Question Two Risk in the widest sense is not new to business. All companies are exposed to traditional business risks: eamings go up and down as a result of such things as changes in the business environment, in the nature of competition, in production technologies, and in factors affecting suppliers. The issue of risk has captured considerable attention from corporate management in recent years, as financial risk management has become a critical corporate activity. Regulators have also responded with new legislation, regulations, and practices that seek to improve corporate govemance standards. Required: Some in the academic world contend that corporate risk management is a zero-sum game. Discuss.
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- Risk assessment is carried out by the organization to identify, analyze and manage relevant risks. Following are circumstances that can cause or change the risk, except: a. New personal who have a different or inadequate understanding of internal control.b. The board of directors establish a code of ethical standards.c. Significant and rapid growth that strains existing internal controls.d. Entering into foreign markets that may impact operations. Explain the answer in 100-150 wordsRisk in the widest sense is not new to business. All companies are exposed to traditional business risks: earnings go up and down as a result of such things as changes in the business environment, in the nature of competition, in production technologies, and in factors affecting suppliers. The issue of risk has captured considerable attention from corporate management in recent years, as financial risk management has become a critical corporate activity. Regulators have also responded with new legislation, regulations, and practices that seek to improve corporate governance standards. Required: ‘Risk management is not about elimination of risk’, Discuss.4 Jamie is an auditor. While preparing to audit his client, FoodCourt, he finds a weakness in the company's internal control that might suggest that the company has a higher than normal risk, and revenue may have been recorded in the wrong period. Given this weakness, what information should be communicated to management? 5 What is the relationship between the internal control system and risk management with corporate governance? How can the internal control system enhance a company s corporate governance?
- The SEC is trying to get companies to notify the investment community more quickly when a "material change" will affect their forthcoming financial results. In what sense might a financial manager be seen as "more ethical" if he or she follows this directive and issues a press release indicating that sales will not be as high as previously anticipated? A manager at a "Check Into Cash" business (see Focus on Ethics box on page 192) defends his business practice as simply "charging what the market will bear." "After all," says the manager, "we don't force people to come in the door." How would you respond to this ethical defense of the payday-advance business? Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and nonquantitative factors best predict bond defaults. Furthermore, some of the raters invest time and money to meet privately with corporate personnel to get nonpublic information that is used in assigning the issue's bond…The SEC is trying to get companies to notify the investment community more quickly when a "material change" will affect their forthcoming financial results. In what sense might a financial manager be seen as "more ethical" if he or she follows this directive and issues a press release indicating that sales will not be as high as previously anticipated?Companies of all sizes try to reduce business risks, create disaster recovery plans, and also purchase insurance for what they cannot completely control. Therefore, the business risk is the risk that: Select one: a.The auditor will give an inappropriate auditor’s opinion when the financial report is materially misstated b.The entity’s business objectives will not be attained due to the external and internal environment affecting the entity and the industry in which it operates. c. An error will occur given the environmental characteristics of the account balance. d.The auditor will be exposed to loss to their professional practice from litigation or adverse publicity arising in connection with an audit.
- With respect to changes in IT auditing today, which of the following is NOT true? a. IT governance, which ties IT to organizational strategy, is increasingly important b. the Sarbanes-Oxley Act of 2002 created an increase in demand for both IT auditors and internal auditors c. IT auditors are concerned only with supporting financial auditors and should not investigate fraud cases d. Third-party assurance seals may provide some comfort to e-business customers regarding the security of online transactionsWhat has been the main thrust of recent changes in the financial reporting rules following the financial scandals of Enron, Worldcom, etc.? Multiple Choice To improve internal control over companies' financial reporting. To add to the work of the companies' external accountants. To force the companies to disclose more of their internal information. To provide incentives to increase their net income. < Prev 27 of 50 NextRisk management is concerned with understanding and managing the risks that an organization faces in its attempt to achieve its objectives. These risks will often represent threats to the organization – such as the risk of heavy losses or even bankruptcy. Risk management has traditionally associated itself with managing the risks of events that would damage the organization.Organizations face many different types of risks including financial risk, financial risks relate to the financial operation of a business– in essence, the risk of financial loss (and in some cases, financial gain) – and take many different forms. These include currency risks, interest rate risks, credit risks, liquidity risks, cash flow risk, and financing risks. The importance of these risks will vary from one organization to another. A firm that operates internationally will be more exposed to currency risks than a firm that operates only domestically; a bank will typically be more exposed to credit risks than…
- Risk management is concerned with understanding and managing the risks that an organization faces in its attempt to achieve its objectives. These risks will often represent threats to the organization – such as the risk of heavy losses or even bankruptcy. Risk management has traditionally associated itself with managing the risks of events that would damage the organization.Organizations face many different types of risks including financial risk, financial risks relate to the financial operation of a business– in essence, the risk of financial loss (and in some cases, financial gain) – and take many different forms.These include currency risks, interest rate risks, credit risks, liquidity risks, cash flow risk, and financing risks. The importance of these risks will vary from one organization to another. A firm that operates internationally will be more exposed to currency risks than a firm that operates only domestically; a bank will typically be more exposed to credit risks than…Since risks, such as credit, liquidity, default, technological, and legal risks, among others, may affect the financial operations of the business or organizations. Laws are created to enfore financial regulations. In financial markets, these laws, rules and regulations control the following drivers: competitiveness, market behavior, consistency and stability. Market Behavior. Financial Regulation sets the parameters to ensure that firms will comply with the standards and level the playing field. The policies were set to regulate the information disclosure, advantage over intemal information, entry of new players, minimum capital requirement and minimum govemance requirements. QUESTION: Explain further what "market behavior" means. How do laws control market behavior in financial markets? Explain. Then identify the risks that arise from it..Identify some of the corporate scandals that took place in the recent past worldwide and discuss to what extent you think the scandals are a result of ineffective corporate governance.