Q1. Which statement is not an advantage of robotic process automation (RPA)?
Bots are more creative than humans✔️
Bots do no need to take time off
Bots improve efficiency
Bots can eliminate human errors
Q2. What effect does a contra asset account have on a balance sheet?
A contra asset is not an accounting term
A contra asset has a credit balance and therefore a negative effect on total assets✔️
A contra asset with a positive balance will increase overall liabilities
A contra asset has a debit balance and therefore a positive effect on total assets
Q3. Internal controls may be preventative, detective, corrective, or directive. Which is a detective control?
physical inventory check✔️
employee background checks
physical locks on inventory warehouse
Q4. On March 15, a business receives an invoice from the power company for utilities used in February. The retailer pays the invoice on April. The business uses accrual-based accounting. Which month should the business recognize the expense?
no record required
Q5. Which choice is a general guideline for adequate separation of duties to prevent both fraud and error?
A person who has control over an asset should not safeguard that asset.
A person who has temporary or permanent custody of an asset should not account for that asset.
A person who has record-keeping responsibility should not make journal entries.✔️
A person who has operational responsibility should not authorize transactions for the area.
Q6. What does the cost of a unit of product under absorption costing method consist of?
direct materials, direct and indirect labor, and fixed overhead
direct materials, indirect labor, and variable and fixed overhead
direct materials, direct labor, and both variable and fixed overhead✔️
direct materials, direct and indirect labor, and variable overhead
Q7. Which answer best describes accruals and deferrals?
Accruals are past cash receipts and payments, while deferrals are expected future cash receipts and payments.
Both accruals and deferrals are both expected future cash receipts and payments.
Accruals are expected future cash receipts and payments, while deferrals are past cash receipts and payments.✔️
Both accruals and deferrals are not expected past cash receipts and payments.
Q8. What do you call a situation where more than one person collaborates to circumvent existing internal controls?
segregation of duties
Q9. Which is not an example of an internal control activity?
review of manufacturing plan✔️
segregation of duties
Q10. Which budgeting approach request justification of all expenditures?
Q11. What does the discontinued operations section of the income statement refer to?
disposal of a major product line or major geographical area of operations✔️
sale of unused or obsolete equipment and discontinued inventory
a plant shutdown or decommissioning of a facility
net income or loss for products completed and sold
Q12. How are the three financial statements (income, statement, balance sheet, and cash flow statement) linked?
Only the assets are reflected in the cash flow statement, and the net income expenses correlate with the liabilities.
The net income goes to retained earnings, but the cash flow remains independent.
The gross profit goes to retained earning, and the shareholder equity total is added to the cash flow statement
The net income goes to the retained earning and to the cash flow statement✔️
Q13. Which is not one of the four perspectives of the balanced scorecard?
learning and growth
Q14. What would be deducted from the balance per books when doing a bank reconciliation?
deposits in transit
bank service fees
electronic fund transfers/payments
Q15. What situation could be the results of the three retails store employees sharing the same cash register?
a thorough internal control activity
a violation of assignment of responsibility✔️
a violation of segregation of duties
a support process to avoid fraud
Q16. A firm has $1,000 in debt and $3,000 in assets. What is the firm’s debt-to-equity ratio?
Q17. An external auditor is required to be independent when performing
all attestation services✔️
all professional services
all tax services
all consulting engagements
Q18. Proper segregation of functional responsibilities calls for separation of
custody, payment, and recording
authorization, custody, and execution
authorization, custody, and recording✔️
custody, execution, and payment
Q19. What does the degree of operating leverage represent?
how much the value of capital assets will change in response to a change in sales
how much the operating income of a company will change in response to a change in sales✔️
the valuation of assets to determine how much additional debt the company can borrow
how much the sales of a company will change in response to a change in operating income
Q20. Which characteristic would concern an auditor about the risk of material misstatements arising from fraudulent financial reporting?
limited employee turnover within the accounting and finance department
management’s disregard of regulations and regulatory authorities✔️
regularly reported bank reconciliations, including deposits in transit
capital assets sold at a loss before being depreciated fully
Q21. An employee who makes a sale, ships the goods, and bills the customer violates which control activity?
assignment of responsibility
segregation of duties✔️
review and reconciliation
Q22. What trait distinguishes auditors from accountants?
The auditor can interpret accounting principles applicable to the country in which the client operates.
The auditor has extensive education beyond what is required for an accountant
The auditor can adapt to a rapidly changing profession.
The auditor has expertise in the gathering and interpretation of audit evidence.✔️
Q23. What is the purpose of an operational audit?
assessing the company’s compliance with environmental laws and regulations
evaluating whether the organization is meeting the metrics set by management in order to achieve the goals and objectives set forth by the board of directors✔️
assessing the organization’s control mechanisms for overall efficiency and reliability
evaluating compliance with applicable laws, regulations, policies, and procedures
Q24. Which statement is false?
The balanced scorecard aligns an organization’s operational activities with its mission.
The balanced scorecard focuses on these four primary areas: financial, customer, internal process, and learning and growth.
The balanced scorecard measures, tracks, and reports on a balance of qualitative and financial data and metrics.
