Expected Loss =

Control Procedure	Risk	Exposure	Revised Expected Loss	Reduction in Expected Loss	Cost of Control(s)	Net Benefit (Cost)
A	0.02	$	$	$	$	$
B	0.03	$	$	$	$	$
Both	0.005	$	$	$	$	$

Question 10 (17 marks) During a recent review, ABC Corporation discovered that it has a serious internal control problem. It is estimated that the impact associated with this problem is $2 million and that the likelihood is currently 5%. Two internal control procedures have been proposed to deal with this problem. Procedure A would cost $30,000 and reduce the likelihood to 2%; procedure B would cost $20,000 and reduce the likelihood to 3%. If both procedures were implemented the likelihood would be reduced to 0.5%. a) Calculate the estimated expected Loss associated with ABC Corporation's internal control problem before any new internal control procedures are implemented. (2 marks) b) Compute a revised estimate of the expected Loss of the following: (1 mark for each answer). 1) if procedure A were implemented; ii) if procedure B were implemented; and 111) if both procedures were implemented