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CIA Part 1 SU3 Governance, Risk Management, and Control quizzes & answers.
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CIA Part 1 SU3 Governance, Risk Management, and Control quizzes & answers.
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CIA Part 1 SU3 Governance, RiskManagement, and Control quizzes &
answers.
Success Tip ANS -The roles of the board, senior management, and internal auditors in organizational
governance are frequently tested on the exam. A sound understanding of their unique roles in
organizational governance will increase your success on the exam.
Governance is defined as ANS -"[t]he combination of processes and structures implemented by the
board to inform, direct, manage, and monitor the activities of the organization toward the achievement
of its objectives."
Stakeholders are ANS -persons or entities who are affected by the activities of the entity. Among others,
these include shareholders, employees, suppliers, customers, neighbors of the entity's facilities, and
government regulators.
Governance has two major components: ANS -strategic direction and oversight
Strategic direction determines ANS -The business model,
Overall objectives,
The approach to risk taking (including the risk appetite), and
The limits of organizational conduct.
Oversight is ANS -the governance component with which internal auditing is most concerned. It is also
the component to which risk management and control activities are most likely to be applied. The
elements of oversight are
a. Risk management activities performed by senior management and risk owners and
b. Internal and external assurance activities.
, Who has ultimate responsibility for oversight. ANS -The board. the board is the source of overall
direction to, and the authority of, management.
The board's duties include: ANS -a. Selection and removal of officers
b. Decisions about capital structure (mix of debt and equity, consideration to be received for shares,
etc.)
c. Adding, amending, or repealing bylaws (unless this authority is reserved to the shareholders)
d. Initiation of fundamental changes (mergers, acquisitions, etc.)
e. Decisions to declare and distribute dividends
f. Setting of management compensation (sometimes performed by a subcommittee called the
compensation committee)
g. Coordinating audit activities (most often performed by a subcommittee called the audit committee)
h. Evaluating and managing risk (sometimes performed by a subcommittee called the risk committee)
A risk committee may be created that ANS -a. Identifies key risks,
b. Connects them to risk management processes,
c. Delegates them to risk owners, and
d. Considers whether tolerance levels delegated to risk owners are consistent with the organization's
risk appetite.
Management performs ANS -day-to-day governance functions. Senior management carries out board
directives (within specified tolerances for unacceptable outcomes) to achieve objectives.
Senior management determines ANS -a. Where specific risks are to be managed,
b. Who will be risk owners (managers responsible for specific day-to-day risks), and
c. How specific risks will be managed.
Senior management establishes ANS -reporting requirements for risk owners related to their risk
management activities.
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