［2008］Topic 61: Aligning Basel II Operational Risk and Sarbanes Oxley 404 P management, principles, statements, framework, following

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AIM 1: List, identify, and summarize the eight principles for an operational risk management framework in the “Sound Practices” study published by BIS in February 2003 relevant to banks.

 

1、Which of the following statements regarding the eight principles for an operational risk management framework is (are) CORRECT?

The “Sound Practices” study, 2003, was published by the Bank for International Settlements (BIS).
The “Sound Practices” study, 2003, develops eight key principles for market risk management framework relevant to banks.
According to the “Sound Practices” study, 2003, the board of directors should not be involved in approval or periodic review of an operational risk management plan.
According to the “Sound Practices” study, 2003, an interest rate risk management plan must be subjected to scrutiny by internal auditors.
A) II and III only.
 
B) I only.
 
C) II, III, and IV only.
 
D) I, II, III, and IV.

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5、How many of the following statements regarding Basel and SOX are CORRECT?

The SEC recognizes the linkage between the (Basel) op risk plan and internal control over financial reporting (SOX 404) via its reference to the report on internal control generated by the Committee of Sponsoring Organizations of the Treadway Commission.
The SOX 404 does not state anything specific about op risk beyond identification of strengths and weaknesses of the control system.
Basel II does not state anything specific about financial reporting.
UBS operational risk management requires a functional area to list the specific expectations about achievements in the implementation of control standards.
A) None of these.
 
B) Two of these.
 
C) All of these.
 
D) Three of these.

nayizhenfeng

The correct answer is C

All the statements are correct.

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AIM 7: Analyze, in light of the requirements in Sarbanes-Oxley Act section 404 and the Basel II Accord, linkages that can streamline implementation.

 

1、In order to establish linkages that can streamline implementation of an integrated risk management plan in light of the requirements of both SOX 404 and Basel II:

an op risk plan must be instituted within a firm.
each op risk control standard must be linked to SOX internal controls for financial reporting.
each op risk control standard, relevant for financial disclosure, must be identified by one or more of five assertions specified in the rules and one or more of five transaction stages.
each op risk control standard is linked to various items of the financial statements, ensuring a connection is developed to encompass a major portion of the balance sheet and profit and loss disclosures.
A) I, II, III, and IV.
 
B) I, II, and III only.
 
C) II, III, and IV only.
 
D) I, II, and IV only.

nayizhenfeng

The correct answer is A

All statements are correct.

nayizhenfeng

4、Which of the following statements is NOT correct?

A) The UBS integrated plan requires periodic reviews to assess whether the control system is working effectively.
 
B) The UBS single integrated operational risk management plan is aimed to combine the requirements of both SOX 404 and the Basel II Accord.
 
C) Potential synergies exist between the Sarbanes-Oxley Act section 404 and the Basel II Accord.
 
D) The overriding objective of the Basel II Accord is to establish requirements for “internal control over financial reporting.”

nayizhenfeng

The correct answer is D

Establishing requirements for internal control over financial reporting is the focus of the Sarbanes-Oxley Act section 404.

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2、An integrated risk management plan connecting op risk control standards to financial reporting disclosures:

allows a firm to quickly identify op risk control failures.
enables a firm to assess the extent of misreporting of financial statements.
offers an effective device for risk management.
still misses various elements of both SOX 404 and Basel II that need to be incorporated in a cross-functional risk management plan.
A) I, II, and III only.
 
B) I, II, III, and IV.
 
C) II and III only.
 
D) I and II only.

nayizhenfeng

The correct answer is B

All the statements regarding an integrated risk management plan are correct.