BEC - Flash Card
When sanctions imposed is over ________, a mandatory bounty can be applied.
1M
What’s the range of mandatory awards?
Btw 10% and 30% of sanctions imposed.
External assessment for internal audit must be conducted _______
Once every 5 yrs
According to COSO principles, risk assessment primarily related to _______?
Organizational objectives, risk assessment, fraud, and change management.
According to the COSO principles, the control environment includes ________?
Establishing integrity and ethical value in the organizational culture.
According to COSO principles, control activities primarily relate to ________?
Risk reduction, technology controls, and policies
According to COSO principles, monitoring primarily relate to ________?
Establishing ongoing and periodic evaluations, and addressing control deficiencies.
What is “debenture”
A “debenture” is an unsecured bond.
What is “indenture”?
“Indenture” is a term given to a bond contract.
Formula of cash cycle:
Inventory conversion cycle + accounts receivable conversion cycle - accounts payable conversion cycle
Def: Infrastructure as a service (laaS)
Access to virtual hardware
Def: Platform as a service (PaaS)
Access operating system and related services
eg. use of the cloud to create (not access) software.
Def: Software as a service (SaaS)
Access software. (Eg. Google doc)
eg. use of the cloud to use (not create) software
A transaction processing system is also called
Operational system
Organizations that adopt activity-based costing tends to have more:
- Precise measures of cost
- Cost pools
- Allocation bases (e.g., multiple causes for costs to occur)
under direct (variable) costing, which of the following is treated as product costs?
Variable manufacturing cost
Fix manufacturing cost
Variable selling and admin cost
Fix selling and admin cost
Only variable manufacturing cost is product cost, the rest of are period cost
Level 2 inputs in the U.S. GAAP hierarchy of inputs for fair value determination include quoted prices in ?
Active markets for similar (but not identical) assets or liabs
AND
Both identical and similar assets and liabs in inactive markets.
Eg. Corp bonds(high yield), mortgage-back securities, bank loans, municipal bonds, certain OTC derivatives
Level 1 inputs:
Observable, quoted prices for identical assets or liabs active markets.
Eg. US government and agency securities, foreign gov debt, listed equites and money market securities.
Level 3 inputs:
Unobservable inputs for assets or liabs
Eg. Distressed debt, private equity, exotic or non-standard derivatives.
Which one of the following is not a limitation of black-scholes option pricing model?
A. It fails to consider the probability that the option will be exercised.
B. It assumes the stock does not pay dividends.
C. It assumes the risk-free rate of return used for discounting remains constant during the option period.
D. It assumes the option can be exercised only at the expiration date.
A
The demand curve reflects the impact that price has on the amount of a _________.
Product purchased.
Dif. Btw call option and a put option?
Call option:
buying a specific security at fixed conditions of price and time.
Put option:
Sell a specific security at fixed conditions of price and time.
Return on investment:
Profit margin percentage:
Capital turnover:
Return on investment:
income/investment
Profit margin percentage:
Income/sales
Capital turnover:
Sales/investment
Operating cycle:
Account receivable conversion cycle+inventory conversion cycle
Risk assessment is,
“…the process of identifying, analyzing, and managing the risks involved in achieving the organization’s objectives.
Control activities are,
“…the policies and procedures that ensure that actions are taken to address the risks related to the achievement of management’s objectives.”
What are “porter’s 5 forces”?
- Competition in the industry
- Potential of new entrants into industry
- Power of suppliers
- Power of customers
- Threat of substitute products
Accounting rate of return approach formula:
ARR=average annual incremental revenue - average annual incremental expenses/initial (or average) investment
Present value is determined using:
NPV=
Present value is determined using: discount rate, also called “hurdle rate”, based on cost of capital to firm. (E.g. WACC)
NPV=Difference btw present value of cash inflows and outflows (initial cash investment)
Profitability Index approach:
PI=NPV of project inflows/PV of project cost
__________ is the cost assigned to goods that either purchased or manufactured for resale.
Product cost.
It also is often referred to as “inventoriable cost”
In a macroeconomic free-market flow model, LEAKAGES result when income is used for the purposes other than __________. E.g. ________ & __________
Domestic production, Savings & taxes
What quality definition can be described as “meeting or exceeding the needs and wants of customers?
Quality of design
Conforming to the design specifications is
Quality of conformance
_________ is a qualitative forecasting method that involves development of a consensus by a group of experts using a multi-stage process to converge on a forecast, which is particularly useful approach for long-term forecasting.
The Delphi method
__________ use past values or patterns to predict a future value or values, but the longer the forecasting period, the less likely will the past values or patterns be relevant to those future values.
Time series models
Over the past 50 years, how has the share of total U.S. purchases and output represented by imports and exports, respectively, changed?
Answers are :
Imports as Share of Purchases
Exports as Share of Output
Increase, Increase
IT facility controls are__________. That is, they are controls over the IT department as a whole.
General Control
Most, but not all, IT facility controls are _________. For example, backup procedures are an important ________ control.
