BEC Wiley MCQ
multiple regression differs from simple regression in that it
has more independent variables. If only one independent variable exists, the analysis is known as simple regression. Multiple regression consists of a functional relationship with multiple independent variables.
luxury goods usually have many substitutes and therefore
have the highest price elasticity coefficient. If substitutes for a good are readily available then the demand for the good is more elastic.
in comparison, the cost of equity is generally
higher than the cost of debt
prices generally increase the fastest in this period
hyperinflation
in an accounting system, a header can be used to
identify data records.
Prescriptive Analytics
identify the best alternatives to minimize or maximize some objective how should we act
Snuggly Whippet Corp. has assigned a staff analyst to investigate privacy laws and regulations related to its business of selling whippet puppies to an international clientele of wealthy purchasers. In relation to the framework for cybersecurity, this is an example of:
identifying references the staff analyst is searching regulations, the goal of this project is to identify relevant privacy laws and regulations ((i.e., references in the language of the framework for cybersecurity).
Which of the following scenarios would encourage a company to use short-term loans to retire its ten-year bonds that have five years until maturity? interest rates have declined
if interest rates have declined, the loans obtained five years ago would have a higher interest rate than loans obtained today
abnormal spoilage happens when spoilage exceeds the normal limit.
if under the tolerance limit, than it is only normal scrap
payback period is calculated by dividing the initial cost of the investment by its annual net cash flows,
ignores salvage value.
Pledge accounts receivables as security for a two-year loan.
impact on current ratio (CA/CL) no effect on AR, increase cash a current asset
the strength of a defense in depth security strategy is in its ability to
implement layered, mutually supportive levels of control. a defense-in-depth strategy implements layered, multi-level controls to minimize system risks.
in assessing a company's business strategy,
important risks does our business strategy align with our mission? does our business strategy align with our core value? do we understand the risks of our strategy? least important will we achieve th goals that we have set?
to reduce the risk of a porfolio, the investor should select investments with negatively correlated returns,
in that way, when one investment decreases in value others will increase.
long run analysis assumes that all inputs can be varied
in the long run, it is assumed that all inputs to the production process can be varied, including the number and size of the production facilitities
goods produced this period bu sold in the following period
included in GDP
effective cloud solutions require considering and integrating
1. relevant business process, 2.a deployment model 3. a service delivery model
CSP
Cloud Service Provider
Protecting customers' payment methods—Suzy Q wants to ensure that her customers not only perceive the payment process as secure but that the company truly is protecting customers' purchasing methods.
Data Encryption
In a cyber-incident response plan, removal of the threat comes before
Decision and action regarding event announcement or secrecy.
In the short run, a severe hurricane creates an immediate strong increase in demand for roofers. Some roofers in other parts of the country are then attracted to the disaster area. Assume that in the long run the increase in demand still exceeds the increase in supply. Incorporating these facts in an analysis, the price for roofers in the short run increases, while in the long run the price will
Decrease, but remain above the original price. This answer is correct. If the increase in demand continues to exceed the increase in supply, price will remain above the original price.
monetary policy
Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
general controls in an information system
IT infrastructure security management software acquistion
If the dollar price of the euro rises, which of the following will occur?
The dollar depreciates against the euro. if the euro increases in value in terms of dollars, the dollar depreciates.
the best starting point for an organizational big data initiative is
a governance structure
expropriation
a government's seizure of a domestic or foreign company's assets (taken by the government)
decision tree
a graph of decisions and their possible consequences; it is used to create a plan to reach a goal recognizes that management often faces a series of decisions that may affect the value of an investment
hot site
equipped with redundant hardware and software that may be used quickly when the primary site went down
A company has a significant e-commerce presence and self-hosts its web site. To assure continuity in the event of a natural disaster, the firm should adopt which of the following strategies?
establish off-site mirrored web server
depreciation is deductible for tax purposes it provides a tax shield
example (cash flows before tax- depreciation)* tax rate (140-90)*0.3=15 (income taxes) 140-15=125 after tax cash flow
COGS can be increased by the amount of underapplied overhead
example COGS/ (COGS+WIP+Finished goods) * underapplied overhead
purchases of common stock as investment are
excluded from GDP stock transactions (sale/purchase) are financial transaction that simply exchange one financial asset-cash-for another financial asset-stock ownership. There is no good or service produced.
purchases of used cars are
excluded from GDP because the sale/purchase of used car (or any used items) does not represent current production
big data initiatives result in
expanding data warehouses
in a statistical analysis, a weighted-average using probabilities as weights is the
expected value.
