Which of the following aspects are included in the Internal Environment Framework of COSO ERM? Each correct answer represents a complete solution.
Choose three.
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A. B. C. D.ACD.
The internal environment for risk management is the foundational level of the COSO ERM framework, which describes the philosophical basics of managing risks within the implementing enterprise.
The different aspects of the internal environment include the enterprise's: -> Philosophy on risk management -> Risk appetite -> Attitudes of Board of Directors -> Integrity and ethical values -> Commitment to competence -> Organizational structure -> Authority and responsibility -> Human resource standards.
The Internal Environment Framework of the COSO ERM (Enterprise Risk Management) includes various aspects that are essential for effective risk management within an organization. These aspects are:
A. Enterprise's integrity and ethical values: The internal environment of an organization should reflect a commitment to ethical values and integrity at all levels. This includes the tone set by top management, the organization's ethical values, and the organization's commitment to compliance with applicable laws and regulations. Ethical values and integrity are the foundation upon which an effective risk management program is built.
B. Enterprise's working environment: The internal environment of an organization should promote an open and transparent culture that encourages the sharing of information and collaboration. An effective working environment is characterized by effective communication, teamwork, and a commitment to continuous improvement.
C. Enterprise's human resource standards: An organization's human resource policies and practices play a critical role in the effectiveness of its risk management program. This includes recruiting and retaining talented employees, providing appropriate training and development, and ensuring that employees are aware of their roles and responsibilities related to risk management.
D. Enterprise's risk appetite: While risk appetite is an essential aspect of an effective risk management program, it is not part of the Internal Environment Framework of the COSO ERM. Risk appetite is a statement of the level of risk that an organization is willing to accept in pursuit of its objectives. It is part of the COSO ERM's Risk Assessment Framework.
Therefore, the three aspects included in the Internal Environment Framework of COSO ERM are A. Enterprise's integrity and ethical values, B. Enterprise's working environment, and C. Enterprise's human resource standards.