CHAPTER 11 1.

Risk Management
1. Is the process of measuring or assessing 2. Risk Management
risk and developing strategies to 3. International Organization of
manage it. Standardization
2. Is a systematic approach in identifying, 4. Create value.
analyzing and controlling areas or Address uncertainty and assumption.
events with a potential for causing Be an integral part of the organizational
unwanted change. processes and decision -making.
3. As defined in the _ risk management is Be dynamic, iterative, transparent,
the identification, assessment, and tailorable, and responsive to change.
prioritization of risks. Be systematic, structured and
4. 6 basic principles of risk management continually or periodically reassessed.
identified by ISO. Create capability of continual
5. Process of Risk Management. improvement and enhancement
6. 5 Common risk identification methods. considering the best available
7. 5 Elements of risk management. information and human factors.
8. 3 relevant risk terminologies. 5. Establishing the Context.
9. 4 Risks associated with Manufacturing, Identification of potential risks.
Trading and Service Concerns. Risk Assessment.
6. Objective-based risk
Scenario-based risk
Taxanomy-based risk
Common-risk checking
Risk charting
7. Identification, characterization, and
assessment of threats.
Assessment of the vulnerability of
critical assets to specific threats.
Determination of the risk.
Identification of ways to reduce those
risks.
Prioritization of risk reduction measures
based on a strategy.
8. Risks associated with Investments.
Risk associated with Manufacturing,
Trading and Service Concerns.
Risk Associated with Financial
Institutions.
9. Financial risk
Operation Risk
Market risk
Business risk
10. 7 Risks associated with Investments. 10. Business risk
11. 2 risks associated with Financial Financial risk
Institutions. Liquidity risk
12. Is related to the probability that some or Default risk
all of the initial investment will not be Interest rate risk
returned. Management risk
13. Cause bond prices to decline and Purchasing power risk
declining interest cause bond prices to 11. Financial
rise. Non-financial
14. Refers to the uncertainty about the rate 12. Default risk
of return caused by the nature of 13. Interest rate risk
business. 14. Business risk
15. Is associated with the uncertainty 15. Liquidity risk
created by the inability to sell the 16. Purchasing power risk
investment quickly for cash. 17. Management risk
16. The risk that the real rate of return will be 18. Liquidity risk
lesser than the nominal or stated rate of Market risk
return due to inflation. Credit risk
17. Decisions made by a firm’s Derivative risk
management and BOD materially affect Financial reporting risk
the risk faced by investors. 19. Leadership Risk
18. Enumerate at least 5 financial risks Environment Risk
associated with Financial Institutions. Regulatory Risk
19. 5 non-financial risk associated with Operational Risk
financial institutions. Integrity Risk
20. 4 Potential Risk Treatments 20. Risk avoidance
21. Involves reducing the severity of the loss Risk reduction
or the likelihood of the loss from Risk sharing
occurring. Risk retentio
22. Involves accepting the loss or benefit of 21. Risk reduction
gain from a risk when it occurs. 22. Risk retention
23. It means losing out on the potential gain 23. Risk avoidance
that accepting the risk may have 24. Risk sharing
allowed. 25. Basel II
24. Means sharing with another party the
burden of loss or the benefit of gain,
from a risk, and the measures to reduce
a risk.
25. The_ framework breaks risks into
market risk, credit risk, and
operational risk.
26. 5 Areas of risk management. 26. Enterprise risk management
27. Risk management process (simplified Risk management activities as applied
framework). to project management.
Risk management for megaprojects.
Risk management of information
technology.
Risk management techniques in
petroleum and natural gas.
27. Assess risks.
Develop/Design action plans.
Implement action plans.
Monitor and report risk management
performance.
Continuously improve risk
management capabilities.
CHAPTER 12 28. Understand the nature of risk.
28. Practical guidelines in reducing and Identify and prioritize risks.
Managing risk. Consider the acceptable level of risk.
29. Enumerate at least 5 risks under the typical Understand why risks become reality.
areas of organizational risk. Apply a simple risk management process.
30. 5 most significant types of risk catalyst. 29.
31. 3 Stages of managing the enterprise-wide
risk.
32. Is the lifeblood of a business.
33. 4 certain skills to improve profitability.
34. Is used to monitor and manage the results of
past decisions, assess the current situation,
and highlight solutions.
35. Is when sales cover costs, where neither a
profit nor a loss is made.
36. To control cost (6).
30. Technology
Organizational change
Processes
People
External factors
31. Risk assessment and analysis
Risk management and control
Controlling and monitoring enterprise-wide
risk
32. Finance
33. Variance analysis
Break-even analysis.
Controlling costs.
Assessment of market entry and exit barriers.
34. Variance analysis
35. Break-even analysis.
36. Focus on the big items of expenditure.
Be cost aware.
Maintain a balance between costs and
quality.
Use budgets for dynamic financial
management.
Develop a positive attitude towards
budgeting.
Eliminate waste.
 37. Practical techniques to improve 37. Set the buying policy.
profitability. Decide how to treat the least profitable
38. Principles for avoiding pitfalls. products.
Make sure new products enhance
overall profitability.
38. Know where the risk lies.
Understand the impact of cashflow.
Consider the impact of financial
decisions.
Avoid weak budgetary control.
Financial expertise must be widely
available.

