BEC - 8

Question 1

COSO ERM Model - Integrated Framework

Answer 1

Defines essential control components, suggest a common language, and provides direction and guidance for enterprise risk management

Question 2

COSO ERM Model requires what kind of view of risk?

Answer 2

Portfolio view of risk

Question 3

ERM Defined

Answer 3

A process:

• effected by BOD, mgmt, etc
• designed to ID potential events that may effect the entity
• manage risks to be within its risk appetite
• provide reasonable assurance wrt achievement of entity objectives

Question 4

Management’s role in ERM

Answer 4

• consider risk interrelations
• develop portfolio view from 2 perspectives:
  
  • Business unit level (major operations)
  • Entity (enterprise) level

Question 5

ERM Model

Answer 5

4 Objectives
4 Organizational Levels
8 Control Components

Question 6

8 Control Components of the ERM Model

Answer 6

Internal Environment
Objective Setting
Identifying Events
Risk Assessment
Risk Response
Control Activities
Information & Communication
Monitoring

Question 7

4 Levels of Activity

Answer 7

Entity (or enterprise)
Division or Subsidiary
Business Unit
Processes

Question 8

What is the inventory management objective?

Answer 8

Neither under invest nor over invest in inventory.

Question 9

Traditional Materials Requirement Planning System (MRP) is characterized by

Answer 9

Supply Push
Use of Inventory Buffers against unexpected demand
Production based on long set-up time and long runs
Impersonal relationships with suppliers
Quality standards allow for certain defects
Use job order and process cost approaches

Question 10

JIT System

Answer 10

Originated with Toyata

Based on obtaining and delivering inventory only when needed

Question 11

JIT System Characterized by

Answer 11

Demand Pull
Reduce inventory (or eliminate)
Production in work centers (or cells)
Close working relationships with a limited # of suppliers physically close to production facilities
Quality is critical throughout the system
Simplified cost accounting - fewer accounts, more items are considered direct cost, thus reducing allocations

Question 12

JIT Benefits

Answer 12

• Reduce investment in inventory
• Lower cost of inventory transportation, warehousing, insurance, etc.
• Reduce lead-time
• Less complex / more relevant accounting