Q1. Which statement is not an advantage of robotic process automation (RPA)?
Q2. What effect does a contra-asset account have on a balance sheet?
Q3. Internal controls may be preventative, detective, corrective, or directive. Which is a detective control?
Q4. On March 15, a business received an invoice from the power company for utilities used in February. The retailer paid the invoice on April 1. The business uses accrual-based accounting. Which month should the business recognize the expense?
Q5. Which choice is a general guideline for adequate separation of duties to prevent both fraud and error?
Q6. What does the cost of a unit of product under the absorption costing method consist of?
Q7. Which are accruals and deferrals?
Q8. What do you call a situation where more than one person collaborates to circumvent existing internal controls?
Q9. Which is not an example of an internal control activity?
'MT: bank recons are internal control, checking to see if figures match. Approval by different level of authorities help to prevent unauthorized transactions - so it is a control too. segregate duties also ensures that.
Q10. Which budgeting approach requests justification of all expenditures?
Q11. What does the discontinued operations section of the income statement refer to?
Q12. How are the three financial statements (income statement, balance sheet, and cash flow statement) linked?
'MT: odd qns. But it should be net profit "npat" flows to retained earnings, and also starts the cashflow statement (so all linked and not independent). Assets are in the balance sheet, and net income is in the income statement. npat goes to retained earnings, not gross profit.
Q13. Which is not one of the four perspectives of the balanced scorecard?
Q14. What would be deducted from the balance per book when doing a bank reconciliation?
Q15. What situation could be the result of the three retail store employees sharing the same cash register?
Q16. A firm has $1,000 in debt and $3,000 in assets. What is the firm’s debt-to-equity ratio?
Q17. An external auditor is required to be independent when performing
'MT: tough qns, ambiguous options. Attest = validate audit data gathered. Consulting is less regulatory/ restrictive, = how to increase pie sales, versus audit/attestation = why you reported more pies in your fridge than we observed. Tax is grey, usually has to be internal audit committee approved or fees disclosed, etc. but there are exceptions.'
Q18. Proper segregation of functional responsibilities calls for the separation of
Q19. What does the degree of operating leverage represent?
' High operating leverage means a firm has a relatively fixed, and usually high cost base. So additional sales would incrementally drive more profits because those sales do not need to incur more costs to generate (like a factory, versus factory workers)'
Q20. Which characteristic would concern an auditor about the risk of material misstatements arising from fraudulent financial reporting?
'MT: regular bank recons and loyal employees are +ve. Nothing wrong with assets sold at a loss before fully depreciated, like you can sell a plane at a loss even before it has been "fully used".
Q21. An employee who makes a sale, ships the goods, and bills the customer violates which control activity?
Q22. What trait distinguishes auditors from accountants?
' MT: auditors are focused on gathering and interpreting audit evidence in specific sectors. Both auditors and accountants would be familiar with the principles that the client operates in'
Q23. What is the purpose of an operational audit?
Q24. Which statement is false?
'MT: BSC is on improving efficiency - deliver goals and how to measure that quantitatively or qualitatively. Nothing to do with how to compensate'
Q25. Which choice is not a component of internal control?
Q26. What is the difference between the cost of an asset and the accumulated depreciation for that asset?
Q28. Who does an audit committee report to?
Q29. A business purchased office equipment by issuing a one-year note payable. The entire amount of the note is due at the end of one year. How do you record this transaction?
' MT answer - it's Debit equipment (asset), Credit notes payable (liability). To +/- assets, need to dr/cr, inverse is true for liabilities. A long-form journal entry is: Borrow cash - Dr cash, Cr notes payable, then for equipment purchase - Dr equipment, Cr cash'
Q30. Which section of a financial annual report describes the corporation’s accounting methods?
Q31. What does “independence” mean in auditing?
Q32. What would cause a bank to increase a depositor’s account?
' MT: depositor account os a liability to the bank - bank owes the money to the depositor. bank collects notes receivable from clients means reducing clients' cash/ deposits. Similarly, if NSF means the cheque owner does not have enough funds to transfer funds into the client's deposits, there no change in deposits.'
Q33. Which statement about current liabilities is true?
Current liabilities are a company's short-term financial obligations that are due within one year or a normal operating cycle.
Q34. How do variable costs and fixed costs act within the relevant range?
While variable costs tend to remain flat, the impact of fixed costs on a company's bottom line can change based on the number of products it produces.
Q35. Which answer can be defined as an investment center’s contribution margin less the fixed costs that are traceable to the investment center?
Contribution Margin = Sales Revenue – Variable Costs
Segment Margin = Segment’s Contribution Margin – Fixed Costs traced to the Segment
Q36. If an auditor is expected to detect the overstatement of sales, what should the auditor trace transactions from?
