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Finance and Accounting > Exam 2 > Flashcards

Exam 2 Flashcards

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1
Q

what is goal congruence

A

aligning the goals of individuals and organizations

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2
Q

what are the three broad methods for aligning goals

A

policies and procedures, monitoring, incentive schemes and performance evaluation

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3
Q

what is strategic management

A

the art and science of formulating, implementing, and evaluating cross functional decisions that enable and org to achieve its objectives

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4
Q

what are the three management function

A

planning, directing, controlling

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5
Q

what is planning

A

looking ahead and establishing objectives

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6
Q

what is directing

A

coordinating a companies diverse activities and human resources to produce a smoothly running operation

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7
Q

what is controlling

A

the process of keeping the companies activities on track

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8
Q

what are the steps in planning

A

identify alternatives, select alternative that best achieves companies objectives, develop budgets to guide progress towards the selected alternative

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9
Q

how are reports used in controlling

A

actual vs planned reports show the differences in outcome from planning and help make further decisions to guide the org towards objectives

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10
Q

what is corporate social responsibility

A

when companies take into account people, profit, and the planet instead of just profit

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11
Q

what is just in time inventory

A

when goods are manufactured just in time for use instead of ahead of time creating stockpiles

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12
Q

what is the theory of constraints

A

identifying bottle necks or constraints, fixing them, then moving on to the next largest bottleneck or constraint

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13
Q

what is the value chain

A

all activities associated with providing a good or service

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14
Q

what is cost behaviour

A

how a cost will react to changes in the level of business activity(sales)

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15
Q

what is a controllable cost

A

a cost that is capable of being regulated by a manager

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16
Q

what is a non controllable cost

A

a cost that is not capable of being regulated by a manager

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17
Q

what is the COGS equation

A

beginning inventory + additions or purchases - ending inventory

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18
Q

what are direct costs

A

costs traceable to a single cost object

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19
Q

what are indirect costs

A

costs that can not be traced to a single cost object

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20
Q

what are the classifications of manufacturing costs

A

direct materials, direct labour, overhead costs

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21
Q

what are direct materials

A

the cost of raw material that is used to make and can be conveniently traced to the finished product

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22
Q

what is direct labour

A

cost of salaries, wages, and fringe benefits for personnel who work directly on manufactured products

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23
Q

what are overhead costs

A

all other manufacturing costs including indirect materials, indirect labour and other costs

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24
Q

what are the inventory classifications for a manufacturer

A

raw materials, work in progress, finished goods

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25
Q

what is cost allocation

A

the process of allocating common costs to individual products

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26
Q

what are budgets

A

detailed plans that set out, in monetary terms, plans for income and expenditures in a future period

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27
Q

what are the steps in the budgetary process

A

develop a budget, analyze differences between budget and actual outcome, take corrective actions, modify future plans, repeat

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28
Q

what is variance

A

the difference between actual and projected figures
favourable variance is is when actual cost is less than budgeted
unfavourable variance is when actual cost is higher than budgeted
sales budgets have opposite for favourable vs unfavourable

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29
Q

what is a static budget

A

a projection of budget data at one level of activity

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30
Q

what is a flexible budget

A

a projection of budget data at multiple levels of activity

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31
Q

what are the steps to making a flexible budget

A

identify the activity index and range of activity
identify VC and budgeted VC per unit
identify fixed costs
prepare the budget for selected activity increments

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32
Q

what is responsibility accounting

A

accounting information that is structured by responsibility centres

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33
Q

what is the point of responsibility accounting

A

it is used to motivate, evaluate, and reward based on only what can be controlled

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34
Q

what is a cost centre

A

it incurs costs but does not directly generate revenues such as the accounting department of a mechanics

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35
Q

what is a profit centre

A

incurs costs and also generates revenues

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36
Q

what is an investment centre

A

incurs costs, generates revenue, and has control over the investment funds that are available for use such as a subsidiary company

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37
Q

what is the controllable margin formula

A

sales - VC - controllable FC
contribution margin - controllable FC

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38
Q

what is the contribution margin formula

A

sales - VC

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39
Q

what is the contribution margin % formula

A

(contribution margin / sales) x 100

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40
Q

what is the formula for ROI

A

controllable margin or operating income / average operating assets
margin x turnover

41
Q

what is the formula for profit margin

A

operating income / sales

42
Q

what is the formula for turnover

A

sales / average operating assets

43
Q

what are the three ways to increase ROI

A

increase sales, reduce expenses, reduce assets

44
Q

what are the four types of audits

A

operational, compliance, financial statement, tax

45
Q

what are operational auditsq

A

an examination of the manner in which an org conducts business with the goal of finding ways to improve ops

46
Q

what are compliance audits

A

an examination of an orgs adherence to certain guidelines or regs

47
Q

what are financial statement audits

A

an examination of an entities financial reporting

48
Q

what are tax audits

A

the CRA or some tax agency checking to ensure reported tax data is correct

49
Q

what are internal audits

A

audits done internally to improve ops, ensure reliability and integrity of reporting, safeguard assets, and ensure compliance

50
Q

who does the internal audit committee report to

A

the audit committee to maintain independence

51
Q

what is external auditing

A

performing checks to ensure the financial statements and or other data prepared for external use are acurate

52
Q

what is the objective of an audit

A

enable the auditor to express an opinion as to whether the statements are prepared in a material sense in conformity with an applicable framework such as GAAP