CHAPTER 13
CHAPTER 13
39. Is the process designed and effected by 39. Internal control
those charged with governance, 40. Reliability of the entity’s financial
management and other personnel to
reporting.
provide reasonable assurance.
Effectiveness and efficiency of
40. 3 objectives of internal control.
operations.
41. Means all the policies and procedures
Compliance with applicable laws and
adopted by the management of an
entity to assist in achieving regulations.
management’s objective of ensuring…. 41. Internal control system.
(Kapoy na kay taas ≥-≤ ). 42. Control environment.
42. Elements/components of internal Entity’s risk assessment process.
control Information system.
43. Is the “identification, analysis, and Control activiti.es.
management of risks pertaining to the Monitoring of controls.
preparation of financial statements.” 43. Risk assessment
44. Enumerate at least 5 reasons why risks 44. Corporate restructuring.
can arise or change due to
Expanded foreign operations.
circumstances.
New personnel.
New technology.
Rapid growth.
45. Consists of infrastructure, software, 45. Information system
people, procedures, and data. 46. Control activities
46. Are the policies and procedures that 47. Performance review
help ensure that management Information Processing Controls
directives are carried out. Physical controls
47. Major categories of control procedures.
48. Proper authorization of transactions and
48. Information processing controls.
activities.
49. In a _ management uses accounting
Segregation of duties.
and operating data to assess
Adequate documents and records.
performance.
50. Are policies and procedures designed to Safeguards over access to assets.
require authorization of transactions Independent checks on
and to ensure the accuracy and performance.
completeness of transaction 49. Performance review
processing. 50. Information processing controls
51. Classifications of control activities 51. Application controls
52. Are controls that pertain to the General controls
processing of a specific type of 52. Application controls
transaction, such a payroll, or sales and
53. General control
collections.
54. Monitoring
53. Are control activities that prevent or
detect errors or irregularities for all
accounting systems.
54. Involves assessing the design and
operation of control on a timely basis
and taking corrective action as
necessary.
CHAPTER 14 55. Fraud
55. Is an intentional act involving the use of 56. Misstatements arising from
deception that results in a material misappropriation of assets.
misstatement of financial statements. Misstatements arising from fraudulent
56. Two types of misstatements. financial transactions.
57. Occurs when a perpetrator steals or
57. Asset misappropriation
misuses an organization’s assets.
58.
58. Asset misappropriation occurs when
employees _.
59. Three common ways which fraudulent
financial reporting take place.
60. Characterizes incentives, opportunities
and rationalizations that enable fraud to 59.
exist.
61. Three elements of the fraud triangle.
62. Incentives relating to asset
misappropriation.
60. Fraud triangle
63. Incentives for fraudulent financial
61. Incentive to commit fraud.
reporting.
Opportunity to commit and conceal the
fraud.
Rationalization (the mindset of the
fraudster to justify committing the
fraud.)
62. Personal factors
Addictions to gambling or drugs.
Pressure from family, friends, or the
culture to live a more lavish lifestyle than
one’s personal earnings.
63.
CHAPTER 15 1. SALES AND COLLECTIONS CYCLE
ACQUISITIONS AND PAYMENTS CYCLE
1. What are the three basic business
transaction cycles? PAYROLL AND PERSONNEL CYCLE
2. It includes mechanical errors, such as
2. ERRORS IN RECORDING SALES AND
using a wrong piece or wrong quantity.
COLLECTIONS TRANSACTIONS
3. It generally relates to fraudulent
3. FRAUDS IN SALES AND COLLECTION
financial reporting.
4. FRAUDULENT FINANCIAL REPORTING
4. Typically results in overstated sales or
5. RECORDING FICTITIOUS SALES
understated sales returns and
RECORDING VALID TRANSACTIONS TWICE
allowances.
5. Give at least four methods that increase RECORDING OPERATING LEASES AS SALES
sales fraudulently.
RECORDING DEPOSITS AS SALES
6. 3 examples of misappropriation of
assets: withholding cash receipts under RECORDING CONSIGNMENTS AS SALES

