CPA Review for Free Flashcards
Systems control activities can generally be divided into what two categories?
General and application
The purchase and sale of commodities for current delivery is known as which market?
Spot Market
A reliable system is one that operates without
material, error, fault or failure during a specified period in a specified environment -
The Availability principle of the AICPA’s Trust Services framework is concerned with
the availability of the system for operations and uses as committed or agreed to in conformity with the entity’s availability policies.
System failures that result in an interruption of business operations or loss of data is:
An example of risk related to the Availability principle
A company produces a product in a long-series of automated steps that requires little direct material and direct labor but a lot of overhead. What costing system is the company most likely to use?
Activity Based Costing
Computer hardware is extremely reliable, primarily due to
chip technology.``
The country of Flattistan’s central bank is seeking to stabilize its nation’s economy in what has become a period of excessive inflation. To this end, the central bank would utilize which of the following tools of monetary policy?
Selling government securities
Which of the following best describes a cold site?
An alternate site where the organization provides and installs hardware
It is less expensive than a hot site but takes longer to recover after a disaster
Cold Site
process a large volume of transactions where management reporting systems provide information used to support business decisions.
Transaction processing systems
Posie Petunia is planning to start up an independent business producing organic hand lotions. Several independent producers already produce such lotions and each produces a differentiated product. The equipment and supplies Posie needs are relatively inexpensive to obtain. Which of the following best describes the market structure into which Posie is planning to enter?
monopolistic competition: several independent producers, low barriers to entry, and differentiated products.
refers to the pricing strategy for products and services bought and sold across international borders between related parties. Transfer pricing is closely tied to a firm’s international tax strategy
Transfer pricing
Caused by decrease in SRAS
Cost-push Inflation
What causes a cost-push inflation
- Increase in oil price
2. Increase in nominal wages
What causes inflation and /or deflation?
Shift in AD and SRAS curves
Shift Right in AD curve will cause
Price Level to rise, leading to inflation
Shift Left in SRAS curve will cause
Price Level to rise, leading to inflation
Demand pull inflation is caused by
an increase in AD
Demand pull inflation could be caused by factors such as
- Increase in gov’t spending
- Decrease in taxes
- Increase in wealth
- Increase in the money supply
Inflation has a inverse relationship with
Purchasing power (As the price level rises the value of money declines)
What are the two most common measures of money supply?
- M1
2. M2
A disaster recovery and business continuity plan should strive for the following goals:
minimize the extent of disruption, damage and loss, establish an alternate method of processing data, facilitate the return to normal operations as soon as possible and train employees to perform under emergency conditions. -
The level of a material misstatements is one of the most important professional judgments that an_______must make.
independent auditor(It is one that the auditor must make without any influence by the audit client.)
Stephanie Felix has been tasked with measuring how often certain manufacturing defects occur at his company’s Salt Lake City plant. Which of the following tools would be the most effective in this case?
A Pareto chart is essentially a bar chart or histogram that ranks the causes of variations in a process from most to least frequent, which is intended to indicate their effects on quality
Which of the following is the best explanation of a futures contract?
A contract to buy or sell a specified commodity at a certain date in the future, at a market-determined price
An agreement to buy 10,000 barrels of light, sweet crude oil (a particular grade of crude oil) on August 12 of the current year at the price being quoted today in the futures market,is an example of
A futures contract
Is a cost that is not described by a straight line over the relevant range
A nonlinear cost function
Can be fixed or variable and are costs that are common to multiple products.
Joint Cost
You see a simultaneous decrease in supply and demand for tobacco products. Which of the following represents the effect of these shifts on output quantity and market price?
Output quantity decreases and output price is indeterminate.
costs have both a fixed and variable component
Mixed costs or semi variable
vary proportionally in total with the level of activity
variable cost
When a bond pays a coupon rate below the prevailing market rate, it will sell
At a discount
If the coupon rate is greater than the current market rate, the bond will sell.
At a premium.
When the coupon rate is equal to the market rate, the bond will sell
At exactly par value
The systems programmer is responsible for
implementing, modifying and debugging the software required to interface with the hardware
A patch is
a change or modification to an existing program and/or may also be added for fraudulent purposes.
An example of patch would be
changes in tax laws may require the implementation of a patch.
An example of internal business process:
should be measured based on how well the company manages to do a particular process
- measures how quickly inventory is acquired and sold.
- measures how cheaply goods can be turned into finished products.
- measures how often goods get to a customer within the time allotted
Useful and used by all levels of the organization not just for the exclusive use of upper management.