The balanced scorecard ensures the organization’s profitability aligns with director compensation and dividend expectations.✔️
Q25. Which choice is not a component of internal control?
information and communication
Q26. What is the difference between the cost of an asset and the accumulated depreciation for that asset?
Q27. A company budgeted 1,200 washers, but only 1,000 are produced. It costs $10 to produce a widget. What is the materials variance?
Q28. Who does an audit committee report to?
board of directors
union of employee representatives
Q29. A business purchased office equipment by issuing a one-year note payable. The entire amount of the note is due at the end of one year. How do you record this transaction?
Debt asset, credit equity
Debt liability, credit asset.
Debit asset, credit liability✔️
Debit equity, credit asset.
Q30. Which section of a financial annual report describes the corporation’s accounting methods?
Notes to the financial statements✔️
An auditor’s report
Listing of the stockholders
Management discussion and analysis
Q31. What does “independence” mean in auditing?
being an advocate for all clients
not being dependent on a client’s fee
having only indirect financial interests in the auditee
Q51. Robinson Hotels is trying to predict its utility costs. It has five years of data, including monthly utility cost, monthly occupancy rates, and average monthly temperature. What tool or technique can Robinson Hotels use to predict or estimate its future utility costs?
time series analysis
net present value
Q52. What does an inventory-turnover ratio measure?
the current value of the inventory
the number of times inventory was sold during the period✔️
how it compares with the industry average
whether the company can maintain the same inventory levels compared to industry averages
Q53. A company earned a gross profit of $4,000,000 and had net sales of $12,000,000. What is the gross margin and what does the result imply to the reviewer?
The 3.33% gross margin represents for every dollar in sales, the company spends $0.9667 to produce the product sold.✔️
The question does not provide sufficient information to offer a proper calculation.
The 3.33% gross margin represents for every dollar in sales, the company spends $0.0667 to produce the product sold.
The 3.33% gross margin represents for every dollar in sales, the company spends $0.0333 to produce the product sold.
Q54. What type of cost changes in proportion to a company’s production volume?
Q55. What do you call the benefit sacrificed when one option is chosen over another?
Q56. The actual price of a widget is $10 and the budgeted price is $7. What is the price variance for 1,000 widgets?
Q57. What is the major financial accounting report system used outside of the United States?
the metric system
Q58. What type of audit evidence would be considered the weakest type?
Q59. Permanent accounts are on what financial statement?
cash flow statement
shareholder equity statement
Q60. The cost of alternative X is $25,000 and the cost of alternative Y is $20,000. What do you call the $5,000 cost difference?
Q61. What is the purpose of a master budget?
to demonstrate to management the level of sales the company will achieve
to provide shareholders and the board of directors confidence in management’s abilities
to give management an opportunity to compile all of the other operational budgets once they are completed
to provide management with a high-level overview of the company finances and be a central planning tool✔️
Q62. What is true about an internal control system?
An internal control system is not effective until the human error is completely eliminated or migrated.
Any internal control activities evaluated and adopted by a company should never be evaluated in terms of cost-benefit.
Only mid- to large-sized companies and governmental organizations need to ensure proper internal control activities.
An internal control system helps a company achieve reliable financial reporting, effective and efficient operations, and compliance with laws and regulations.✔️
Q63. According to cost formula Y = $20,000 + $4x, what would be the total cost at an activity level of 15,000 units?
Q64. A company can change to a new accounting principle if management can justify that the change will result in what?
more relevant decision-making information✔️
lower net income to report for tax purposes
changing depreciation methods for higher net income
reduced potential for administrative error
Q65. Which cost items would be classified as an internal failure cost on a quality costs report?
cost of scrap
training for assembly line workers✔️
patent cost for new product
customer returns of defective products
Q66. What type of audit evidence would most likely be used to verify the existence of fixed assets?
Q67. What should an auditor do before auditing the balance sheet?
Confirm whether probable legal action is disclosed to the auditor.
Investigate whether liens on assets are committed as collateral.
Determine the client’s planned and imminent purchase commitments.
Gain a clear and proper understanding of the client’s internal control processes.✔️
Q68. At McKay Company, machine hours are limited. There is more demand for McKay’s products than it can produce due to limited machine hours. To maximize profits, the company should evaluate each product’s
contribution margin per unit
segment margin per unit
gross profit per unit
contribution margin per machine hour✔️
Q69. The asset-turnover ratio calculation measures
when the company must decide to purchase assets and what investment is required
how much of a company’s assets are financed by creditors
how often a company must replace existing assets and equipment
how efficiently a company uses its assets to generate revenue✔️
Q70. What cost is easily traceable to a cost object?
Q71. Which value chain element is associated with the cost of staffing a customer support phone line?
production and purchases
Q72. Flexible budgets are created to demonstrate how
changes in activity levels affect predicted revenue and costs✔️
management need to make changes to budget targets following poor performance
an inaccurate operational budget results from poor budgeting data
current results fully align to budgetary allocations
Q73. Which is the appropriate term for an incurred cost that cannot be changed by any decision?
Q74. Which factor is most likely to increase an auditor’s awareness of possible fraudulent financial reporting?
management’s complete disclosure of unresolved legal action
limited competition in the company’s industry resulting in increasing profitability
the audit committee’s approval of specific accounting methods and principles
year-end financial adjustments significantly impacting the financial results✔️
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