18 Questions
What is residual risk?
The level of risk that remains after management has taken action to mitigate the risk
Which two factors are considered when assessing residual risk?
Loss frequency or probability and loss severity
What does a Risk Map visually depict?
Relative risks based on their expected frequency and expected loss
What does 'Maximum probable loss' refer to?
The average loss over several years
Why should businesses reserve capital for unexpected loss?
To cover losses beyond what was budgeted for expected losses
What is the significance of the 'maximum possible loss'?
It is the largest loss that can occur under extreme circumstances
What is the main purpose of risk assessment in the COSO Model?
To manage risks efficiently
Which of the following is NOT a part of control activities in the COSO Model?
Capturing and exchanging information
How does the COSO Model suggest addressing risks to an organization's objectives?
Through ongoing monitoring activities
Which principle is NOT associated with Information and Communication under the COSO Model?
Exercising oversight of internal control performance
What is the role of the board of directors in internal control according to the COSO Model?
Independence from management
How does the COSO Model advocate for managing risks effectively?
By establishing appropriate authorities and responsibilities
What does inherent risk refer to in the context of a company?
The risk that occurs naturally in the company's activities
Which of the following best describes inherent risk?
Natural risk in company activities
When does inherent risk occur within a company?
Before management takes any action against the risk
Which statement best defines inherent risk?
Risk inherent in company processes before any action is taken by management
What characterizes inherent risk within a company?
It is the natural level of risk present before management interventions
Which factor contributes to inherent risk in a company?
The level of risk present before management actions
This quiz covers concepts related to risk management and residual risk in business. Topics include inherent risk, steps to address and mitigate risk, and factors used to assess residual risk. Test your knowledge on loss frequency, loss severity, and more.
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