BEC - 14

Question 1

COSO ERM Model’s 8 Control Components

Answer 1

Internal Environment
Objective Setting
Event ID
Risk Assessment
Risk Response
Control Activities
Information & Communication
Monitoring

Question 2

SaaS

Answer 2

Software as a service
Remote access to software

Office 365 suite of office productivity programs

Question 3

PaaS

Answer 3

Platform as a service

Creating cloud-based software programs using cloud-based services

Examples Salesforce.com, Force.com

Question 4

IaaS

Answer 4

Infrastructure as a service.

Use of the cloud to access virtual hardware such as computers and storage.

Examples include Amazon Web Services, Carbonite

Question 5

Profitability Index

Answer 5

AKA Cost/Benefit ratio, provides a way of ranking projects by taking into account both cash flow benefit expected from each project and the cost of each project.

PI determines the benefit to cost ratio of a project (or other investment) by computing the value provided per unit of investment

Use either PVFC or NPV

PI = PV of Cash Inflows / Cost

PI = NPV / Cost

Question 6

PEST analysis

Answer 6

Evaluates the macroeconomic environment

Political
Economic
Social
Technological

Characteristics of a nation or region

Question 7

Define Compensating Control

Answer 7

When a control meets the same objective as another control

Question 8

Slope

Answer 8

Variable cost, rise over run which is the x axis change in amount over the y axis change in amount

Question 9

Under frost-free conditions, Cal Cultivators expects its strawberry crop to have a $60,000 market value.

An unprotected crop subject to frost has an expected market value of $40,000.

If Cal protects the strawberries against frost, then the market value of the crop is still expected to be $60,000 under frost-free conditions and $90,000 if there is a frost.

What must be the probability of a frost for Cal to be indifferent to spending $10,000 for frost protection?

AICPA.951153BEC-AR

Answer 9

Earnings will be affected by either frost or no frost.
Management can take two actions: provide frost protection at $10k or not.

The probability of frost or no frost determines the expected income for each action.

P = probability of frost

If frost protection IS provided:

Expected Net Income = $90,000(p) + $60,000(1-p) - $10,000

If frost protection is NOT provided:

Expected Net Income = $40,000(p) + $60,000(1-p)

The indifference point is when the two equations equal another.

Ans: P=.20

Question 10

What do conversion costs include?

Answer 10

Labor and OH. Because both labor and OH are included, conversion costs are incurred continuously.