QUESTION: 57

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.
Which of the following best explains the relevance of quantifying the risk in that way?

There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.
The probability is so low as to be ignored.
The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.
The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer(s): A

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QUESTION: 58

Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?

Every member of the entity.
The board of directors only.
Managers and directors only.
The shareholders.

Answer(s): A

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QUESTION: 59

An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.
The following disclosure appears in the oil company's risk report:
"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest." Which of the following statements are correct?

The risk report means that the shareholders know exactly how bad the risk is.
The risk report says nothing useful about the risk.
Now the shareholders know the directors are aware of the risk.
If the risk report had not reported the risk the shareholders might not have been aware of the risk.
The shareholders now have more useful information.

Answer(s): C,D,E

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QUESTION: 60

Which of the following is an ethical dilemma?

A company is considering giving poorly-paid staff a generous pay rise.
A company is deciding whether to issue debt or equity.
A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.
A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

Answer(s): A

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QUESTION: 57

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QUESTION: 60