frauds in sales and collections. 6. SKIMMING

7. This technique is used to conceal the LAPPING
fact that cash has been abstracted. KITING
8. This refers to the act of withholding cash
7. LAPPING
receipts without recording them.
8. SKIMMING
9. This is another technique used to cover
9. KITING
cash shortage or to inflate cash
10. FAILING TO RECORD CASH PAYMENT
balance.
FAILING TO RECORD PREPAID EXPENSES AS
10. Enumerate at least 3 errors in the
ASSETS
acquisitions and payments cycle.
11. Enumerate 3 frauds in the acquisitions RECORDING A PAYMENT TWICE
and payments cycle.
11. PAYING FOR FICTITIOUS PURCHASES
12. This involves the perpetrator creating a
PURCHASING GOODS FOR PERSONAL USE
fictitious and processing the invoice for
RECEIVING KICKBACK
payment.
13. In this scheme, a purchasing agent may 12. PAYING FOR FICTITIOUS PURCHASES
agree with a vendor to receive a 13. RECEIVING KICKBACKS
kickback. 14. PURCHASING GOODS FOR PERSONAL USE
14. Purchased by executive or purchasing 15. PAYING EMPLOYEES AT THE WRONG RATE
agents and charged to the company’s PAYING EMPLOYEES FOR MORE HOURS
account. THAN THEY WORKED

15. What are the Errors that occur in the

CHARGING PAYROLL EXPENSE AT THE
payroll and personnel cycle? WRONG ACCOUNT

KEEPING TERMINATED EMPLOYEES ON THE

PAYROLL
 16. What is the major payroll-related 16. FICTITIOUS EMPLOYEES.
frauds? EXCESS PAYMENT TO EMPLOYEES.

FAILURE TO RECORD PAYROLL.

INAPPROPRIATE ASSIGNMENT OF LABOR

COST TO INVENTORY.

CHAPTER 16 CHAPTER 16

1. Most of the processes relating to cash 1. FINANCE DEPARTMENT

handling are the responsibility of what 2. SEPARATE CASH HANDLING FROM RECORD
department? KEEPING.
2. Give at least five guidelines for achieving RECORD CASH RECEIPTS ON A TIMELY
internal control over cash. BASIS.
3. Potential misstatements in cash
DEPOSIT CAHS RECEIPTS DAILY.
receipts.
4. Potential misstatements in cash CENTRALIZE RECEIVING OF CASH TO THE

disbursement. EXTENT PRACTICAL.

5. It is the most important group of DO NOT PERMIT ANY ONE EMPLOYEE TO

financial investment because they are HANDLE A TRANSACTIO FROM THE
found more frequently and usually are of BEGINNING TO END.
greater peso value.
3. RECORDING FICTITIOUS CASH RECEIPTS.
6. Are financial instruments that derive
FAILURE TO RECORD RECEIPTS FROM CASH
their value from other financial
SALES.
instruments.
FAILURE TO RECORD CASH FROM
COLLECTION OF A/R.

