BEC CPA REAL EXAM 250 QUESTIONS AND CORRECT
DETAILED ANSWERS 2025// ALL YOU NEDD TO PASS
CPA BEC EXAM
Principals-based approach of COSO framework - ANSWER-management judgement
3 objectives of COSO - ANSWER-O-operating objectives (effectiveness and efficiency)
R-reporting objectives (reliability, timeliness, transparency)
C-compliance objectives (adhering to laws and regulations)
5 Components of COSO Framework - ANSWER-1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
Control Environment (EBOCA) - ANSWER-Ethics
Board independence and oversight
Org. structure
Commitment to competence
Accountability
Risk Assesment (SAFR) - ANSWER-Specify objectives
Assess and identify changes
Fraud potential
Risk (analyzed)
Information and Communication (OIE) - ANSWER-Obtain and use information
Internally communicate information
,External parties communication
Monitoring (So D) - ANSWER-Separate/ongoing evaluations
Deficiencies communicated
Existing Control Activities (CA T P) - ANSWER-Control Activities
Technology controls
Policies and procedures
According to the COSO Enterprise Risk Management, what is the definition of risk - ANSWER-Risk
is the possibility that events will occur and affect the achievement of strategy and business
objectives
ERM - ANSWER-Enterprise Risk Management is the culture, capabilities, and practices integrated
with strategy-setting and performance, that organizations rely on to manage risk in creating,
preserving and realizing value
5 components of ERM - ANSWER-G-governance and culture
O-objective setting/strategy
P-performance
R-review and revision
O-ongoing information, communication, and reporting
Governance & Culture ("DOVES") - ANSWER-D-desired culture
O-oversight from board
V-values commitment
E-employees (capable)
S-structure established
Objective setting/strategy (SOAR) - ANSWER-S-strategies (alternative)
O-objectives (business)
,A-analyzes business context
R-defines risk appetite
Performance (VAPIR) - ANSWER-V-view (portfolio)
A-assesses severity of risk
P-prioritizes risk
I-identifies risks (events)
R-responses to risk implemented
Review and revision (SIR) - ANSWER-S-substantial change
I-improvement in ERM
R-reviews risk and performance
why do creditors use debt covenants in lending agreements, how does this impact the issuer -
ANSWER-Debt covenants are stipulated in lending agreements to protect the creditors' interests
by limiting or prohibiting certain actions of the debtors that may be harmful to the creditors interests
(ex: issuing more debt)
debt covenants are disadvantageous to the issuer (the debtor), as they may restrict certain
management activities (ex: selling assets)
operating leverage - ANSWER-operating leverage is the degree to which a firm uses FIXED
operating costs, as opposed to VARIABLE operating costs
financial leverage - ANSWER-financial leverage is the degree to which a firm's use of DEBT to
finance the firm magnifies the effects of a given percentage change in EBIT on the percentage change
in EPS
working capital - ANSWER-current assets - current liabilities = working capital
cash conversion cycle (CCC) - ANSWER-CCC= inventory conversion period + receivables (A/R)
collection period - payables (A/P) deferral period
, inventory conversion period - ANSWER-ICP= 365/inventory turnover
inventory turnover= COGS/Avg. inventory
receivables collection period - ANSWER-RCP= 365/AR turnover
AR turnover= Sales/Avg. AR
payables deferral period - ANSWER-PDP= 365/AP turnover
AP turnover= COGS/Avg. AP
what methods can be used to delay disbursements? - ANSWER-defer payments
drafts
line of credit
zero-balance accounts
annual percentage rate for quick payment discounts - ANSWER-360/(pay period-discount period) x
discount %/(100%-discount %)
reorder point for inventory formula - ANSWER-reorder point= safety stock + (lead time x sales
during lead time)
what is the equation for economic order quantity (EOQ) - ANSWER-order size = sqr.root of [2(sales
in units)(order cost per purchase)]/carrying cost per unit
Factoring as a mechanism for speeding cash collections - ANSWER-factoring involves the sale of
accounts receivable to another party (a factor) in exchange for cash
the selling company will receive an upfront cash advance of x% of their receivables and will be
charged both a fee on all receivables purchased and an interest rate on the upfront advance (while
