CPA BEC
Internal controls ✔✔Process that is designed and implemented by an organization's
management , board of directors and other employees to provide reasonable assurance that it
will achieve its compliance, operating, and reporting objectives
Cost Estimation Method: Parametric Estimating ✔✔A cost estimation method that relies on a
statistical relationship between historical costs and other variables, such as square footage.
Cost Estimation Method: Analogous estimating ✔✔A cost estimation method that says the cost
of similar sized project conducted in the past is used to approximate the cost of the current
project.
Cost Estimation Method: Work Breakdown Structure Estimation (WBS) ✔✔A bottom-up
analysis because each activity is estimated and the the cost of each activity are aggregated to
form the project budget
Cost Estimation Method: Three point Estimations ✔✔Refers to the range of cost estimates
based on a most-likely assumption (realistic) of project costs. Optimistic assumption and
pessimistic assumptions
Cost Estimation Method: Project management software ✔✔Programs usually include a feature
that can be used to estimate project costs
Cash Flow Hedge ✔✔Designed to hedge exposure to variability in expected future cash flows
that could impact earnings
Fair Value hedge ✔✔Designed to hedge exposure to changes in the fair value of an asset or
liability that could impact earnings
A foreign currency hedge ✔✔a hedge designed to hedge exposure to foreign currency
variability. It can be classified as a cash flow hedge, a fair value hedge, or a hedge of exposures
to changes in value of a net investment in foreign operations.
Derivative ✔✔a contract between two or more parties whose value is based on an agreed-
upon underlying financial asset, index or security. Common underlying instruments include:
bonds, commodities, currencies, interest rates, market indexes and stocks.
,Economic Rate of Return on Common Stock ✔✔measures the dividend income and capital
growth in relation to the initial investment, the beginning price of the stock.
Zero-coupon bonds ✔✔Bonds that have a fixed stated rate of return that would require
assignment of a premium or discount to the underlying security to produce a market rate of
interest if that market yield is different from the stated rate.
Constant (Gordon) Growth Dividend Discount Model ✔✔The dividend discount model that
assumes that dividend payments are the cash flows of an equity security and that the intrinsic
value of the company's stock is the present value of the expected future dividends
Negative Arbitrage Effect ✔✔This occurs when interest Obligations exceed interest income
from cash reserves
change control system ✔✔A system put in place for the purpose of authorizing and monitoring
changes related to information technology, including software implementation, development,
application programs, database administration, etc. Although system implementations often
take longer and cost more than originally budgeted, these issues (along with scope creep) can
be minimized with better oversight through an established system
control Activities are most closely related to.... ✔✔Risk Response
Components of Internal controls ✔✔1.Control Environment (Tone at the top--ethics) 2. Risk
Assessment (f/s misstatement or fraud) 3. Information and communication (fair, accurate,
complete, timely (FACT)) 4.Monitoring (efficiency of IC, report deficiencies) 5. (Existing) control
activities--policies/procedures to mitigate risk
Effective internal controls ✔✔Present-included in design
Functioning-operating as designed
Enterprise Risk Management (ERM) Purpose ✔✔Integrated framework to assist organizations
in developing a comprehensive response to risk management.
Enterprise Risk Management (ERM) definition ✔✔Designed to identify potential events that
may affect the entity, and manage risk to be within its risk appetite, to provide reasonable
assurance regarding the achievement of entity objectives
Criteria to evaluate ERM ✔✔The components of the enterprise risk management framework.
