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CPA BEC > BEC NINJA > Flashcards

BEC NINJA Flashcards

1
Q

Examples of Market (Systematic Risk)

A

Cannot be eliminated through diversification. It includes noncontrollable factors such as:

  • Inflation or recession
  • Fluctuations in World energy markets
  • Congressional Tax Reform
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2
Q

Define Off Shore Operations. When is a company considered Off Shore?

A

It describes an organization incorporating outside of the original jurisdiction of primary operations. It will be considered off shore if:

  • Incorporate under off shore company laws
  • Incorporate as a nonresident
  • Does not trade within the offshore jurisdiction
  • Meets nominal tax expenses
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3
Q

Floating Rate Bonds - Market Rates and Interest Rate Risks

A
  • Most likely to maintain market rates
  • Eliminate interest rate risk since the interest rate paid for a given payment period is based upon the prevailing rates in the current bond market
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4
Q

Define Relevant Range

A

Is the production range within which fixed costs are unchanged and variable costs are constant on a per unit basis

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5
Q

The Trough of a business cycle is characterized by what?

A

Unused productive capacity and an unwillingness to risk new investments

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6
Q

How are fixed costs per unit treated when production levels are increased within a relevant range?

A

Fixed costs per unit decreases

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7
Q

The Recessionary Phase - Characteristics

A
  • Is a period in which more resources become unemployed and actual output falls below potential output. There will be a decline in the number of hours in the average work week since output falls
  • The natural rate of unemployment will be unchanged
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8
Q

The Change Control Process (4)

A
  • Identify the change
  • Review the effectiveness of the change
  • Approve
  • Implement
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9
Q

Enables continuous monitoring of transaction processing

A

Embedded Audit Modules

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10
Q

Assumptions of the Economic Order Quantity

A
  • Periodic demand for the good is known
  • Total carrying costs vary with quantity ordered
  • Costs of placing an order are unaffected by quantity orders
  • Purchase costs per unit are not affect by quantity discounts
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11
Q

Any transactions involving the corporation as a WHOLE are performed by who?

A
  • The Board of Directors
  • The Audit Committee
  • Shareholder votes
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12
Q

Political Business Cycle Theory

A

Politicians want the economy to be “pointed in the right direction” as the election approaches with the unemployment rate and inflation rate falling
-Relatively expansionary fiscal policy prior to election, followed by more restrictive fiscal policy soon after the election

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13
Q

Database Management Systems (DBMS) - Characterisitics

A
  • Access and identification of security
  • Concurrent use of data
  • Back up and Recovery
  • DOES NOT run applications
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14
Q

Expected Value Method - Characteristics

A
  • Most useful when risk is being prioritized
  • Sum of outcomes multiplied by the probability of each event occurring
  • Way of prioritizing the alternatives while considering risk
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15
Q

Materials Requirement Planning (MRP) - Characteristics

A
  • Ordering raw materials and other components used in manufacturing based on needs for completed projects
  • Demand dependent since materials are not ordered until the system plans when those materials will be used in manufacturing
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16
Q

Define Cycle Counting

A

Counting physical inventory in batches, where all inventory is counted over time, but only a sub component of it is counted in each separate cycle

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17
Q

Variables traditionally found in National Income calculations

A
  • Disposable Income
  • Gross Domestic Product
  • Net Domestic Product
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18
Q

Real per capita gross domestic product

A
  • Is GDP for a particular year adjusted for inflation compared to a base year using a price index
  • This number is then divided by population to derive real GDP
  • Often used as an estimate of changes in well being in a society over time
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19
Q

Auditors must be involved in the system design of the application when using this auditing technique

A

Embedded Audit Module

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20
Q

What effect does the Federal Reserve buying federal securities have on the economy

A

This expands the money supply, thus having an expansionary effect on the economy

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21
Q

Project Management - Implementation Stage

A
  • Includes holding meetings, monitoring the progress of the project, updating the project plan, tracking costs and communicating the progress of the project
  • The Implementation stage coincides with the planning stage
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22
Q

Define Decision Tables

A
  • Is a chart used to document actions to specific conditions

- Logical relationships among conditions and actions

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23
Q

Define a Flow Chart

A

-Is a graphical depiction, using uniform symbols to show the control flow, primary actions and interrelationships of a task or a set of tasks

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24
Q

Database Sub-schema Authorizations control access to what?

