ERM Framework
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CPA Auditing and Attestation (AUD) › ERM Framework
An entity successfully launching a profitable new product line represents:
Value erosion
Value creation
Value preservation
Value realization
Explanation
Successfully launching a profitable new product is the best example of value creation.
A company owns and operates multiple businesses in the Caribbean. Management has identified interruptions in normal operations as a potential risk resulting from storm damage caused by hurricanes. Recognizing this, the company decides to treat the potential damage as part of its business model. The company's response to this potential risk is known as:
Sharing
Avoidance
Reduction
Acceptance
Explanation
Self-insurance or tolerating the full exposure to a risk is acceptance of that risk.
Governance and culture is a component of COSO's ERM framework. It is supported by all of the following principles except:
Analyzes business context
Defines desired culture
Exercises board oversight
Commitment to core values
Explanation
Analyzing a business context is the core principle of strategy and objective setting within the COSO ERM framework.
The core values of an entity most closely relate to its:
Practices
Capabilities
Strategy
Culture
Explanation
The word most closely related to "core values" will always be culture as "tone at the top" is to corporate governance.
According to COSO's ERM framework, which of the following is an essential element of the governance and culture of an entity?
Information, communication, and reporting
Performance
Strategy
Commitment to core values
Explanation
A commitment to core values is one of the principles underlying governance and culture.
According to the COSO ERM framework, which of the following components would not belong to Review and Revision?
Assess substantial change
Evaluate alternative strategy
Pursue improvement in ERM
Review risk and performance
Explanation
Evaluate alternative strategy is a component of Strategy and Objective Setting under the COSO ERM framework.