Which audit procedure is most effective in testing credit sales for overstatement?
Vouch a sample recorded sales from the sales journal to shipping documents.
Q37. What is the formal method of analysis applied by management to identify appropriate cost drivers and effects on the costs of production?
[Reference]Activity analysis involves studying and evaluating the activities and processes within an organization to understand their cost implications. It helps in identifying the key activities that drive costs and analyzing their relationship with various cost drivers. By understanding these relationships, management can make informed decisions to optimize costs and improve overall efficiency.
Q38. When independent auditors can maintain their actual independence, it is referred to as independence in ____.
In Accounting Series Release no. 269, the SEC defined independence in fact and independence in appearance as separate but equally necessary factors in establishing the auditor’s objectivity and integrity when certifying financial statements filed with the commission by an issuer of securities. Few would debate that independence in fact—that is, that the auditor is unbiased—is essential to the validity of an audit.
Q39. When applying a cost-volume-profit analysis (CVP), certain assumptions must be respected. Which answer is not one of these assumptions?
CVP assumes the following:
- Constant sales price;
- Constant variable cost
- Constant total fixed cost
- Units sold equal units produced.
These are simplifying, largely linearizing assumptions, which are often implicitly assumed in elementary discussions of costs and profits.
Q40. Which statement about a perpetual inventory system is true?
I’m not 100% sure on this.
Perpetual inventory is a method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.
Q41. Which type of business would be most likely to use a job order costing system?
Since lawyers and accountants work with different clients on unique accounts, many will use a job order costing system to track how much time and resources were used for each customer.
Q42. Assigning indirect costs to specific jobs is completed by _.
I’m not 100% sure on this.
Indirect cost rate calculations can be determined by dividing an indirect cost by a cost object, such as sales revenues or square footage.
Q43. Which is an assurance engagement?
Q44. What is a conversion cost the sum of?
Q45. Under a perpetual inventory system, merchandise is purchased on account. What is the correct journal entry for this purchase?
Q46. Which is not a task usually associated with activity-based costing (ABC)?
Q47. What is true when the units in ending inventory increase during the year?
Q48. When independent auditors can maintain their actual independence, it is referred to as independence in__.
Q49. What is the formal method of analysis applied by management to identify appropriate cost drivers and effects on the costs of production?
Q50. When do you expect to apply job costing over process costing?
Q52. What does an inventory turnover ratio measure?
Q53. The company earned a gross profit of $4,000,000 and had net sales of $12,000,000. What is the gross margin and what does the result imply to the reviewer?
Q54. What type of cost changes in proportion to a company’s production volume?
Q55. What do you call the benefit sacrificed when one option is chosen over another?
Actual Cost = $10 per widget
Budgeted Cost = $7 per widget
Quantity = 1,000 widgets
Price Variance = (Actual Cost - Budgeted Cost) x Quantity
Price Variance = ($10 - $7) x 1,000
Price Variance = $3 x 1,000
Price Variance = $3,000
Therefore, the price variance for 1,000 widgets is $3,000.
Q57. What is the major financial accounting report system used outside of the United States?
Q58. What type of audit evidence would be considered the weakest type?
Q59. Permanent accounts are on what financial statement?
Q60. The cost of alternative X is $25,000 and the cost of alternative Y is $20,000. What do you call the $5,000 cost difference?
Q61. What is the purpose of a master budget?
Q62. What is true about an internal control system?
Q63. According to the cost formula Y = $20,000 + $4x, what would be the total cost at an activity level of 15,000 units?
Q64. A company can change to a new accounting principle if management can justify that the change will result in what?
Q65. Which cost items would be classified as an internal failure cost on a quality costs report?
Q66. What type of audit evidence would most likely be used to verify the existence of fixed assets?
Q67. What should an auditor do before auditing the balance sheet?
Q68. At McKay Company, machine hours are limited. Due to limited machine hours,there is more demand for McKay’s products than it can produce . To maximize profits, the company should evaluate each product’s _.
To determine the contribution margin per machine hour, the contribution margin for a product is divided by the number of machine hours required to produce that product. This calculation results in the amount of contribution margin earned for each machine hour used.
Q69. The asset-turnover ratio calculation measures _.
Q70. What cost is easily traceable to a cost object?
Q71. Which value chain element is associated with the cost of staffing a customer support phone line?
Q72. Flexible budgets are created to demonstrate how _.
Q73. Which is the appropriate term for an incurred cost that cannot be changed by any decision?
Q74. Which factor is most likely to increase an auditor’s awareness of possible fraudulent financial reporting?
Q75. Which step of the accounting cycle involves checking to see if total debits equal total credits?