CAE ASAE EXAM WITH ALL CORRECT & 100% VERIFIED
ANSWERS|ALREADY GRADED A+
Segregation of Duty ✔Correct answer-No individual should control all 4 aspects of a financial
transaction.
Initiation (check request)
Authorization (approval to pay)
Asset custody (keeping the checkbook)
Recording transaction (posting)
Clean Audit ✔Correct answer-An opinion that provides the *highest level of assurance* that the:
-Statement of Financial Position
-Statement of Activities
-Statement of Cash Flows
are all fairly presented.
Accounting Services Levels ✔Correct answer-Audit (greatest level of assurance)
Review (limited scope - uncovers misstatements)
Compilation (no assurance of accuracy)
Sarbanes-Oxley ✔Correct answer-The two provisions that impact non-profits are:
1. Whistle-blower protection
2. Prohibition of document destruction upon commencement of a federal investigation
Management Letter ✔Correct answer-A letter issued by an independent auditor that
communicates what levels that management needs to address in order to come into compliance with
GAAP accounting practices.
Statement of Activities ✔Correct answer-Shows financial activity by month and on a year-to-date
basis.
Reports:
Revenue generated
Expenses incurred
Results in net income or net loss
Statement of Cash Flows ✔Correct answer-Helps creditors determine ability to generate future
cash flow to meet obligations. Cash flow and ability to convert assets into cash important to maintain
financial flexibility.
Accrual-basis Accounting ✔Correct answer-Recognizes revenues when earned and expenses when
incurred.
This is a best practice in association accounting. It gives a better picture than cash accounting.
Allocate dues when earned monthly rather than lump sum when received.
Chart of Accounts ✔Correct answer-Lists all the line item accounts being used.
Liquidity Ratio ✔Correct answer-Measures ability to pay *short term obligations*.
Current Ratio ✔Correct answer-Total Current Assets / Total Current Liabilities
, Profitability Ratio ✔Correct answer-Profits / Losses (over a period of time).
Quick Ratio ✔Correct answer-Measures the ability to pay current debts.
Current Assets (inventory and pre-paids) / Total Current Liabilities
Reserve Ratio ✔Correct answer-Measures liquidity.
Expendable Net Assets / Total Annual Expenses
Coverage Ratio ✔Correct answer-Projections for interest and principal payments to creditors and
investors.
Can you cover things?
Net Assets ✔Correct answer-Assets *after* liabilities have been paid.
Maslow's Hierarchy of Needs ✔Correct answer-A theory of human motivation:
Fulfilled bottom to top:
Self-Actualization
Esteem
Love/Belonging
Safety
Physiological
*SSASS* (survival, safety, affiliation, self-esteem, self-actualization)
Statement of Purpose ✔Correct answer-The reason for an association's existence.
This is crucial in determining if an association can be a non-profit and tax-exempt organization.
Mission ✔Correct answer-What drives the organization.
A mission can change, but a purpose generally does not.
UBIT ✔Correct answer-*Unrelated Business Income Tax*
Tax paid on money derived from business activity not related to the association's tax-exempt
purpose.
Tax-exempt status can be jeopardized if UBI is too high a proportion of income.
501(c)6 ✔Correct answer-Business Leagues
Membership associations
Free to lobby
501(c)3 ✔Correct answer-Nonprofit Foundation
Scientific
Education
Limited lobbying
IRS Form 990 ✔Correct answer-Discloses:
Records retention policy
Conflict of interest policy
Whistle-blower policy
Investment/reserve policy
Anti-fraud policy
ANSWERS|ALREADY GRADED A+
Segregation of Duty ✔Correct answer-No individual should control all 4 aspects of a financial
transaction.
Initiation (check request)
Authorization (approval to pay)
Asset custody (keeping the checkbook)
Recording transaction (posting)
Clean Audit ✔Correct answer-An opinion that provides the *highest level of assurance* that the:
-Statement of Financial Position
-Statement of Activities
-Statement of Cash Flows
are all fairly presented.
Accounting Services Levels ✔Correct answer-Audit (greatest level of assurance)
Review (limited scope - uncovers misstatements)
Compilation (no assurance of accuracy)
Sarbanes-Oxley ✔Correct answer-The two provisions that impact non-profits are:
1. Whistle-blower protection
2. Prohibition of document destruction upon commencement of a federal investigation
Management Letter ✔Correct answer-A letter issued by an independent auditor that
communicates what levels that management needs to address in order to come into compliance with
GAAP accounting practices.
Statement of Activities ✔Correct answer-Shows financial activity by month and on a year-to-date
basis.
Reports:
Revenue generated
Expenses incurred
Results in net income or net loss
Statement of Cash Flows ✔Correct answer-Helps creditors determine ability to generate future
cash flow to meet obligations. Cash flow and ability to convert assets into cash important to maintain
financial flexibility.
Accrual-basis Accounting ✔Correct answer-Recognizes revenues when earned and expenses when
incurred.
This is a best practice in association accounting. It gives a better picture than cash accounting.
Allocate dues when earned monthly rather than lump sum when received.
Chart of Accounts ✔Correct answer-Lists all the line item accounts being used.
Liquidity Ratio ✔Correct answer-Measures ability to pay *short term obligations*.
Current Ratio ✔Correct answer-Total Current Assets / Total Current Liabilities
, Profitability Ratio ✔Correct answer-Profits / Losses (over a period of time).
Quick Ratio ✔Correct answer-Measures the ability to pay current debts.
Current Assets (inventory and pre-paids) / Total Current Liabilities
Reserve Ratio ✔Correct answer-Measures liquidity.
Expendable Net Assets / Total Annual Expenses
Coverage Ratio ✔Correct answer-Projections for interest and principal payments to creditors and
investors.
Can you cover things?
Net Assets ✔Correct answer-Assets *after* liabilities have been paid.
Maslow's Hierarchy of Needs ✔Correct answer-A theory of human motivation:
Fulfilled bottom to top:
Self-Actualization
Esteem
Love/Belonging
Safety
Physiological
*SSASS* (survival, safety, affiliation, self-esteem, self-actualization)
Statement of Purpose ✔Correct answer-The reason for an association's existence.
This is crucial in determining if an association can be a non-profit and tax-exempt organization.
Mission ✔Correct answer-What drives the organization.
A mission can change, but a purpose generally does not.
UBIT ✔Correct answer-*Unrelated Business Income Tax*
Tax paid on money derived from business activity not related to the association's tax-exempt
purpose.
Tax-exempt status can be jeopardized if UBI is too high a proportion of income.
501(c)6 ✔Correct answer-Business Leagues
Membership associations
Free to lobby
501(c)3 ✔Correct answer-Nonprofit Foundation
Scientific
Education
Limited lobbying
IRS Form 990 ✔Correct answer-Discloses:
Records retention policy
Conflict of interest policy
Whistle-blower policy
Investment/reserve policy
Anti-fraud policy