A

Controls access to specific views of fields in a database

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25
Q

Define Operations Risk. Examples?

A
  • Deals with factors within the production process
  • Loss resulting from downtime, engineering of the production process, the efficient use of energy, and the training of personnel
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26
Q

Define Business Risk

A

Uncertainty associated with the ability to forecast EBIT due to factors such as sales variability and operating leverage

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27
Q

Define Supply Chain Risk

A

The potential disruptions to continued manufacturing production and thereby commercial financial exposure

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28
Q

Define Product Liability Risk

A

The responsibility of the firm or vendor of goods to compensate for injury caused by defective merchandise that it has provided for sale

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29
Q

Define Edit Checks

A

Are run by a computer to check the validity, accuracy, and reasonableness of the data which has been input from source documents

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30
Q

When should Edit Checks be performed? Why?

A

Edit Checks should be performed on transactions prior to updating a master file to minimize the introduction of error in both the initial recording of data and the conversion into machine readable form

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31
Q

Just In Time (JIT) Production is also known as…

A

Lean Manufacturing. The goal is to maximize customer value and minimize costs

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32
Q

Define Dis-economies of Scale

A

Is when the average total cost starts going up

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33
Q

What is the purpose of Hedging Foreign Exchange Risk?

A

to isolate the firm from exposure to exchange rates

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34
Q

Which Ratio/Index considers the size of the original investment and the value of the discounted cash flows

A
  • The Profitability Index

- PI = (PV of Cash Flows / Initial Investment)

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35
Q

What does movement along the supply curve represent?

A

The price for the product increases or decreases if all factors remain constant

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36
Q

What are some exmples on why the Supply Curve shifts (a change in demand)?

A

Changes in supply determinants such as:

  • Technology
  • Price of resources
  • Expectation of future prices
  • Number of sellers
  • Taxes and other government restrictions and subsidiaris
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37
Q

At the Breakeven Point what does Contribution Margin equal?

A

Fixed Costs

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38
Q

A Static Budget - Characteristics

A
  • Is prepared for a single target level of activity

- A static budget does not change, although actual or possible levels of activity might vary

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39
Q

What are Direct Costs?

A

Costs that relate directly to and are traceable to products

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40
Q

What are Value Added Costs?

A

Costs that are necessary to production and add value to the product

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41
Q

When using the NPV when should a project be accepted?

A

When the projects have a NPV of 0 or greater

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42
Q

Which ratio is increased when a firm purchase’s treasury stock with surplus cash?

A

The firm’s financial leverage ratio, because the debt to equity ratio increases

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43
Q

In monopolistic competition what is the goal of advertising?

A

To make the firm’s demand curve less elastic (the change of demand isn’t huge)

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44
Q

Who must the computer operator obtain files and programs from when processing transactions?

A

The Data librarian

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45
Q

Online Access Controls - Examples?

A
  • User Code numbers that restrict access to only authorized users
  • Passwords that create a second barrier for access after user code number’s
  • List of files and programs along with lists of the type and extent of access a user is entitled to have to those files and programs
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46
Q

A Systems Analyst would be involved in…

A
  • Analysis of the present system
  • Preparing program specifications
  • Designing computer applications and flowcharts
  • NOT develop and coding programs
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47
Q

GDP can be calculated using which two approaches?

A

An Income Approach or Expenditures Approach

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48
Q

Income Approach GDP

A

Sums items such as wages, rental income, dividends and other similar items

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49
Q

Expenditures Approach GDP

A

Sums personal consumption, investments, net exports and governmental acquisitions

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50
Q

What is an advantage of EDI (referring to the business cycle)

A

A compressed business cycle with lower year end receivable balances

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51
Q

What kind of interest rate loans create the greatest interest rate risk for both borrowers and lenders? Why?