Data Mining
The definition of a data warehouse is:
An integrated collection of data used for reporting and analysis to support management decisions
Which of the following is a requirement established by the New York Stock Exchange for the companies that are officially listed on that exchange?
A code of conduct must be adopted by the governing board and made public.
What is meant by the term “economic profit?”
any profit earned in excess of a normal amount of profit.
Internal control systems should be designed to achieve operations and information process goals. What are three examples of operations goals?
- Effectiveness of operations
- Efficient resources
- Security of resources
a small number of powerful firms that dominate the marketplace and significant barriers to entry
An oligopoly
Which of the following definitions best describes an internal site for disaster recovery?
The organization’s site or intranet -
The steps to process improvement are:
1) design
2) modeling (which involves simulation of the process)
3) execution (including training of personnel and testing of the process)
4) monitoring
5) optimization
A disaster recovery and business continuity plan should include
Specific assignments for personnel who are familiar with the plan and their responsibilities
is a second generation language that requires an assembler to translate assembly language into machine language.
Assembly language
the risk to the firm’s earnings associated with translating its financial statements into functional currencies
Translation risk
Responsible for creating the visual content of the website?
The Web Designer
Examples of confidential data are:
- Engineering details of products
- legal documents
- customer lists
Internal control systems should be designed to achieve operations and information process goals. Which of the following are five examples of information goals?
Input validity, input completeness, input accuracy, update completeness, and update accuracy -
The COBIT framework describes four categories of IT resources:
applications, which include systems and manual procedures to process information; the information itself; infrastructure, which includes hardware, equipment, and operating systems needed to process information; and people.
The seven criteria set forth in the COBIT framework are:
1) effectiveness, 2) efficiency, 3) confidentiality, 4) integrity, 5) availability, 6) compliance, and 7) reliability
Two methods to control access to appropriate users include
Passwords and user IDs and Independent review of transactions -
A character is a
letter, number or symbol
System failures that result in an interruption of business operations or loss of data is an example of risk related to:
the Availability principle
Computer software designed to help humans make decisions?
Artificial intelligence
An example of a tool used by a Systems Analyst?
A systems flowchart
An example of a Master File is:
Vendor names and addresses
responsible of overseeing the development, planning and the implementation of a website. -
The Web Administrator or also called a Web Developer
Batch processing accumulates and processes similar
transactions in batches
On-line processing processes transactions as
they occur
Unemployment that occurs when unemployed laborers have manufacturing skills but job openings are for laborers with service skills is known as
Structural Employment
Frictional unemployment occurs
when there is job turnover
Cyclical unemployment occurs when
aggregate labor supply exceeds aggregate labor demand in a low point of the business cycle.
Full employment occurs when
all workers willing to work at market wages are employed using their skills
A period cost cannot be directly associated with
the production of a good and is expensed as incurred rather than being capitalized.
Product costs or “inventoriable” costs (such as direct material and direct labor) are directly associated with the
production of a good and are, thus, capitalized, or added to the cost of those items
if the cost of capital is 8 percent per year, then the IRR must be
above 8 percent for an investment to be a worthwhile venture
The potential that the present value of an organization’s cash flows could increase or decrease as a result of changes in the exchanges rate
Economic Exposure
Measurement of transaction exposure is generally done in two steps
- Project foreign currency inflows and foreign currency outflows
- Estimate the variability(risk) associated with the foreign currency.
Exchange rate risk is defined , in part, by
Transaction Exposure
Globalization is often measured using
World trade growth as a percentage of GDP
An increase in the discount rate would cause
MS ↓ INTEREST RATES ↑
When do differentiation strategies fail
The value of the firm’s premium does not exceed its cost
Occurs when an investor’s certainty equivalent is equal to the expected return on the investment
Risk indifferent
Occurs when an investor’s certainty equivalent is less than the expected rate of return
Risk-Averse(investor seeks higher returns for more risk)
Inelastic supply curve occurs when
the percentage change in Qty supplied is LESS than the percentage change in price
Subsidy is:
effectively reduces the costs of producing a product
Ideally, functions in a control environment should be segregated. This is not always possible. At a minimum, an attempt should be made to segregate what three functions?
Programming, operations and the data library
Which function is generally responsible for the custody of removable media?
The Librarian
An economist is hoping to see a future increase in gross domestic product. The economist is looking for evidence that might indicate this future change will happen. Which of the following is most likely to indicate this possibility?
-
Increase in the hours worked each week by production workers
GDP is a measure of
Productivity
definition for GDP using the expenditure (input) approach?
Consumption + investment + government expenditure + net exports.
When a firm uses standard unit costs for elements of production, budget variances are calculated by
comparing actual costs with those based on standard unit costs at the actual level of production -
