CGIC flashcards
CGIC · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Agency problem
- Conflict arising when managers (agents) pursue their own interests rather than the interests of shareholders (principals), driven by separation of ownership and control.
- Board independence
- A director is independent when free of relationships with the company or management that could materially influence judgment, such as former employment or consulting fees.
- Audit committee
- Board committee of independent, financially literate members responsible for overseeing financial reporting, external audit, internal audit, and internal control.
- Stakeholder theory
- View that the corporation should account for interests of employees, customers, suppliers, communities, and shareholders rather than maximizing shareholder value alone.
- OECD governance principles
- International benchmark covering shareholder rights, equitable treatment, stakeholder role, disclosure and transparency, and board responsibilities.
- Segregation of duties
- Control that separates authorization, custody, and recordkeeping so no single person can both commit and conceal an error or fraud.
- Residual risk
- The level of risk remaining after existing controls and risk responses have been applied; compared against risk appetite for acceptance decisions.
- Risk appetite
- The amount and type of risk an organization is willing to accept in pursuit of its objectives, expressed qualitatively or quantitatively.
- Risk response options
- Four standard responses: avoid the activity, reduce or mitigate likelihood/impact, transfer or share risk (insurance, hedging), or accept the risk.
- Key risk indicator
- Leading metric with defined thresholds that provides early warning that risk exposure is increasing beyond acceptable levels.
- Three lines model
- Governance model where operations own risk, risk/compliance functions provide oversight, and internal audit provides independent assurance to the board.
- Inherent risk
- Risk exposure assessed before considering the effect of internal controls, used as a baseline for deciding whether controls are warranted.
- Risk register
- Structured record of identified risks including description, owner, likelihood, impact, score, existing controls, and planned response.
- Control risk
- The risk that a material misstatement or process failure will not be prevented or detected on a timely basis by the entity's internal controls.
- Compliance program elements
- Core components include standards and procedures, oversight, training, monitoring and auditing, incentives and discipline, and remediation of failures.
- Whistleblowing channel
- Mechanism allowing confidential or anonymous reporting of misconduct, accompanied by anti-retaliation protections to encourage reporting.
- Third-party due diligence
- Risk-based screening of vendors, agents, and partners for bribery, sanctions, and money-laundering exposure before and during the relationship.
- Sanctions screening
- Comparison of counterparties against government watchlists to identify prohibited persons or entities, with documented resolution of false positives.
- Conflicts of interest
- Situations where personal or organizational interests could improperly influence decisions; managed by disclosure, recusal, or segregation of duties.
- Regulatory horizon scanning
- Systematic tracking of upcoming regulatory changes to assess impact, update policies, and evidence implementation before effective dates.
- Compliance culture
- Shared values and behavior that make regulatory adherence and ethical conduct expected norms, reinforced by tone at the top and incentives.
- Audit risk model
- Formula AR = IR × CR × DR, where audit risk equals inherent risk times control risk times detection risk; the auditor controls detection risk.
- Materiality
- Threshold at which a misstatement could influence users' economic decisions; performance materiality is set below overall materiality.
- Sufficient appropriate evidence
- Evidence that is sufficient in quantity and appropriate in relevance and reliability to support the auditor's conclusion.
- Audit opinions
- Four types: unmodified, qualified, adverse, and disclaimer; scope limitations typically lead to qualified opinion or disclaimer.
- Sampling risk
- Risk that the auditor's conclusion based on a sample differs from the conclusion reached by testing the entire population.
- Internal audit independence
- Internal audit reports functionally to the audit committee and administratively to management, and does not assume operational management responsibilities.
- Reasonable assurance
- High but not absolute level of assurance, limited by sampling, judgment, and the possibility of collusion or management override.
- Fundamental ethical principles
- IESBA principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.
- Ethical threats
- Categories of threat to compliance with principles: self-interest, self-review, advocacy, familiarity, and intimidation.
- Independence of mind
- State of mind enabling the expression of a conclusion without being affected by influences that compromise professional judgment.
- Independence in appearance
- Avoidance of facts and circumstances that a reasonable and informed third party would perceive as compromising objectivity.