (correct)

    • Which of the following best defines a control deficiency?

  • A critical error that must be reported to external stakeholders
  • Any instance of risk that requires immediate action
  • A minor flaw that does not impact operations
  • A situation where a control is not properly designed or implemented (correct)

    • What is a corrective action plan intended to achieve in the context of internal control deficiencies?

    <p>To outline a strategy for addressing identified risks</p> Signup and view all the answers

    How does Enterprise Risk Management (ERM) differ from traditional risk management practices?

    <p>ERM approaches risks as interconnected, rather than in isolation</p> Signup and view all the answers

    What documentation requirement must agencies fulfill as part of the internal control evaluation process?

    <p>Comprehensive records detailing the assessment of internal controls</p> Signup and view all the answers

    What is included in the guidance on annual assurance statements and reporting requirements?

    <p>The allowance for a single assurance statement under specific conditions</p> Signup and view all the answers

    Which aspect is not a consideration mentioned regarding internal controls?

    <p>Addressing marketing strategies</p> Signup and view all the answers

    What is a key benefit of establishing a culture of open and transparent communication within agencies regarding risk points?

    <p>It increases chances of developing a collaborative response.</p> Signup and view all the answers

    How does Enterprise Risk Management (ERM) relate to an organization's governance framework?

    <p>ERM and internal control are components of a governance framework.</p> Signup and view all the answers

    What is the primary focus when assessing risk in Enterprise Risk Management?

    <p>A broader portfolio view of all areas of risk exposure.</p> Signup and view all the answers

    Which of the following is NOT typically considered a critical aspect of Control Deficiencies?

    <p>Ensuring absolute risk elimination.</p> Signup and view all the answers

    What is a significant aspect of developing Corrective Action Plans?

    <p>Having clear measures for monitoring and follow-up.</p> Signup and view all the answers

    What is the primary purpose of integrating risk management with strategy within ERM?

    <p>To identify and mitigate risks affecting strategic goals</p> Signup and view all the answers

    Which of the following best defines inherent risks?

    <p>Risks that exist by nature of programs or activities and cannot be removed</p> Signup and view all the answers

    What is a key characteristic of a well-established ERM program?

    <p>It is systematic, structured, and responsive to change</p> Signup and view all the answers

    Which type of risk is primarily focused on human factors within an organization?

    <p>People risk</p> Signup and view all the answers

    How can organizations ensure that their ERM is responsive to changing risks?

    <p>By continuously monitoring and adapting to the evolving risk profile</p> Signup and view all the answers

    What role does leadership play in effective ERM implementation?

    <p>Leadership sets the tone at the top, promoting engagement in risk management.</p> Signup and view all the answers

    Which of the following statements best describes control risk?

    <p>It is related to ineffective internal processes and errors.</p> Signup and view all the answers

    What is a significant benefit of adopting ERM within an organization?

    <p>It helps identify opportunities and add value.</p> Signup and view all the answers

    Which characteristic describes the culture shift an organization may experience when implementing ERM?

    <p>Enhanced collaboration and proactive risk awareness</p> Signup and view all the answers

    What is primarily defined by OMB Circular A-11?

    <p>The development and execution of strategic plans</p> Signup and view all the answers

    The Federal Managers' Financial Integrity Act (FMFIA) of 1982 focuses on which key aspect of federal programs?

    <p>Enhancing accountability in federal government programs</p> Signup and view all the answers

    Which document provides guidance for federal managers on risk identification and internal controls?

    <p>OMB Circular A-123</p> Signup and view all the answers

    What is a key responsibility of federal leaders in terms of internal control?

    <p>Implementing practices to assess and report risks</p> Signup and view all the answers

    Which factors are recognized as risks that could impede an agency's goals and objectives?

    <p>Economic, operational, and organizational change factors</p> Signup and view all the answers

    The revision of OMB Circular A-123 in July 2016 incorporated guidance on which major topic?

    <p>Enterprise Risk Management (ERM)</p> Signup and view all the answers

    Which of the following is NOT a responsibility of federal leaders and managers?

    <p>Implementing corrective action plans selectively</p> Signup and view all the answers

    What is the purpose of performance reviews as established by OMB Circular A-11?