Preventive, corrective
The ___________ method of evaluating capital projects uses a _______(also called hurdle rate or cost of capital rate) to _______ future cash flows (or savings) to their present value. Thus, the discount rate or hurdle rate must be established in advance of using the method.
Net present value, discount rate, discount
Describe the Theory of Constraints (TOC).
TOC identifies strategies to maximize income when the organization is faced with bottleneck operations. A bottleneck operation occurs when the work to be performed exceeds the capacity of the production facilities.
Define “Six Sigma.”
Six Sigma is a quality improvement approach that is designed to systematically reduce defects. Six Sigma is also a fact-based method to achieve cost reduction.
______ is the risk to the organization if management does nothing to alter its likelihood or impact. ______is the risk of the event after considering management’s response.
Inherent risk, Residual risk
Define “project risks”.
Project risks are related to adequately defining the project, properly organizing resources, and organizing and committing team members.
_______ is the process of adding resources (such as overtime labor or adding additional materials or equipment) to shorten selected activity times on the critical path. _______ is the shortest possible time to complete an activity after accelerating resources.
Crashing, Crash time
How is the projected completion time determined using Program Evaluation and Review Technique (PERT)?
Expected time of completion is determined by assigning a weighting of one for each of the optimistic and pessimistic estimates, a weighting of four for the most probable estimate, adding the assigned values together, and then dividing that sum by six.
Activity ______ is the maximum amount of time that an activity can be delayed without delaying the entire project.
Example:
slack
component of COSO’s enterprise risk management framework
The components include (1) internal environment, (2) objective setting, (3) event identification, (4) risk assessment, (5) risk response, (6) control activities, (7) information and communication, and (8) monitoring.
The Dodd-Frank Act of 2010 established a requirement that all members of the ________ of public companies must be independent.
compensation committee
The Wall Street Reform and Consumer Protection (Dodd-Frank) Act of 2010 requires public corporations to disclose _______________.
why or why not the chairman of the board is also the chief executive officer
Response to a risk as identified by COSO’s Enterprise Risk Management Framework (RISK RESPONSE)
a. Avoidance. This response involves exiting the activity that gives rise to the risk.
b. Reduction.
c. Sharing.
d. Acceptance.
Enterprise risk management is
Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in a strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
A financial expert is one that possesses all of the following attributes:
1] An understanding of generally accepted accounting principles and financial statements
2] Experience in preparing, auditing, analyzing, or evaluating financial statements of the breadth and complexity expected to be encountered with the company
3] An understanding of internal controls and procedures for financial reporting
4] An understanding of audit committee functions
The nominating/corporate governance committee def.
(1) oversees board organization, including committee assignments, (2) determines director qualifications and training, (3) develops corporate governance principles, and (4) oversees CEO succession.
The compensation committee def.
(1) reviews and approves CEO compensation based on meeting performance goals, (2) makes recommendations to the board with respect to incentive and equity-based compensation plans, and (3) attempts to align incentives with shareholder objectives and risk appetite.
Measures of ____________ success are related to the quality and efficiency of production, and include such things as scrap and rework percentages, warranty costs, workplace safety record, and downtime.
internal business process
Measures of ___________ are related to the quality, vitality, and productivity of the workforce and include such things as employee turnover, new product development, product improvements, employee satisfaction levels, and personnel training and education.
learning and growth
According to the Institute of Internal Auditors’ Standards, the internal audit function should have all of the following competencies except:
Knowledge of key information technology risks.
Knowledge to evaluate fraud risk.
Knowledge of information technology audit techniques.
Knowledge of financial reporting.
Knowledge of financial reporting.
According to the IIA International Standards for the Professional Practice of Internal Auditing, the internal audit charter should set forth the _______, ________, and _________ of the internal audit activity.
purpose, authority, responsibility
*The scope of the activity should not be included in the charter.
With ____________ the shareholder gets one vote for each director for each share of stock owned.
cumulative voting rights
With _____________, a shareholder gets one vote for each share owned.
statutory voting rights
Specific NYSE and NASDAQ rules that make a director not independent include:
(a) A director is not independent if s/he has been an employee of the corporation or an affiliate in the last 5 years (3 years for NASDAQ).
(b) A director is not independent if a family member has been an officer of the corporation or affiliate in the last 5 years (3 years for NASDAQ).
(c) A director is not independent if s/he was a former partner or employee of the corporation’s external auditor in the last 5 years (3 years for NASDAQ).
(d) A director is not independent if s/he or a family member in the last 3 years received more than $120,000 (for a twelve-month period) in payments from the corporation other than for director compensation.
(e) A director is not independent if s/he is an executive of another entity that receives significant amounts of revenue from the corporation.
“The chairman of the board of directors cannot also serve as the chief executive officer” - is an requirement of ______, but not New York Stock Exchange (NYSE).
Dodd-Frank
The eight components of COSO’s enterprise risk management framework
ERM consists of eight interrelated components, including (1) internal environment, (2) *objective setting, (3) *event identification, (4) risk assessment, (5) *risk response, (6) control activities, (7) information and communication, and (8) monitoring.
