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11. Monitoring and Reporting on Risk questions with answers.
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11. Monitoring and Reporting on Riskquestions with answers.
Helen is a member of ABC Insurance Company's board of directors. She chairs the audit committee and
is a member of the risk management committee. Helen ordered a review of company policies and
procedures to make sure ABC managers were complying with company guidelines. This review found
that one person could write checks for claims under $500 without a second person signing-off on the
payment. Although no losses occurred, the small claims payment procedure was modified so that a
second person had to approve issuance of the check. The review that Helen ordered is called:
A. A systemic risk review.
B. An internal audit.
C. A loss reserve certification.
D. A strategic risk review. ANS - B. An internal audit.
Which one of the following federal laws passed in 2002 requires CEO's and CFO's to certify the accuracy
of the corporation's quarterly and annual financial reports?
A. Sarbanes -Oxley Act
B. Employee Retirement Income Security Act
C. Securities Exchange Act
D. Graham Leach Bliley ANS - A. Sarbanes -Oxley Act
Which one of the following broad categories of risks that an organization's board of directors must
oversee includes risks that arise from trends in the economy or society?
A. Technological risks
B. Strategic risks
C. Operational risks
D. Financial risks ANS - B. Strategic risks
, The ultimate responsibility for an organization's risk management rests with the board of directors.
Which one of the following broad categories involves risks that arise from people, processes, systems, or
controls?
A. Strategic risk
B. Operational risk
C. Political risk
D. Financial risk ANS - B. Operational risk
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework list five
interrelated components of internal controls. Which one of the following components forms the basis
for carrying out all of the organization's other functions?
A. Risk assessment
B. Control environment
C. Information and communication
D. Control activities ANS - B. Control environment
When Cameron was named president and CEO of XYZ Insurance Company, he knew there were morale
issues with many employees. The previous president was a task master who had alienated many
employees. One of Cameron's first moves was starting the "Third Thursday of the Month Program." On
the third Thursday each month, lunch was provided to employees. All of the officers, including Cameron,
were available to meet with the employees to answer questions and discuss the company's values. At
some of the meetings, employees are given questionnaires to provide feedback to management. The
open forum with employees and eliciting feedback through questionnaires are examples of:
A. Financial leverage
B. Operating leverage
C. Soft controls
D. Hard controls ANS - C. Soft controls.
Internal controls at an organization may be hard controls or soft controls. Which one of the following is
an example of a hard control?
A. Process checklists
B. Attending voluntary skills update classes
C. 401-k pension plan enrollment
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