BEC CPA Exam Chapter 1 Questions and
Answers
Accounts Payable Application - correct Answer-• Net liability imports risk FC thus liability
increases
• If FC increase, use profit on derivative to offset loss
• Futures hedge contract to buy mitigate risk of a weakening domestic currency
Accounts Receivable Application - correct Answer-• Net asset export risk...FC
decreases thus asset decreases (Loss)
• If FC decrease, use profit on derivative to offset loss
• Futures hedge contract to sell - mitigate risk of a strengthening domestic currency
Amendment to Sentencing Guidelines Related to Certain White- Collar Offenses -
correct Answer-Review an additional aggravating or mitigating circumstances for a
particular offense that could justify an exception to the existing sentencing ranges
Annual Percentage Rate (APR) - correct Answer-Noncompounded version of the
effective annual percentage rate
effective (periodic) rate * #periods in year
Application to Management and Board - correct Answer-Assists management and BOD
in the following:
-effectively applying IC to the overall organization
-determining the requirements of an effective IC system
-Identifying and analyzing risks
- extending IC applications beyond the financial reporting
Application to stakeholders - correct Answer--Provides greater understanding of what
constitutes an effective IC
-greater confidence in management and BOD has effective oversight
-
Attempt and Conspiracy - correct Answer-Mail and fraud were increased from 5 to 20
years
ERISA were increased from not more than 5000 to 100000 and from not more than 1
year to not more than 10 years
Code of ethics for Senior Officers- "Tone at top" - correct Answer-Disclose whether the
issuer has adopted a code of conduct
, Code of ethics contemplates standards that promote:
• Honest and ethical conduct
• Full, fair, accurate and timely disclosures
• Compliance with laws/ rules
Committee of Sponsoring organizations - correct Answer-- Independent private sector
created in the mid 1980's to study the factors that led to fraulent financial reporting
Communication - correct Answer-• Internal→ responsibilities of personnel
• External→ supplier and customer feedback
• Means of Communication
• Monitoring→ frequency dictated by risk
Components of ERM - correct Answer-1. Internal Environment
2. Setting Objectives
3. Event Identification
4. Assessment of Risk
5. Risk Response
6. Control Activities
7. Information and Communication
8. Monitoring
Components of IC (CRIME) - correct Answer-- Applies to all 3 ORC Objectives
Control Environment
Risk assessment
Information and Communication
Monitoring
Existing Control Activities
Compound Interest (amount) - correct Answer-Based on the original principal plus any
unpaid interest earnings or expense
Principal* (1+i)^n
Conflict of Interest Provisions - correct Answer-Issuers prohibited from making personal
loans to directors or executive officers
Control Activities - correct Answer-•Integration with Risk Response
•Types of Control Action
• Top-level reviews
• Direct function or Activity Management
• Information Processing
• Physical Controls
• Performance Indicators
• Segregation of Duties
• Policies and Procedures
Answers
Accounts Payable Application - correct Answer-• Net liability imports risk FC thus liability
increases
• If FC increase, use profit on derivative to offset loss
• Futures hedge contract to buy mitigate risk of a weakening domestic currency
Accounts Receivable Application - correct Answer-• Net asset export risk...FC
decreases thus asset decreases (Loss)
• If FC decrease, use profit on derivative to offset loss
• Futures hedge contract to sell - mitigate risk of a strengthening domestic currency
Amendment to Sentencing Guidelines Related to Certain White- Collar Offenses -
correct Answer-Review an additional aggravating or mitigating circumstances for a
particular offense that could justify an exception to the existing sentencing ranges
Annual Percentage Rate (APR) - correct Answer-Noncompounded version of the
effective annual percentage rate
effective (periodic) rate * #periods in year
Application to Management and Board - correct Answer-Assists management and BOD
in the following:
-effectively applying IC to the overall organization
-determining the requirements of an effective IC system
-Identifying and analyzing risks
- extending IC applications beyond the financial reporting
Application to stakeholders - correct Answer--Provides greater understanding of what
constitutes an effective IC
-greater confidence in management and BOD has effective oversight
-
Attempt and Conspiracy - correct Answer-Mail and fraud were increased from 5 to 20
years
ERISA were increased from not more than 5000 to 100000 and from not more than 1
year to not more than 10 years
Code of ethics for Senior Officers- "Tone at top" - correct Answer-Disclose whether the
issuer has adopted a code of conduct
, Code of ethics contemplates standards that promote:
• Honest and ethical conduct
• Full, fair, accurate and timely disclosures
• Compliance with laws/ rules
Committee of Sponsoring organizations - correct Answer-- Independent private sector
created in the mid 1980's to study the factors that led to fraulent financial reporting
Communication - correct Answer-• Internal→ responsibilities of personnel
• External→ supplier and customer feedback
• Means of Communication
• Monitoring→ frequency dictated by risk
Components of ERM - correct Answer-1. Internal Environment
2. Setting Objectives
3. Event Identification
4. Assessment of Risk
5. Risk Response
6. Control Activities
7. Information and Communication
8. Monitoring
Components of IC (CRIME) - correct Answer-- Applies to all 3 ORC Objectives
Control Environment
Risk assessment
Information and Communication
Monitoring
Existing Control Activities
Compound Interest (amount) - correct Answer-Based on the original principal plus any
unpaid interest earnings or expense
Principal* (1+i)^n
Conflict of Interest Provisions - correct Answer-Issuers prohibited from making personal
loans to directors or executive officers
Control Activities - correct Answer-•Integration with Risk Response
•Types of Control Action
• Top-level reviews
• Direct function or Activity Management
• Information Processing
• Physical Controls
• Performance Indicators
• Segregation of Duties
• Policies and Procedures
