BEC 1-2

Question 1

Up to how long can someone be imprisoned for knowingly altering, destroying, or covering up documents with the intent of obstructing an investigation?

Answer 1

20 years

Question 2

Up to how long can an auditor be imprisoned for not retaining workpapers for seven years?

Answer 2

10 years

Question 3

What are appropriate techniques to mitigate transaction risk?

Answer 3

Currency option hedge
Forward hedge
Futures hedge

Question 4

Which component of the internal control framework addresses an entity’s policies and procedures?

Answer 4

Existing control activities

Question 5

Which component of the internal control framework addresses an entity’s financial reporting competencies?

Answer 5

Control Environment

Question 6

Which component of enterprise risk management addresses an entity’s processes for establishing the likelihood and impact of events?

Answer 6

Performance

Question 7

Safety stock levels are affected by:

Answer 7

1. Uncertain sales forecasts
2. Dissatisfaction of customers
3. Uncertain lead times

Note: Reorder costs do not impact safety stock levels

Question 8

What is the price earnings ratio and what does a higher ratio mean?

Answer 8

P/E ratio measures the amount that investors are willing to pay for each dollar of EPS; higher P/E ratios indicate that earnings have growth potential

Price per share/ Earnings per share

Question 9

According to SOX, an issuer must disclose whether or not it has adopted a code of ethics for who?

Answer 9

For senior officers (CEO, CFO, controller, etc.)

Question 10

What is a letter of credit?

Answer 10

Represents a third-party guarantee, generally by a bank (lowers cost of borrowing)

Question 11

What is a line of credit?

Answer 11

Represents a bank loan (like credit card)