A

Fixed Interest Rate Loans

-The chance for interest rates to change is much greater over a long time period than over a short time period

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52
Q

What is the goal of Demand Management in the Supply Chain?

A

Is designed to synchronize supply and demand to reduce inventory and production is pulled through the plant in response to specific customer needs

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53
Q

What is another name for a Flexible Budget?

A

An Incremental Budget

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54
Q

When is the Cost (Asset Based) Approach for valuation appropriate?

A
  • The Company is in liquidation
  • The company is worth more in liquidation than as a going concern
  • The company’s value is basically related to the assets held
  • The company has had no income in recent years
  • Future benefit streams cannot adequately be predicted
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55
Q

Which technique is recommended for evaluating projects when capital is rationed and there are no mutually exclusive projects from which to choose?

A

The Profitability Index

-It assumes reinvestment at cost of capital rather than IRR. Important when capital is rationed

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56
Q

Why should Incentive Compensation Programs be set up?

A

To promote and maintain an inspired and productive work environment

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57
Q

What can management doe regarding risk (3) ?

A

Accept, transfer or manage the risk

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58
Q

What is Total Quality Management?

A

Is the application of quality principles to all processes to better satisfy customers

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59
Q

What is the best way to identify and manage risk?

A

Have experts in the area of the project on the team

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60
Q

What is Translation Exposure?

A

The exposure of a multinational corporations consolidated FS to foreign exchange fluctuations

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61
Q

What are the 4 categories of Entity Objectives in ERM?

A
  1. Strategic
  2. Operations
  3. Reporting
  4. Compliance
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62
Q

What is a disadvantage of using ROI instead of Residual Income?

A

ROI may lead to rejecting projects that yield a positive cash flow

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63
Q

Break Even Analysis assumes over the relevant range:

A
  • Unit Revenues are linear (prices do not change)
  • Unit variable costs are unchanged (linear)
  • Total costs increase as number of units increase
  • Fixed costs are constant
  • Product mix and technology will remain unchanged
64
Q

The Systems Development Life Cycle (SDLC)

A
  • Analysis
  • Conceptual Design
  • Detailed Design
  • Implementation
  • Operation
65
Q

What is a Transaction Processing System?

A

Is a form of information system that collects, stores, modifies, and retrieves the data transactions of an enterprise

66
Q

What is a Sequential File Processing/Organization?

A

Data is placed in the file using a key or code for the sequencing. Sequential data can only be accessed after all preceding data records have been passed
-It is impossible to edit data on a real time basis

67
Q

What are Run to Run Controls?

A

Controls for an online system that are able to accumulate separate totals for all transactions processed during the day and then agree the totals to the total of items accepted for processing

68
Q

What are Computer Sequence Checks?

A

Identify changes or breaks in numerical sequences

69
Q

Define Management Reporting Systems (MRS)

A
  • Rely on a mix of internal and external data
  • They also combine financial and operational data so that managers have flexibility in determining the information that they will use for decision making
70
Q

Define Ring Networks

A

Ring Networks do not have a central computer. Each site connects directly to only the other sites, but is still able to communicate to all other sites by going through its neighbor

71
Q

Key Characteristics of Emerging Market Economies

A
  • Include low debt to GDP ratios
  • A significant increase in trade among and between emerging market economies
  • Low cost of labor
  • High savings rates
  • Large Currency Reserves
  • High investment in infrastructure
  • Significant growth in the number of middle class consumers and improving supply chain effectiveness
72
Q

Suppliers have more power when:

A
  • The product they are supplying is differentiated from other products
  • Substitute products are not available
  • Few companies produce the same product
  • The purchasing industry is not an important customer to the supplying industry
73
Q

The duties of Information Security Officers?

A
  • Developing an information security policy for the organization
  • Commenting on security controls in new applications
  • Monitoring and investigating unsuccessful access attempts
74
Q

Define a risk adverse investor

A

Is one who is willing to take risk, but believes that they will be reasonably compensated for the level of risk being taken

75
Q

What is a Check Digit?

