CMA EXAM PART 2 REVIEW UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

CMA EXAM PART 2 REVIEW UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS

Question:
1. IMA's Overarching Principles
Answer:
1. Honesty
2. Fairness
3. Objectivity
4. Responsibility

Question:
2. IMA's Four Standards
Answer:
1. Competence
2. Confidentiality
3. Integrity
4. Credibility

Question:
3. Resolution of Ethical Conflict
Answer:
a. Discuss the issue with you immediate supervisor
b. Advance to the next level of management until addressed
c. Consult with confidential IMA ethics advisor
d. Seek external counsel

Question:
4. Competence (4)
Answer:
1. Maintain expertise though continued learning
2. Adhere to laws, regulations, etc.
3. Provide adequate decision support
4. Recognize and communicate professional limitations

Question:
5. Confidentiality (3)
Answer:
1. Maintain unless authorized or legally required
2. Inform relevant parties of appropriate use
3. Do not use for unethical or illegal advantage

Question:
6. Integrity (3)

,Answer:
1. Mitigate actual, avoid apparent, advise possible
2. Avoid activities to cause prejudice
3. Abstain from discrediting activities

Question:
7. Credibility (3)
Answer:
1. Communicate fair and objectively
2. Disclose all relevant information
3. Disclose all delays or deficiencies in conforming with controls, leads, etc.

Question:
8. Describe the provisions of the Foreign Corrupt Practices Act of 1977
Answer:
1. Accounting
a. Internal Controls
b. Accurate Records
2. Anti-Bribery
a. No domestic concern may offer corrupt payments ('grease' payments ok)

Question:
9. SOX 406(a) & 406(c)
Answer:
a. Companies must issue a Code of Ethics to senior financial officers.
c. Code of Ethics must include standards to promote (basically IMA's standards)

Question:
10. Corporate Responsibility for Ethical Behavior (7)
Answer:
1. Foster ethics
2. Ethical vs. Legal
3. Tone from the Top
4. Culture
5. Training
6. Monitoring (KPI's, whistleblower framework, etc.)
7. Ethical behavior framework is prerequisite for internal control

Question:
11. Process Controls for Ethical Behavior (3)
Answer:
1. Business Process Reengineering
2. Quality Management
3. Continuous Process Improvement

Question:
12. Types of Fraud (2)

,Answer:
1. Financial Misreporting - usually management
2. Misappropriation of Asset - usually employee (immaterial)

Question:
13. Fraud Risk Model
Answer:
1. Opportunity - Controllable
2. Rationalization - Inherent
3. Motivation - Generally external

Question:
14. Fraud Investigation Techniques (3)
Answer:
1. Interviewing
2. Public Search
3. Documentation

Question:
15. Primary/Secondary Fraud Controls (4/2)
Answer:
1. Preventative
2. Detective
3. Corrective
4. Directive
A. Compensatory - Manager Review
B. Complementary - Deposit Slips

Question:
16. Segregation of Duties
Answer:
1. Custody
2. Authority
3. Record-Keeping

Question:
17. Net Working Capital Ratio
Answer:
= Net Working Capital/Total Assets

Question:
18. Accounts Payable Turnover
Answer:
= Purchases/Average AP

Question:
19. Days' Purchases in AP

, Answer:
= Days in Year/AP Turnover

Question:
20. Operating Cycle
Answer:
= Days' Sales in AR + Days' Sales in Inventory

Question:
21. Cash Cycle
Answer:
= Operating Cycle - Days' Purchases in AP

Question:
22. Fixed Asset Turnover Ratio
Answer:
= Net Sales/Net Average PPE

Question:
23. Total Assets Turnover
Answer:
= Net Sales/Average Total Assets

Question:
24. Total Debt to Total Capital Ratio
Answer:
= Total Debt/Total Capital
- Creditors prefer low to cushion losses

Question:
25. Debt to Equity Ratio (eq.+2)
Answer:
= Total Debt/Total Equity
- Higher means shareholders want higher returns
- Lower means better interest rates

Question:
26. Debt Ratio
Answer:
= Total Debt/Total Assets

Question:
27. Times Interest Earned
Answer:
= EBIT/Interest Expense
- Should not include irregular earnings