ERM Accounting Exam Questions & Answers 2024/2025
Description of ERM - ANSWERSProcess, effected by an entity's board of directors, management, and other perssonel, applied in strategy settings and across the enterprise, designed to
- identify potential events that may affect the entity
- ass...
Description of ERM - ANSWERSProcess, effected by an entity's board of directors, management, and
other perssonel, applied in strategy settings and across the enterprise, designed to
- identify potential events that may affect the entity
- assess and manage risk
- provide reasonable assurance regarding the achievement of entity objectives within its risk appetite
Risk Management vs Performance Management - ANSWERSRisk Management Performance
Management
Who? Risk managers. Functional Managers and staff
Risk and Audit committees. Top management
Auditors
What? Risk indicators and metrics. Performance measures, KPI's
How? ERM System. Balanced scorecards
Budgets, targets, other controls
Components of the ERM Framework - ANSWERS- Establish Objectives
- Define control environments (external and internal)
- Identify events and assess risks
- Respond to risks and design control activities
- Communicate to inform
- Monitor
, 1. Objective Setting - ANSWERS- objectives must exist before management can identify potential events
affecting their achievement
- ERM ensures management has a process in place to set objectives and that the objectives support and
align with the entity's mission and are consistent with its risk appetite
2. Define Control Environment - ANSWERS- Encompasses the tone of an organisation
- Sets the basis for how risk is viewed and addressed by an entity's people
Includes:
- risk management philosophy and risk appetite
- objectives for risk management, scope and outcomes required
- identification of key stakeholders and their needs that by be affected by risk management
- criteria for measuring risks (probability, kinds of consequences)
3. Identify Events and Assess Risks - Identify Events - ANSWERSInternal and External events affecting
achievement of an entities objectives must be identified, distinguishing between risks and opportunities:
- risks - those events that would have a negative effect on organisational objectives
- opportunities - are channeled back to management's strategy or planning processes
3. Identify Events and Assess Risks - Types of Risks - ANSWERSDownside risks - mitigate
- have no positive benefit
- have only a downside or negative result associated with the risk
E.g. the risk of unauthorised access and theft
Upside risks - search for opportunities
- have possibly a positive payoff
E.g. risks associated with a business acquisition merger
3. Identify Events and Assess Risks - Assess Risks - ANSWERS- risks are analysed, considering likelihood
and impact, as a basis for determining how they should be managed
- risks are assessed on an inherent and residual basis
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