saving on collection-related expenses)
DETAILED ANSWERS 2025// ALL YOU NEDD TO PASS
CPA BEC EXAM
Principals-based approach of COSO framework - ANSWER-management judgement
3 objectives of COSO - ANSWER-O-operating objectives (effectiveness and efficiency)
R-reporting objectives (reliability, timeliness, transparency)
C-compliance objectives (adhering to laws and regulations)
5 Components of COSO Framework - ANSWER-1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
Control Environment (EBOCA) - ANSWER-Ethics
Board independence and oversight
Org. structure
Commitment to competence
Accountability
Risk Assesment (SAFR) - ANSWER-Specify objectives
Assess and identify changes
Fraud potential
Risk (analyzed)
Information and Communication (OIE) - ANSWER-Obtain and use information
Internally communicate information
,External parties communication
Monitoring (So D) - ANSWER-Separate/ongoing evaluations
Deficiencies communicated
Existing Control Activities (CA T P) - ANSWER-Control Activities
Technology controls
Policies and procedures
According to the COSO Enterprise Risk Management, what is the definition of risk - ANSWER-Risk
is the possibility that events will occur and affect the achievement of strategy and business
objectives
ERM - ANSWER-Enterprise Risk Management is the culture, capabilities, and practices integrated
with strategy-setting and performance, that organizations rely on to manage risk in creating,
preserving and realizing value
5 components of ERM - ANSWER-G-governance and culture
O-objective setting/strategy
P-performance
R-review and revision
O-ongoing information, communication, and reporting
Governance & Culture ("DOVES") - ANSWER-D-desired culture
O-oversight from board
V-values commitment
E-employees (capable)
S-structure established
Objective setting/strategy (SOAR) - ANSWER-S-strategies (alternative)
O-objectives (business)
,A-analyzes business context
R-defines risk appetite
Performance (VAPIR) - ANSWER-V-view (portfolio)
A-assesses severity of risk
P-prioritizes risk
I-identifies risks (events)
R-responses to risk implemented
Review and revision (SIR) - ANSWER-S-substantial change
I-improvement in ERM
R-reviews risk and performance
why do creditors use debt covenants in lending agreements, how does this impact the issuer -
ANSWER-Debt covenants are stipulated in lending agreements to protect the creditors' interests
by limiting or prohibiting certain actions of the debtors that may be harmful to the creditors interests
(ex: issuing more debt)
debt covenants are disadvantageous to the issuer (the debtor), as they may restrict certain
management activities (ex: selling assets)
operating leverage - ANSWER-operating leverage is the degree to which a firm uses FIXED
operating costs, as opposed to VARIABLE operating costs
financial leverage - ANSWER-financial leverage is the degree to which a firm's use of DEBT to
finance the firm magnifies the effects of a given percentage change in EBIT on the percentage change
in EPS
working capital - ANSWER-current assets - current liabilities = working capital
cash conversion cycle (CCC) - ANSWER-CCC= inventory conversion period + receivables (A/R)
collection period - payables (A/P) deferral period
, inventory conversion period - ANSWER-ICP= 365/inventory turnover
inventory turnover= COGS/Avg. inventory
receivables collection period - ANSWER-RCP= 365/AR turnover
AR turnover= Sales/Avg. AR
payables deferral period - ANSWER-PDP= 365/AP turnover
AP turnover= COGS/Avg. AP
what methods can be used to delay disbursements? - ANSWER-defer payments
drafts
line of credit
zero-balance accounts
annual percentage rate for quick payment discounts - ANSWER-360/(pay period-discount period) x
discount %/(100%-discount %)
reorder point for inventory formula - ANSWER-reorder point= safety stock + (lead time x sales
during lead time)
what is the equation for economic order quantity (EOQ) - ANSWER-order size = sqr.root of [2(sales
in units)(order cost per purchase)]/carrying cost per unit
Factoring as a mechanism for speeding cash collections - ANSWER-factoring involves the sale of
accounts receivable to another party (a factor) in exchange for cash
the selling company will receive an upfront cash advance of x% of their receivables and will be
charged both a fee on all receivables purchased and an interest rate on the upfront advance (while
saving on collection-related expenses)