,business judgment rule ✔✔Management from liability for actions that result in corporate
losses or damages if the actions are undertaken in good faith and are within both the power of
the corporation and the authority of management to make.
organizational structure principle ✔✔reporting relationships should not undermine the
commitment to effective financial reporting and internal control. Maintaining reporting
independence of the internal auditor is one way to apply this principle.
nature of the Board of Directors of XYZ Co.'s relationship to the company ✔✔Fiduciary
Internal Environment ✔✔Tone at the top
EBOCA-Ethical values, Board oversight, Organization structure, Commitment to Competence,
Accountability
HR-Human resources standards, Risk Management Philosophy, Risk Appetite
Event Identification (Ear) ✔✔Internal and external risks
Inherent risk ✔✔Risk that an organization that exists if management takes no action
Residual risk ✔✔risk to an organization that exists after management takes action to mitigate
impact
Risk Assessment techniques ✔✔Benchmarking
Probabilistic models (statistical data)
Non-probabilistic models
Risk Response options ✔✔Avoidance
Reduction
Sharing
Acceptance
Elements of effective ERM ✔✔IS EAR AIM
each element must be present and functioning
Financial performance measures ✔✔Profit
Return on Investment
Variance Analysis-actual vs expected
Balanced Scorecard-for implementing strategy
, Non financial measures ✔✔these measures are an effective way to observe problems as they
occur and thereby direct attention to potential errors or inefficiencies before poor financial
results are produced.
External Benchmarking
Internal Benchmarking
External Benchmarking ✔✔Productivity measures-variance/efficiency
Total Factor productivity ratios- output/total costs
Partial Productivity Ratios-output/ specific quanitity
Internal Benchmarking ✔✔Techniques to find and analyze problems (deviations)
Pareto Diagram ✔✔Histogram
used to determine the quality control issues that are most frequent and often demand the
most attention
Cause and Effect (Fishbone) Diagram ✔✔Used to identify the sources of problems in the
production process by resources and take corrective action
Characteristics of Effective performance measures ✔✔Relate to the goals of the organization;
Balance long-term and short-term issues;
Reflect management of key activities;
Are under the control or influence of employees;
Are understood by employees;
Are used to evaluate and reward the employee or otherwise constructively influence behavior;
Are used consistently
Marketing practices and methods ✔✔Transaction marketing
Interaction-Based Relationship marketing
Database marketing
E-marketing
Network Marketing
Transaction marketing ✔✔Single sale at the lowest price
Interaction-based Relationship Marketing ✔✔Repeat Business/ loyalty discounts
Internal controls ✔✔Process that is designed and implemented by an organization's
management , board of directors and other employees to provide reasonable assurance that it
will achieve its compliance, operating, and reporting objectives
Cost Estimation Method: Parametric Estimating ✔✔A cost estimation method that relies on a
statistical relationship between historical costs and other variables, such as square footage.
Cost Estimation Method: Analogous estimating ✔✔A cost estimation method that says the cost
of similar sized project conducted in the past is used to approximate the cost of the current
project.
Cost Estimation Method: Work Breakdown Structure Estimation (WBS) ✔✔A bottom-up
analysis because each activity is estimated and the the cost of each activity are aggregated to
form the project budget
Cost Estimation Method: Three point Estimations ✔✔Refers to the range of cost estimates
based on a most-likely assumption (realistic) of project costs. Optimistic assumption and
pessimistic assumptions
Cost Estimation Method: Project management software ✔✔Programs usually include a feature
that can be used to estimate project costs
Cash Flow Hedge ✔✔Designed to hedge exposure to variability in expected future cash flows
that could impact earnings
Fair Value hedge ✔✔Designed to hedge exposure to changes in the fair value of an asset or
liability that could impact earnings
A foreign currency hedge ✔✔a hedge designed to hedge exposure to foreign currency
variability. It can be classified as a cash flow hedge, a fair value hedge, or a hedge of exposures
to changes in value of a net investment in foreign operations.
Derivative ✔✔a contract between two or more parties whose value is based on an agreed-
upon underlying financial asset, index or security. Common underlying instruments include:
bonds, commodities, currencies, interest rates, market indexes and stocks.
,Economic Rate of Return on Common Stock ✔✔measures the dividend income and capital
growth in relation to the initial investment, the beginning price of the stock.
Zero-coupon bonds ✔✔Bonds that have a fixed stated rate of return that would require
assignment of a premium or discount to the underlying security to produce a market rate of
interest if that market yield is different from the stated rate.