A

A Check Digit is an extra reference number that follows an identification code and bears a mathematical relationship to other digits

76
Q

What are Inventory Carrying Costs? Examples?

A

Aee costs incurred as a result of holding inventory for a period of time

  • Storage
  • Insurance
  • Opportunity cost of inventory investment
  • NOT cost of inspecting
77
Q

What kind of a budgeting and costing system is recommended? A manager is concerned with monitoring total cost, total revenue, and net profit conditioned upon the level of productivity

A

Flexible Budgeting and Standard Costing

78
Q

The Key elements of Financial Risk Management (3)

A
  • Interest Risk
  • Foreign Currency Risk
  • Credit Risk
79
Q

What is Financial Management Risk?

A

Is the handling of uncertainties resulting from events in financial markets. It involves assessing financial risks facing an organization and developing and implementing management strategies and polices consistent with the organizations internal priorities and policies

80
Q

Which interest rates are lower: Short or Long term? Why?

A

Short Term, because there is less risk involved in a shorter time period

81
Q

Information Systems Steering Committees - Who is on it and purpose?

A

Should consist of systems management, the controller, and other management personnel and should establish policies with regard to an organizations information systtem

82
Q

The Risk Management Process includes bother Internal and External controls and involves:

A
  • Identification and prioritization of risks and understanding their relevance
  • Understanding the stakeholders objectives and their tolerance for risk
  • Developing and implementing appropriate strategies in the context of a risk management policy
83
Q

Activity Based Costing - Characteristics

A
  • Collects financial and operating data based on the underlying nature and extent of the cost drivers
  • Identifies activities and cost of performing those activities
  • Identifies appropriate cost drivers for all activities
  • Develops activity costs per unit of cost driver
  • Assigns costs to products/services based on consumption of activity costs
84
Q

What kind of processing provides the most accurate and complete set of information for decision making?

A

Online Transaction Processing

85
Q

What is Enterprise Risk Management (ERM)?

A

Is the process used by organizations to manage risk and seize opportunities to achieve goals of the organization. It provides a framework for risk management, determines response strategy, and monitors progress.

86
Q

When does a favorable balance of trade exist?

A

When exports exceed imports

87
Q

What happens in the Implementation Process?

A
  • Selecting and installing equipment
  • Training Personnel
  • Establishing operating policies
  • Getting software to function properly
88
Q

What is a Throughput Costing Method?

A
  • A new costing method that is being adopted

- Relegates all product costs except direct materials to period cost (expense) status

89
Q

A primary function of a Database Management System (DMS) is…

A

Capability to create and modify the database

90
Q

These controls are essential in a disaster recovery plan in order to allow uninterrupted operation

A

Back up and Downtime Controls

91
Q

What are some Processing Controls designed to ensure reliability and accuracy of data processing?

A
  • Limit Test

- Validity Check Test

92
Q

What is the most important control objective in the audit of an online order entry system that maintains information critical to management systems?

A

Data Integrity

93
Q

What is necessary to determine an organizations definition of a disaster?

A

Risk Analysis

94
Q

What are some Contingency strategies to react to a disaster?

A
  • System Backup Analysis
  • Vendor Supply Agreement Analysis
  • Contingent Facility contract analysis
95
Q

What is the function of a Source Code Library Maintenance Software?

A

Monitoring and recording changes to program source and object code

96
Q

What is the greatest risk regarding an entity’s use of EDI?

A

An improper distribution of EDI transactions

97
Q

What is the purpose of Program Documentation?

A

Program Documentation serves to improve communication, providing reference material for past actions, provides a guide for system maintenance, set ups as a tool for training, reduces impact of turnover
-As a control device, it helps keep programs up to date and performing as intended

98
Q

Corporate Intranets vs. LAN/WAN

A

Corporate Intranets have a higher security risk, but are less costly to operate than local or wide area networks

99
Q

How are decision tables used in a program?

