MAC3761/MAC3701/MAC2601/MAC260 2 - MANAGERIAL FINANCE 10TH ED

MAC3761/MAC3701/MAC2601/MAC260 2 - MANAGERIAL FINANCE 10TH ED compliance - answersadherence to policies, plans, procedures, laws, regulations, contracts of other requirements corporate governance - answersvalues/goals are established and communicated, accomplishment of goals are monitored, accountability is ensured, and values are preserved governance umbrella - answersboard of directors up top- they have strategic direction, governance oversight role of the Board in Governance - answersto identify the stakeholders of an organization, understand the needs and expectations of the stakeholders, identify the potential outcomes that would be unacceptable to key stakeholders different types of outcomes - answersfinancial, compliance, operations, strategic Risk appetite - answersAmount of risk the organization or function is willing to pursue or accept to attain its goals risk tolerance - answersThe degree of uncertainty that an investor can ACTUALLY handle in regard to a negative change in the value of his or her portfolio. risk owners - answersindividuals who have day to day responsibility for ensuring that risk management activities effectively manage risks within the organization's risk tolerance levels internal auditors role in governance - answersinternal audit activity muts assess and make appropriate recommendations on how to improve governance 3 lines of defense for the governing body - answers1st line: mgmt controls, internal control measures 2nd line: financial controller, risk mgmt, compliance, health and safety, environmental, quality assurance 3rd: internal auditor SOX Act 2002 Title 1 - answersestablishment of the PCAOB SOX Act 2002 Title III - answerscorporate responsibility- the public company audit committee is responsible for oversight of the work of a public accounting firm, audit committee members must be from the board and not accept money, financial reports are required to be signed by officers for accuracy of the financial statement SOX Act 2002 Title IV - answersenhanced disclosures: managements assessment of internal controls, code of ethics, requires somebody to be able to have expertise in the area to perform these duties Risk defined by COSO - answersthe possibility that an event will occur and adversely affect the achievement of an objective 4 categories of risk - answersstrategic, operational, financial reporting, compliance strategic risk - answersstrategy goals of the business failing operational risk - answersrisk that is related to the operations, manufacturing, inventory financial reporting risk - answersrisk that the financial reports are not reliable and accurate, reliability of the information compliance risk - answerslegal risk COSO ERM - answersapplied when setting an organization's strategy.... a process that is ongoing and flows throughout and organization 8 components of ERM - answersinternal environment, setting objectives, event identification, assessment of risk, risk response, activities, information and communications, monitoring 4 types of objectives - answersstrategic, operational, reporting, compliance objectives Roles of the board of directors for ERM - answersproviding oversight and direction to an organization's management. the board can play a role in strategic setting, formulating high level objectives, broad based resource allocation, and shaping the ethical environment role of management ERM - answersall activities regarding ERM. the CEO is ultimately responsible for the effectiveness and success of ERM 11 principles of ISO 31000 - answers• Creates and protects value. • Is an integral part of all organizational processes. • Is a part of decision making • Explicitly addresses uncertainty. • Is systematic, structured, and timely • Is based on the best available information. • Is tailored. • Takes human and cultural factors into account.0 ○ Health related issues, different country's cultures • Is transparent and inclusive. • Is dynamic, iterative, and responsive to change. • Facilitates continual improvement of the organization. Framework of ISO 31000 - answers1. Mandate and commitment from the board and senior management to ensure alignment with organizational objectives and commitment of sufficient resources to enable success 2. Design of framework for managing risk; which ensures that the foundation is set for effective risk mgmt process 3. implementing the risk mgmt framework and process - to help organization objectives 4. monitor the framework to determine its ongoing effectiveness 5. continually improving the framework to ensure sustainability process of ERM - answersestablish the context, assess the risks, treat the risks. monitor the risks, establish a communication and consulting process residual risk - answersthe risk that is left over after going through the the residual risk is higher than what the company can tolerate than there is an issue and as an internal auditor you need to inform the management that there is a problem core internal audit role - answersgive assurance on risk mgmt process, give assurance that risks are correctly evaluated, evaluate risk mgmt process, evaluate reporting of key risks, review the mgmt of key risks consulting role internal auditor in ERM - answersfacilitate identification and evaluation of risks, coach management in responding to risks, coordinate ERM activities, consolidate reporting on risks. maintain and develop erm framework roles the internal auditor SHOULD NOT take on - answerssetting risk appetite, setting risk tolerance, imposing risk mgmt processes, management assurance on risks, implementing risk responses on mgmt behalf, accountability for risk mgmt IPPF Framework Mandatory Guidance - answersdefintion, international standards, code of ethics IPPF Framework strongly recommended guidance - answersposition papers, practice advisories, practice guids position papers - answersassist a wide range of interested parties in understanding significant governance, risk, or control issues and delineating related roles and responsibilities of internal auditing. practice advisories - answerselaborate on certain issues, in between the papers and the guides. addresses the approach, methodology, and considerations but not detailed processes and procedures