Constant (Gordon) Growth Dividend Discount Model ✔✔The dividend discount model that
assumes that dividend payments are the cash flows of an equity security and that the intrinsic
value of the company's stock is the present value of the expected future dividends
Negative Arbitrage Effect ✔✔This occurs when interest Obligations exceed interest income
from cash reserves
change control system ✔✔A system put in place for the purpose of authorizing and monitoring
changes related to information technology, including software implementation, development,
application programs, database administration, etc. Although system implementations often
take longer and cost more than originally budgeted, these issues (along with scope creep) can
be minimized with better oversight through an established system
control Activities are most closely related to.... ✔✔Risk Response
Components of Internal controls ✔✔1.Control Environment (Tone at the top--ethics) 2. Risk
Assessment (f/s misstatement or fraud) 3. Information and communication (fair, accurate,
complete, timely (FACT)) 4.Monitoring (efficiency of IC, report deficiencies) 5. (Existing) control
activities--policies/procedures to mitigate risk
Effective internal controls ✔✔Present-included in design
Functioning-operating as designed
Enterprise Risk Management (ERM) Purpose ✔✔Integrated framework to assist organizations
in developing a comprehensive response to risk management.
Enterprise Risk Management (ERM) definition ✔✔Designed to identify potential events that
may affect the entity, and manage risk to be within its risk appetite, to provide reasonable
assurance regarding the achievement of entity objectives
Criteria to evaluate ERM ✔✔The components of the enterprise risk management framework.
,business judgment rule ✔✔Management from liability for actions that result in corporate
losses or damages if the actions are undertaken in good faith and are within both the power of
the corporation and the authority of management to make.
organizational structure principle ✔✔reporting relationships should not undermine the
commitment to effective financial reporting and internal control. Maintaining reporting
independence of the internal auditor is one way to apply this principle.
nature of the Board of Directors of XYZ Co.'s relationship to the company ✔✔Fiduciary
Internal Environment ✔✔Tone at the top
EBOCA-Ethical values, Board oversight, Organization structure, Commitment to Competence,
Accountability
HR-Human resources standards, Risk Management Philosophy, Risk Appetite
Event Identification (Ear) ✔✔Internal and external risks
Inherent risk ✔✔Risk that an organization that exists if management takes no action
Residual risk ✔✔risk to an organization that exists after management takes action to mitigate
impact
Risk Assessment techniques ✔✔Benchmarking
Probabilistic models (statistical data)
Non-probabilistic models
Risk Response options ✔✔Avoidance
Reduction
Sharing
Acceptance
Elements of effective ERM ✔✔IS EAR AIM
each element must be present and functioning
Financial performance measures ✔✔Profit
Return on Investment
Variance Analysis-actual vs expected
Balanced Scorecard-for implementing strategy
, Non financial measures ✔✔these measures are an effective way to observe problems as they
occur and thereby direct attention to potential errors or inefficiencies before poor financial
results are produced.
External Benchmarking
Internal Benchmarking
External Benchmarking ✔✔Productivity measures-variance/efficiency
Total Factor productivity ratios- output/total costs
Partial Productivity Ratios-output/ specific quanitity
Internal Benchmarking ✔✔Techniques to find and analyze problems (deviations)
Pareto Diagram ✔✔Histogram
used to determine the quality control issues that are most frequent and often demand the
most attention
Cause and Effect (Fishbone) Diagram ✔✔Used to identify the sources of problems in the
production process by resources and take corrective action
Characteristics of Effective performance measures ✔✔Relate to the goals of the organization;
Balance long-term and short-term issues;
Reflect management of key activities;
Are under the control or influence of employees;
Are understood by employees;
Are used to evaluate and reward the employee or otherwise constructively influence behavior;
Are used consistently
Marketing practices and methods ✔✔Transaction marketing
Interaction-Based Relationship marketing
Database marketing
E-marketing
Network Marketing
Transaction marketing ✔✔Single sale at the lowest price
Interaction-based Relationship Marketing ✔✔Repeat Business/ loyalty discounts