A

It indicates alternative logic conditions and actions to be taken in a program

100
Q

What is an advantage of using a VAN?

A

It provides increased security for Data Transmissions

101
Q

What are some benefits of EDI?

A

-Improved business relationships with trading partners

102
Q

What is a Turnaround Form?

A

-A Turnaround Form is an output form that is later used for input. The turnaround form increases efficiency and eliminates input errors

103
Q

Who is the person ultimately responsible for Enterprise Risk Management?

A

The Chief Executive Officer (CEO)

104
Q

The demand for money varies _______ with the rate of interest.

A

Inversely

105
Q

What is the Liquidity Preference Function?

A

It relates money demand to the rate of interest. As interest rates fall, the quantity of money demanded increases. As rates rise, the quantity of money demanded decreases.

106
Q

What is a Zero Balance Account?

A

Is an account that maintains a zero balance since funds only sufficient to cover the checks presented are transferred from another account

107
Q

What is Concentration Building?

A

Is when a company uses a geographically dispersed collection center to speed up the collection process

108
Q

Just In Time Inventory System - Characteristics (Suppliers, deliveries, etc.)

A
  • Decrease the number of suppliers
  • Minimize the standard delivery quantity
  • Increase the number of deliveries required
109
Q

What is Residual Risk?

A

Is the risk that remains after management responds to the risk

110
Q

Why has Communications Risk generally increased in recent years?

A

Primarily because of technological changes

111
Q

The Audit Committee of the Board of Directors oversees:

A
  • Financial Reporting
  • Financial Disclosure
  • Compliance with standards
112
Q

Section 302 of SOX

A

Requires that CEO’s and CFO’s certify the accuracy of the FS and the reliability of Internal Controls prior to the statements being signed

113
Q

What should a written policy and procedure manual contain?

A

Policies and Procedures that help the employee understand the organizations policies

  • Proper business practices
  • Purpose of the organization
  • Responsibilities
  • Definitions
114
Q

The Procedures for a well designed control process:

A
  • The change control board approves the change and assigns a project manager
  • The project manager makes sure all paperwork has been received and approved
  • The project manager sets up schedules for all personnel involved
  • The projects are completed
  • Changes are tested and approved before release
115
Q

The Limitations of Enterprise Risk Management:

A
  • ERM deals with risk, which relates to the future and is inherently uncertain
  • ERM operates at different levels with respect to different objectives
  • ERM is as effective as the people responsible for its functioning
116
Q

How long must an accountant maintain workpapers on an audit?

A

For at least 7 years

117
Q

The COSO definition of Internal Control consists of how many interrelated components?

A

5; CRIME

118
Q

ERM is best defined as process affected by who in an organization?

A

By an entity’s Board of Directors, Management and other personnel

119
Q

The “True” Rate of interest is the same as…?

A

The Effective Interest Rate

120
Q

What is the primary source of funds for Sovereign Wealth Funds?

A

Export earnings from commodity based exports and the trade surplus generated by the export of the manufactured goods

121
Q

Globalization requires the need for Scenario Planning. How does this effect the firm under globalization?

A

It causes the firm to look at a number of different future possibilities for the firm under varying conditions of high uncertainty

122
Q

Technological Advances lead to what kind of unemployment?

A

Structural Unemployment

123
Q

The Demand Curve for a Product reflects what?

A

The impact that price has on the amount of a product purchased

124
Q

Companies will use Strategic Alliances to:

A
  • Open up or improve access to new markets
  • Learn from other companies by sharing technology and various experiences
  • Improve supply chain efficiency
  • Gain access too necessary resources
  • Get into critical countries in an effective and efficient manner
125
Q

Who has the duty of supplying an adequate amount of money to accommodate the needs of US businesses?

A

The Federal Reserve

126
Q

When does the highest effective interest rate occur?

A

When it is compounded continuously

127
Q

Supply Chain Management (Basic Definition)

A

Getting the right product to the right place at the right time at minimum cost

128
Q

Define Sovereign Wealth Funds

A

They are government investments funded by foreign currency reserves that are managed separately from official currency reserves and invested for profit

129
Q

What does the Multiplier Effect explain?

