CPA Business Environment and Concepts (BEC) : ERM Framework
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #1 : Erm Framework
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:
Reduction
Acceptance
Sharing
Avoidance
Acceptance
Self-insurance or tolerating the full exposure to a risk is acceptance of that risk.
Example Question #2 : Erm Framework
Governance and culture is a component of COSO's ERM framework. It is supported by all of the following principles except:
Commitment to core values
Defines desired culture
Analyzes business context
Exercises board oversight
Analyzes business context
Analyzing a business context is the core principle of strategy and objective setting within the COSO ERM framework.
Example Question #3 : Erm Framework
The core values of an entity most closely relate to its:
Practices
Strategy
Culture
Capabilities
Culture
The word most closely related to "core values" will always be culture as "tone at the top" is to corporate governance.
Example Question #4 : Erm Framework
According to COSO's ERM framework, which of the following is an essential element of the governance and culture of an entity?
Commitment to core values
Strategy
Performance
Information, communication, and reporting
Commitment to core values
A commitment to core values is one of the principles underlying governance and culture.
Example Question #5 : Erm Framework
According to the COSO ERM framework, which of the following components would not belong to Review and Revision?
Review risk and performance
Pursue improvement in ERM
Assess substantial change
Evaluate alternative strategy
Evaluate alternative strategy
Evaluate alternative strategy is a component of Strategy and Objective Setting under the COSO ERM framework.
Example Question #6 : Erm Framework
An entity successfully launching a profitable new product line represents:
Value realization
Value creation
Value erosion
Value preservation
Value creation
Successfully launching a profitable new product is the best example of value creation.
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