CPA Business Environment and Concepts (BEC) : ERM Framework

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Example Questions

Example Question #2 : Cpa Business Environment And Concepts (Bec)

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:

Possible Answers:

Reduction

Avoidance

Acceptance

Sharing

Correct answer:

Acceptance

Explanation:

Self-insurance or tolerating the full exposure to a risk is acceptance of that risk.

Example Question #6 : Cpa Business Environment And Concepts (Bec)

Governance and culture is a component of COSO's ERM framework. It is supported by all of the following principles except:

Possible Answers:

Exercises board oversight

Analyzes business context

Defines desired culture

Commitment to core values

Correct answer:

Analyzes business context

Explanation:

Analyzing a business context is the core principle of strategy and objective setting within the COSO ERM framework.

Example Question #7 : Cpa Business Environment And Concepts (Bec)

The core values of an entity most closely relate to its:

Possible Answers:

Capabilities

Strategy

Culture

Practices

Correct answer:

Culture

Explanation:

The word most closely related to "core values" will always be culture as "tone at the top" is to corporate governance.

Example Question #1 : Erm Framework

According to COSO's ERM framework, which of the following is an essential element of the governance and culture of an entity?

Possible Answers:

Information, communication, and reporting

Strategy

Performance

Commitment to core values

Correct answer:

Commitment to core values

Explanation:

A commitment to core values is one of the principles underlying governance and culture.

Example Question #11 : Corporate Governance

According to the COSO ERM framework, which of the following components would not belong to Review and Revision?

Possible Answers:

Assess substantial change

Review risk and performance

Evaluate alternative strategy

Pursue improvement in ERM

Correct answer:

Evaluate alternative strategy

Explanation:

Evaluate alternative strategy is a component of Strategy and Objective Setting under the COSO ERM framework.

Example Question #2 : Erm Framework

An entity successfully launching a profitable new product line represents:

Possible Answers:

Value preservation

Value erosion

Value creation

Value realization

Correct answer:

Value creation

Explanation:

Successfully launching a profitable new product is the best example of value creation.

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