Why is Enterprise Risk Management so important for firms?
What will be an ideal response?
There has been a clear breakdown in corporate governance and ERM provides a solution by examining all risks in the firm collectively and by elevating the analyses to the highest level in the corporation. This way the people in the corporate boardroom can no longer escape responsibility.
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Which of the following is not one of the underlying principles of an effective control environment as developed by COSO?
a. The organization demonstrates a commitment to integrity and ethical values. b. The board of directors demonstrates independence from management and exercises oversight for the development and performance of internal control. c. Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities in pursuit of objectives. d. The organization considers the potential for fraud in assessing risks to the achievement of objectives.
How would David McClelland likely differ from Paul Lawrence in assessing an employee who seems extremely driven to seek promotions and control the work of others?
a. McClelland would say there is simply a high need for power instead of an imbalance of needs. b. McClelland would say the employee had achieved all needs in the hierarchy instead of a healthy balance. c. McClelland would say the employee needs more emphasis on social needs instead of the drive to learn. d. McClelland would say the employee has a strong drive to learn instead of a strong need for power.
A principal is bound by contracts that an agent enters into with authority. Discuss the various types of contractual authority an agent may have
Cheryl owns 200 shares of Cornerstone Corporation common stock which has an adjusted basis of $60,000 and a fair market value of $75,000. John owns 200 shares of Cable Corporation with a $75,000 fair market value.
a. If Cheryl and John exchange their stock, what is the amount of Cheryl's realized gain? b. If Cheryl and John exchange their stock, what is the amount of Cheryl's recognized gain?