A

The Multiplier Effect explains why a small change in investment can have a much larger impact on GDP

130
Q

What is a Put Option?

A

It is an option that gives its owner the right to sell a specific security at fixed conditions of price and time

131
Q

What is a Principal Risk?

A

It relates to changes in the value of a particular Note, usually caused by changes in the Interest Rate

132
Q

How is a Normal Good defined?

A

Is one for which Demand Increase as income increases

133
Q

What happens to a country’s currency when the Central Bank raises interest rates sharply?

A

The Country’s currency will increase in relative value

134
Q

What does a Best Cost Provider attempt to do?

A

The Best Cost Provider attempts to provide a product with superior quality, features, durability, etc… at the lowest cost

135
Q

Domestic/Global Mergers/Acquisitions allow: (The benefits or advantages)

A
  • Lower risk by diversifying into additional industries
  • Enter New Markets
  • Provide possible opportunities for quick profitability in new areas
  • Provide opportunities to take advantages of economies of scope
  • Broaden the strength of resources and capabilities
  • Lower costs in the value chain
136
Q

What is the Dominant Reason why countries devalue their currencies?

A

To improve the balance of trade

137
Q

The IRS allows these methods in attempt to control transfer pricing manipulation:

A
  • The comparable uncontrolled price
  • The resale price
  • Cost Plus Approach
138
Q

Which is more secure: Encryption performed by physically secure hardware or software?

A

Physically Secure Hardware

139
Q

What does the Database Schema show?

A

It shows all elements of the database and areas of responsibility of individuals

140
Q

What is the Primary Purpose of a Database Management System (DMS)?

A

Reduce Data Redundancy

141
Q

Purpose of Change Management Control Policies?

A

To put in place the proper processes and approval channels to make changes to an organizations systems

142
Q

What are Service Programs?

A

Specialized programs that are made available to users of a computer system to perform routine and reportive functions

143
Q

What is a Distributed Data Processing Network?

A

A System where several computers are connected for communication and data transmission purpose, but where each computer can also process its own data

144
Q

What do Repatriation Restrictions prevent?

A

Repatriation Restrictions limit the parent’s ability to receive cash from international subsidiaries

145
Q

Which part of the business cycle does Potential Income exceed National Income?

A

The Recessionary Phase

146
Q

How is Structural Unemployment defined?

A

As unemployment due to workers not having the skills demanded by the employers

147
Q

Why and when would someone purchase a Put or Call option?

A
  • If someone purchases a Call Option, he/she expects prices to rise during the option period
  • A Put Option is purchased if the price is expected to decrease over the option period
148
Q

How can the balance of payment deficits and surpluses be eliminated?

A

Through the market mechanism of flexible exchange rates

149
Q

Define Aggregate Demand

A

A schedule or curve that shows the amount of Real GDP or Output that buyers collectively desire to buy at every price level

150
Q

As the US Dollar depreciates, what happens to imports and exports?

A

Import Price increase and export prices decrease

151
Q

What is an indicator that the economy is in a recession?

A

Potential National Income exceeds Actual National Income

152
Q

What is the Prime Rate?

A

Is the Bases rate that banks use in pricing short maturity loans to their best, most credit worthy customers

153
Q

Ursury Laws - Why were they developed?

A

Ursury Laws were developed in order to provide protection for borrowers against unnecessarily high and unreasonable interest rates
-Disadvantage: Less credit worthy customers are excluded from the market

154
Q

If the price for a product increases and the demand curve for a second product shifts to the left, then what kind of goods are these two?

A

They are complementary goods - Interchangeable

155
Q

The Online Data Entry Control - Preformatting

A

Is the display of a document with blanks for data items to be entered by the terminal operator

156
Q

Cloud Computing - Purpose/What is it?

A

Allows organizations to use the internet to access and use services and applications that run on remote 3rd party technology infrastructure

CPA BEC (3 decks)

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