    <p>To assess the effectiveness of operational strategies</p> Signup and view all the answers

    The governance structure for federal accountability primarily derives from which sources?

    <p>Laws enacted by Congress and executive directives</p> Signup and view all the answers

    Which reporting type is essential for federal leaders to maintain compliance with laws and regulations?

    <p>Annual Performance Plans and Reports</p> Signup and view all the answers

    What is the primary purpose of developing a risk profile according to OMB Circular A-123?

    <p>To analyze the risks faced by an agency in achieving its strategic objectives</p> Signup and view all the answers

    Which phase of the ERM model involves making decisions about risk response options?

    <p>Respond to risks</p> Signup and view all the answers

    What is a key component in the initial risk identification phase of the ERM model?

    <p>Recognizing potential undesired outcomes and opportunities</p> Signup and view all the answers

    How often should continuous risk identification occur according to the ERM model?

    <p>Throughout the year, including surveillance of leading indicators</p> Signup and view all the answers

    What does OMB Circular A-123 require regarding audit reporting requirements?

    <p>Agencies must develop corrective action plans for identified deficiencies</p> Signup and view all the answers

    In the ERM model, which option best describes the purpose of the 'monitor and review' phase?

    <p>To evaluate and monitor performance of risk management strategies</p> Signup and view all the answers

    Which of the following is NOT one of the seven phases of the ERM model outlined in OMB Circular A-123?

    <p>Conduct financial audits</p> Signup and view all the answers

    What is involved in the 'develop alternatives' phase of the ERM model?

    <p>Assessing a range of risk response options guided by risk appetite</p> Signup and view all the answers

    What is meant by 'systematically' in the context of the ERM model?

    <p>Following a structured and organized approach</p> Signup and view all the answers

    What essential element must agencies consider while analyzing and evaluating risks in the ERM model?

    <p>The probability of the risk occurring and its potential outcomes</p> Signup and view all the answers

    Study Notes

    EDFMTC Module 1: Resource Management Environment

    • This module covers resource management within the Department of Defense (DoD).
    • Effective risk management and internal controls are crucial for success in the DoD.
    • The DoD has a framework for guidance on Enterprise Risk Management (ERM) and internal control.
    • Management's role in implementing ERM and internal control is a key focus.

    Management's Responsibility for Enterprise Risk Management and Internal Control

    • Effective risk management and internal controls are essential for any organization.
    • The DoD has established a framework to guide ERM and internal control implementation.
    • Key topics include identifying and assessing risks, designing and implementing internal controls, monitoring, and reporting on risks and controls, and addressing deficiencies.
    • Management plays a critical role in governing risks and internal controls within the DoD.
    • The module will cover the guidance and guidelines, that govern ERM and internal control implementation.

    Lesson 1: Overview of ERM and IC

    • The components of ERM, including risk identification, assessment, mitigation, and monitoring are covered
    • The characteristics of effective internal control, including control environment, risk assessment, control activities, information and communication, and monitoring activities are described.
    • OMB requirements for implementing ERM in federal agencies are explained.
    • The specific requirements and expectations of the DoD in managing risks and internal controls are outlined.

    Lesson 2: Internal Control Guidelines

    • Internal controls are a crucial aspect of organizational operations, ensuring resources are used effectively and objectives are achieved.
    • Internal controls are processes, procedures, and systems to safeguard assets, ensure accurate financial information, and comply regulatory requirements.

    Lesson 3: Relationship between ERM and Internal Control Guidance

    • Enterprise Risk Management (ERM) and internal control (IC) are components of a governance framework.
    • ERM involves a portfolio view of all potential risks, including financial, information technology, acquisitions, human capital, organizational performance, and reputation risk.
    • Internal controls are an integral part of ERM.
    • The FMFIA established the legal framework for internal control in the federal government.

    Lesson 1, 2, and 3: Additional Information and Resources

    • This section provides additional resources, such as circulars, instructions, and acts, for further development of knowledge, and to aid students in their understanding of the topics covered.
    • There are supplementary documents (OMB circulars, GAO standards, and other relevant acts) to further enhance learning about ERM and internal control management.

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    Related Documents

    EDFMTC Module 1 - Section 3 Extract - Participant Guide (PDF)

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