These are answers and explanation. best of luck to all of us
Answer (D) is correct.
D. Establishing a proper ethical culture.
The COSO model treats internal control as a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of entity objectives. The control environment component of internal control reflects the attitude and actions of the board and management regarding the significance of control within the organization. It sets the organization’s tone and influences the control consciousness of its personnel. Moreover, the control environment provides discipline and structure for the achievement of the primary objectives of internal control. The control environment includes, among other elements, integrity and ethical values. Thus, standards should be effectively communicated, e.g., by management example. Management also should remove incentives and temptations for dishonest or unethical acts.
Answer (A) is correct.
A. The remote possibility of criminal prosecution is unlikely to deter an executive management group committed to producing misleading financial statements.
One criticism that has been leveled against SOX is that any CEO and CFO who are engaged in a serious fraud of the scope of Enron or WorldCom are unlikely to be deterred by the remote possibility of criminal penalties from signing off on statements they know to be not fairly presented.
Answer (B) is correct.
B. Inform XYZ about its risk appetite regarding supply failures.
The risk appetite is the level of risk that an organization is willing to accept. In an enterprise risk management (ERM) system, the risk appetite is considered in (1) evaluating strategic options, (2) setting objectives, and (3) developing risk management techniques. Thus, communicating about the risk appetite with external parties is an important aspect of risk management. It allows the organization to develop strategies to work with suppliers who may have different objectives.
Answer (C) is correct.
C. The director breached a duty of loyalty by usurping a corporate opportunity.
Directors owe a fiduciary duty to a corporation. When presented with a corporate opportunity, directors must give the corporation the right of first refusal, which must be presented formally to the entire board of directors. By failing to do this, the director breached the duty of loyalty.
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