53
Q

what are the four audit opinions

A

unmodified, qualified, adverse, disclaimer of opinion

54
Q

what is an unmodified opinion

A

there are no material misstatements

55
Q

what is a qualified opinion

A

financials are fairly reported with the exception of a specific area

56
Q

what is an adverse opinion

A

the financials are misrepresented, misstated, and do not accurately reflect the orgs financial position and health

57
Q

what is a disclaimer of opinion

A

no opinion is being given regarding the statements due to some lack of information typically

58
Q

what is business risk

A

the risk that a company may fail to achieve goals due to economic changes, tech changes, or for management decisions(auditors do not report on business risk)

59
Q

what is information risk

A

the risk that the financial information fails to reflect economic substance of business activities(the risk financial info is unreliable)

60
Q

what are the two categories of information risk

A

accounting risk and audit risk

61
Q

what is accounting risk

A

the risk that accounting info in the statements does not accurately reflect the underlying economic events of the business

62
Q

what is audit risk

A

the risk of insufficient evidence being gathered on the facts concerning the clients economic circumstances and an inappropriate opinion is expressed

63
Q

what are the three parts to audit risk

A

inherent risk, control risk, detection risk

64
Q

what is inherent risk

A

the probability a material misstatement will occur in the statements

65
Q

what is control risk

A

material misstatements will not be prevented or detected by internal controls

66
Q

what is detection risk

A

material misstatements will not be detected by the auditor

67
Q

what is fraud

A

a deliberate deception practiced so as to secure unfair or unlawful gain

68
Q

what is occupational fraud and abuse

A

the use of ones occupation for personal enrichment thorugh he deliberate misuse of the employing orgs resources

69
Q

what fraud is categorized as corruption

A

conflicts of interest, bribery, illegal gratitudes, economic extortion

70
Q

what fraud is categorized as asset misappropriations

A

cash misappropriation, inventory and other asset misappropriation

71
Q

what are the categories of fraudulent statements

A

financial and non financial

72
Q

what are the elements of fraud

A

a material false statement, knowledge that the statement was false when it was uttered, reliance on the false statement by the victim, a risk that damages may be suffered as a result of the victims reliance on the false statement

73
Q

what is larceny

A

theft

74
Q

what is conversion

A

unauthorized exercise of the right of ownership over property belonging to another, to the alteration of their condition or the exclusion of the owners rights

75
Q

what is embezzlement

A

taking someone else’s property that you originally acquired lawfully in a position of trust

76
Q

what is breach of fiduciary duty

A

breach of duty of care when in a highly trusted position

77
Q

what is fraud examination

A

resolving allegations of fraud from tips, complaints, or accounting clues

78
Q

what is involved in fraud examination

A

documentary evidence, interviewing witnesses, writing investigative reports, testifying, assisting in the detection and prevention of fraud

79
Q

what is the order of tools used in fraud examination

A

observation, document analysis, neutral third party witnesses, corroborative witnesses, co-conspirators, target

80
Q

what is a prediction in fraud examination

A

a totality of circumstances that would lead a reasonable, trained, and prudent individual to believe fraud has, is, or will, occur

81
Q

what are the three points to the fraud triangle

A

pressure, opportunity, rationalization

82
Q

what are things that lead to perceived opportunity to commit fraud

A

general information, technical skill, poor controls

83
Q

what are the three types of tax entities

A

individuals(T1), Corps(T2), Trusts(T3)

84
Q

what are the 7 types of individual income

A

employment income, business income, property income, capital gains, other income, other deductions, losses

85
Q

what are examples of other income

A

interest, dividends, rental income

86
Q

what are examples of other deductions

A

RRSP contributions, child care expenses

87
Q

what is the process for calculating taxable income

A

add up all income sources and subtract losses, capital gains are only 50% taxable

88
Q

what are tax credits

A

things that directly reduce taxes payable

89
Q

how do employees pay taxes

A

they pay throughout the year through withholding tax on each pay check and at the end of the year file a tax return and either get back overpaid taxes or pay more for underpaid taxes

90
Q

how do self employed individuals pay taxes

A

can pay throughout the year in instalments and file a tax return to adjust for nay over or underpayment

91
Q

what is CPP

A

the Canada pension plan that employees pay into through withholding tax throughout the year based on a percentage of income

92
Q

what is EI

A

employment insurance that Canadian employees pay into through withholding tax and can be claimed back in the event of loss of employment

93
Q

who is required to file a tax return

A

any Canadian residence who have taxes payable. if the government owes you money you don’t need to file but you will not get the money

94
Q

when are tax returns due

A

for normal employees it is April 30th of the following year

for self employed individuals and their spouses is is June 15th of the following year but the balance owing still must be paid by April 30th

95
Q

what is an RRSP

A

a registered retirement savings plan in which contributions are tax deductible but withdrawals are taxable and their are contribution limits

96
Q

what is a TFSA

A

a tax free savings account in which contributions are not deductible and there is a contribution limit but withdrawals are not taxable

97
Q

how do you calculate current unused TFSA room

A

last years withdrawals + current year annual TFSA limit - current year contributions

98
Q

what is a FHSA

A

first home savings account which has a lifetime contribution limit of $40,000 and an annual limit of $8,000. contributions are tax deductible and withdrawals for first home purchase are non taxable. FHSA lasts for 15 years after opening

Finance and Accounting (3 decks)

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