EARLY(LATE) RECOGNITION OF CASH

RECEIPTS- “CUTOFF PROBLEM”

4. UNRECORDED DISBURSEMENTS.
DUPLICATE RECORDING AND PAYMENT OF
PURCHASES.

INACCURATE RECORDING OF
PURCHASE/DISBURSEMENTS.

5. MARKETABLE STOCKS AND BONDS

6. DERIVATIVES
 7. INCOMPLETE RECORDING OF
7. Potential misstatements in financial INVESTMENTS.
investments. MISSTATEMENT OF RECORDED VALUE OF
8. It includes not only claims against INVESTMENTS.
customers arising from the sale of
UNAUTHORIZED INVESTMENT
goods or services but also a variety of
TRANSACTIONS.
miscellaneous claims such as loans.
9. These are written promises to pay 8. ACCOUNTS RECEIVABLE

certain amounts at future dates. 9. NOTES RECEIVABLE

10. Potential misstatements in revenue/ 10. RECORDING UNEARNED REVENUES.

receivables. EARLY/LATE RECOGNITION OF REVENUES.

11. These are included in the Inventories.
12. Potential misstatements in inventory/
cost of goods sold.
13. Major subgroups of PPE.
14. Potential misstatements in investments
in PPE.
RECORDING REVENUE WHEN SIGNIFICANT
UNCERTAINTIES EXIST.
RECORDING REVENUE WHEN SIGNIFICANT
SERVICES MUST STILL BE PERFORMED BY
THE SELLER.
OVERESTIMATION OF THE AMOUNT OF
REVENUE EARNED.

11. GOODS ON HAND READY FOR SALE

GOODS IN THE PROCESS OF PRODUCTION

GOODS TO BE CONSUMED DIRECTLY OR

INDIRECTLY IN PRODUCTION.

12. MISSTATEMENT OF INVENTORY COST.

MISSTATEMENT OF INVENTORY QUANTITY.

EARLY/LATE RECOGNITION OF
PURCHASES-“CUTOFF PROBLEMS”

13. LAND
BUILDINGS, MACHINERY, EQUIPMENT, AND
LAND IMPROVEMENTS

NATURAL RESOURCES

14. MISSTATEMENT OF ACQUISITIONS OF PPE

FAILURE TO RECORD RETIREMENTS OF PPE

IMPROPER REPORTING OF UNUSUAL

TRANSACTION.
CHAPTER 17

1. It is used to describe short-term 1. ACCOUNTS PAYABLE

obligations arising from the purchase of 2. ACCRUED LIABILITIES
goods and services. 3. INACCURATE RECORDING OF A PURCHASE
2. It generally accumulate over time and OR DISBURSEMENT
management must make accounting MISAPPROPRIATION OF PURCHASES
estimates of the year-end liability.
DUPLICATE RECORDING OF PURCHASES
3. Potential misstatement in accounts
payable. LATE/EARLY RECORDING OF COST OF
4. It is the acquisition and repayment of PURCHASE
capital.
4. FINANCING CYCLE
5. Internal control over debts.
5. AUTHORIZATION BY THE BOARDS OF
6. Internal control on equity.
DIRECTORS
7. Three principal elements of strong
USE OF AN INDEPENDENT TRUSTEE
internal control over share capital and
dividends. INTEREST PAYMENTS ON BONDS AND
NOTES PAYABLE

6. CONTROL OF SHARE CAPITAL

TRANSACTION BY THE BOD.
INDEPENDENT REGISTRAR AND STOCK
TRANSFER AGENT.

7. THE PROPER AUTHORIZATION OF

TRANSACTIONS BY THE BOD AND
CORPORATE OFFICE
THE SEGREGATION OF DUTIES IN HANDLING
THESE TRANSACTIONS

THE MAINTENANCE OF ADEQUATE

RECORDS