BEC Mnemonics

Question 1

What are the three objectives within the COSO Internal Control Framework and what do they aim to achieve?

Answer 1

ORC

1. Operation Objectives - relates to the EFFECTIVENESS and EFFICIENCY of entities operations.
2. Reporting Objectives - relate the reliability, timeliness, and transparency of entity’s external and internal reporting
3. Compliance Objectives - make sure the entity is complying with laws and regulations

Question 2

What are the principles that make up Control Environment?

Answer 2

EBOCA

E - Ethical Values and Integrity
B - Board Independence and Oversight
O - Organizational Structure
C - Commitment to Competence
A - Accountability

Question 3

What are the principles that make up Risk Assessment?

Answer 3

SICI

S - Specify objectives
I - Identify and analyze risks
C - Consider the potential for fraud
I - Identify and and assess change

Question 4

What are the principles that make up Information and Communication?

Answer 4

OIE

O - Obtain and use information
I - Internally communicate information
E - Externally communicate information

Question 5

What are the principles that make up Monitoring?

Answer 5

SOC

S - Separate and/or Ongoing evaluations
C - Communication of deficiencies

Question 6

What are the principles that make up Existing Controls?

Answer 6

SSD

S - Select and develop control activities
S - Select and develop technology controls
D - Deploy through policies and procedures

Question 7

What are the components of Enterprise Risk Management?

Answer 7

GO PRO

G - Governance and Culture
O - Objective and Strategy-Setting
P - Performance
R - Review and Revision
O - Ongoing information, communication, and reporting

Question 8

What are the principles that make up Governance and Culture?

Answer 8

DEEAD

D - Defines Desired Culture
E - Exercises board oversight
E - Establishes operating structure
A - Attracts, develops, and retains competent employees
D - Demonstrates commitment to core values

Question 9

What are the principles that make up Objective and Strategy-setting Culture?

Answer 9

FADE

F - Formulates business objectives
A - Analyzes business context
D - Defines risk appetite
E - Evaluates alternative strategies

Question 10

What are the principles that make up Performance?

Answer 10

I PAID

I - Identify risks
P - Prioritize risks
A - Assess severity of risk
I - Implement risk response
D - Develop portfolio review

Question 11

What are the principles that make up Review and Revision?

Answer 11

APR

A - Assess substantial change
P - Pursue improvement in ERM
R - Review risk and performance

Question 12

What are the principles that make up Ongoing information, communication, and reporting?

Answer 12

LCR

L - Leverages IT
C - Communicates risk information
R - Reports on risk, culture, and performance

Question 13

What are the types of risk responses?

Answer 13

RAAPS

R - Reduce risk by hedging
A - Accept (no action is taken
A - Avoid (leaving line of business)
P - Pursue
S - Share (outsourcing and buying insurance)

Question 14

What are the components of SCOR model?

Answer 14

Plan, source, make and deliver

Question 15

What are some examples of carrying costs?

Answer 15

Storage costs, insurance costs, opportunity costs, lost inventory due to obsolescence or spoilage

In essence, it is the cost of having inventory

Question 16

What are prime and conversion costs?

Answer 16

Prime costs = Direct Labor + Direct Materials

Conversion Costs = Direct Labor + OH

Question 17

Product Costs vs Period Costs vs Manufacturing Costs

Answer 17

Product Costs are all costs related to the manufacture of the product (capitalized as inventory till they are sold). Made of DM DL and Manufacturing OH

Period Costs are expensed in the period in which they are incurred. SG&A, Depreciation,

Manufacturing costs also known as Manu. OH, are made up of DM DL and indirect costs (IL IM Factory costs)

Question 18

What are the measuring costs objects/objectives?

Answer 18

PIE

Product Costing
Income Determination
Efficiency Measurements

Question 19

What are the steps in allocated Overhead using the traditional approach?

Answer 19

Step 1: Calculate OH rate = Budgeted OH Costs/Estimated Cost Driver

Step 2: Actual Cost Driver * Step 1

Question 20

What are the economic indicators and what do they measure?

Answer 20

LLC

Leading: predict economics activity

Lagging: follow economic activity (after the fact)

Coincident: provide information about the current state of the economy

Question 21

What are the four types of Markets?

Answer 21

MMOP

Monopolistic Competition - many sellers compete to sell a differentiated product

Monopoly - concentration of supply in the hands of single firm

Oligopoly - few sellers dominate the sales of a product and high entry barrier

Perfect Competition - no individual firm can influence the market price or supply

Question 22

What are Porters Five Forces

Answer 22

BBB (big baller brand) ME

B - Barriers to Entry
B - Bargaining Power of Customers
B - Bargaining Power of Suppliers

M - Market Competitiveness
E - Existence of Substitute Products

Question 23

What are the types of business combinations

Answer 23

Horizontal - companies in the same industry join together under single management l

Vertical - combination of companies at different stages of production process

Circular - different business units with remotes connections join under single management

Diagonal - company joins with other company who provides ancillary support for the other companies primary activity

Question 24

What are the two broad categories risks can be classified to?

Answer 24

DUNS

Diversifiable
Unsystematic (think firm specific)
Non-diversifiable
Systematic (think market)

Question 25

What are critical success factors classified as?

Answer 25

FICA

F - Financial
I - Internal Business Processes
C - Customer Satisfaction
A - Advancement of innovation and HR development

Question 26

What are the types of costs of quality?

Answer 26

A PIE

A - Appraisal costs: incurred to discover and remove defective parts before they are shipped to customer of next department

P - Prevention costs: incurred to prevent the production of defective units

I - Internal Failure costs: costs to cure a defect discovered before product is sent to to the customer

E - External Failure costs: costs to cure a defect after the product is sent to to the customer

A & P = Conformance
I & E =Nonconformance (failure)

Question 27

What are the relevant costs for Special Order decisions, Male vs Buy, Sale or Process Further, and Keep or Drop segment

Answer 27

Special Order:

Incremental costs
IF at Full capacity, consider opportunity costs

Make vs. Buy:

Excess capacity - costs of avoiding the product all together

No excess capacity - avoided costs and opportunity cost

Sale or Process Further:

Incremental costs after the split-off point

Keep or Drop:

Fixed costs that can be avoided and contribution margin that will be lost if the segment is dropped

Question 28

What is a Decision Support System

Answer 28

a type of MIS that serves as a tool to support daily decision making

Question 29

What are the traditional networking equipment and their functions?

Answer 29

Modem - these connect network to the internet

Routers - manage network traffic by connecting devices to form a network (assigns IP)

Switches - similar to routers in that they connect and divide devices within a computer network, but not as advanced (think about a power outlet)

Gateway - intermediary between different networks: it transforms data from one protocol into another so info can flow between networks.

Servers - physical or virtual machines that coordinate the computers, programs and data that are part of the network