ERM & COSO Framework Flashcards
7 cards from real CRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 ERM & COSO Framework flashcards as text
The COSO 2013 Internal Control framework requires that the five components and 17 principles be:
Answer: Present and functioning for an effective system of internal control
All five components and 17 principles must be present and functioning together for internal control to be deemed effective under COSO 2013.
In ERM, a 'black swan' event is best characterized as:
Answer: A rare, high-impact event largely outside the prediction of standard models
Black swan events are extreme outliers with severe consequences that conventional risk models typically fail to anticipate.
Which technique allows an ERM practitioner to assess how sensitive a risk outcome is to changes in individual input assumptions?
Answer: Sensitivity analysis
Sensitivity analysis varies one input at a time to measure its isolated effect on the output, revealing which assumptions most drive the result.
A board committee that provides oversight of the ERM program is typically called the:
Answer: Risk Committee or Audit and Risk Committee
Risk Committees (or combined Audit and Risk Committees) are the primary board-level bodies charged with ERM oversight.
Under COSO ERM 2017, 'Substantial Change' is a trigger for which component's activities?
Answer: Review and Revision
The Review and Revision component specifies that substantial changes in the business environment should prompt a reassessment of ERM practices.
Which of the following best describes 'emerging risk' in an ERM context?
Answer: A newly identified or evolving risk whose potential impact is not yet fully understood
Emerging risks are developing threats or opportunities on the horizon that organizations need to monitor before they become fully understood or realized.
An organization uses expected loss (EL) models to set loan loss provisions. Under ERM, which additional metric should be monitored to capture extreme downside scenarios beyond expected loss?
Answer: Economic capital or Value at Risk at a high confidence level
Economic capital or VaR at a high confidence level (e.g., 99.9%) captures tail risk beyond what expected loss models cover.