*additional from 5 components of COSO
The five components of COSO’s internal Control - integrated framework
(1) Control Environment, (2) Risk Assessment, (3) Control Activities, (4) Information and communication, and (5) monitoring
A key objective in setting executive compensation is to __________.
align management’s decisions and actions with the long-term interests of shareholders (e.g., long-term stock price).
The two principles related to the monitoring component include:
a. The organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning.
b. The organization evaluates and communicates internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors, as appropriate.
According to COSO, the position or internal entity that is best suited, as part of the enterprise risk management process, to devise and execute risk procedures for a particular department is
A manager within the department
The principles related to risk assessment include:
a. The organization specifies objectives with sufficient clarity to enable the identification and assessment of risks relating to objectives.
b. The organization identifies risks to the achievement of its objectives across the entity and analyzes risks as a basis for determining how the risks should be managed.
c. The organization considers the potential for fraud in assessing risks to the achievement of objectives.
d. The organization identifies and assesses changes that could significantly impact the system of internal control.
- Control baseline
- Change identification
- Change management
- Control revalidation/update
- Control baseline—establishing a starting point that includes a supported understanding of the existing internal control system.
2. Change identification—identifying through monitoring changes in internal control that are either necessary because of changes in the operating environment or have already taken place.
3. Change management—evaluating the design and implementation of the changes, and establishing a new baseline.
4. Control revalidation/update—periodically revalidating control operation when no known changes have occurred.
If the real rates of interest are the same, the country with the ________ nominal interest rate is expected to experience a higher rate of inflation.
higher
The movement along the demand curve from one price-quantity combination to another is called a(n)
increase or decrease in the quantity demanded.
________ markets are characterized by few large competitors. Therefore, the actions of one affect others in the market.
Oligopolistic
_______is the rate of increase in the price level of goods and services, usually measured on an annual basis. ________is a very high, unusually increasing level of inflation.
Inflation, Hyperinflation
If the Federal Reserve purchases government securities, they are able to ______ the monetary supply and, therefore, _____________ on interest rates. When a central bank is purchasing government securities and expanding the money supply, it is called an ____________.
increase, put downward pressure, expansionary open-market operation
An oligopoly is an industry that is dominated by a small number of sellers. It is best described by ________ which models conflict and cooperation among decision makers.
game theory
________ unemployment is due to imperfections in the labor market and relates to workers searching for jobs or waiting to take jobs in the near future.
Frictional
The rate of unemployment caused by changes in the composition of employment opportunities over time is referred to as the
Structural unemployment rate
eg. 網上購物上升，商店Sales Person失業。 Structural unemployment is a form of unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (also known as the skills gap).
________ unemployment is caused by the recession phase of the business cycle, that is, by a deficiency of aggregate spending.
Cyclical
_________ is the cost assigned to goods that were either purchased or manufactured for resale. ________ also is often referred to as “inventoriable cost.”
Product cost, Product cost
The _______ of a business cycle is generally characterized by unused productive capacity and an unwillingness to risk new investments.
trough
Total units of product Average fixed cost Average variable cost Average total cost 6 $15.00 $25.00 $40.00 7 12.86 24.00 36.86 8 11.25 23.50 34.75 9 10.00 23.75 33.75
The marginal cost of producing the ninth unit is
The amount may be obtained by subtracting the total cost of 9 units from the total cost of 8 units. $25.75 = ($33.75 × 9) – ($34.75 × 8).
______ policy influences taxes, subsidies, and government spending.
Fiscal
An oligopoly is formed by the combination of firms in the same line of business, as in a ________merger.
horizontal
The capital structure of a firm includes bonds with a coupon rate of 12% and an effective interest rate is 14%. The corporate tax rate is 30%. What is the firm’s net cost of debt?
the cost of debt is equal to the effective rate less the tax advantage, or 9.8% [14% × (1–.3)].
A call feature
The bonds may have a call provision allowing the firm to force the bondholders to redeem the bonds before maturity. Call provisions typically call for payment of a 5 to 10% premium over par value to redeem the bonds. Investors generally do NOT like call features because they may be used to force them to liquidate their investment.
Sinking fund provisions—
The firm makes payments into a sinking fund which is used to retire bonds by purchase.
The economic order quantity formula is
EOQ=根号2aD/k
In the above equation, a = cost of placing one order, D = annual demand in units, and k = annual cost of carrying one unit in inventory for 1 year (i.e., inventory carrying cost).
The average accounts receivable balance is calculated as:
Credit sales per day x Average collection period = (10,000 units × $66 unit price) / 365 × 25 days = $45,205.48.
_______ is the risk of loss from a particular event.
Event risk
Which of the following is the least effective device for monitoring management behavior?
The audit committee of the board of directors.
The external auditor.
The internal auditor.
Security analysts.
Security analysts
*Security analysts have little access to, or control over, top management.
In the COSO framework, Individuals that monitor controls are referred to as _______.
evaluators
The degree of operating leverage (DOL):
Percent change in operating income/Percentage change in sales volume
The degree of financial leverage (DFL)
Percent change in EPS/Percent change in EBIT
________ mature on varying dates allowing an investor to choose a maturity date.
Serial bonds