Predictive Analytics
extracts information from data and uses it to predict future trends and identify behavioral patterns (aka data mining)
you should not tell external parties about all of your cyber attacks
for example,few banks announce that they have lost money in a theft or cyberhack
GDP includes
foreign net export spending government spending gross investment household income (not included)
assuming that the real rate of interest is the same for both countries, if country A has a higher nominal interest rate than country B,. then the currency of country A will likely be selling at a
forward discount relative to the currency of country B. the country with the higher nominal interest rate is expected to experience a higher rate of inflation, which results with the devaluing of a currency, A forward discount is a term that denotes a condition in which the forward or expected future price for a currency is less than the spot price
equal to net operating profit after taxes plus noncash expenses less capital expenditures and the change in working capital requirements.
free cash flow
this unemployment is the least important to management when trying to predict the future state of economy
frictional unemployment, this is temp unemployment that always exists as workers change jobs or new workers enter the workforce.
catalonian olive oil products runs an ERP system and conducts backup procedures that are _____,_______and_____
full, incremental and differential
a mfg company properly classifies and accounts for one product as a by product as a rather than as a main product because it
has low sales value when compared to the main products
an enterprise resource planning system is designed to
integrate data from all aspects of an organization's activities.
cost of funds equals
interest cost, minimum balance needed in the bank times the interest rate
in a large public corporation, evaluating internal control procedures should be the responsibility of
internal audit staff who report to the board of directors.
differences between mass production and lean manufacturing
mass production: higher set up time, dedicated equipment lean production: lower set up times, flexible equipment and highly skilled, cross trained workers.
backup and recovery systems should both ____ and _____
off site redundant Correct! Backup systems should include an off-site company and should include redundancy.
the internal rate of return is the
rate of interest that equates the present value of cash outflows and the present value of cash inflow.s
What is the computer process called when data processing is performed concurrently with a particular activity and the results are available soon enough to influence the particular course of action being taken or the decision being made?
real-time processing, online real time systems are those for which processing is performed as data are input and the results are available and immediately.
electronic fund transfer systems minimize the need for entry of information, and therefore,
reduce the chance of entry errors
after the goals of the company have been established and communicated, the next step in the planning process would be the development of
sales budget, planning begins with the development of sales budget
if your goods are normal goods
sales of income elastic products likely increased during the recession
NPV and IRR criteria will always lead to the
same accept or reject decision for two independent projects
this activity involves collecting data about all segments of the firm's general environment to understand the effects of economic changes on the firm's industry?
scanning (a scan of all segments of the general environment)
the market for outstanding, listed common stock is called the
secondary market
selling government securities serves to reduce capital available for other investments, therefore serves to contract the economy
this is one way to stabilize the economy during an inflationary period.
emerging data analytic methods are unhelpful to risk assessment
this statement is false regarding data analytics, data mining and risk assessment. (many emerging data analytic methods are critical to risk assessment. ( data mining, data visualization, heat mapping, sentiment analysis)
collection float for a firm is best described as the
time between when a creditor mails a check and when the funds are available for use by the firm
lead time
time interval between ordering and receiving the order
sequential use of color
uses different shades of a color to indicate different periods/progression
a monopoly will charge prices higher than a perfect competition and
uses resources less efficiently than in a perfect competition
Superzapping
using special software to bypass system controls and perform illegal acts
A customer's order was never filled because an order entry clerk transposed the customer identification number while entering the sales transaction into the system. Which of the following controls would most likely have detected the transposition?
validity check, a validity check is a check of an entered number to see if it is in valid form or a valid account number.
which of the following input controls would prevent an incorrect state abbreviation from being accepted as legitimate data
validity check.
systematic evaluation of the trade-offs between product functionality and product cost while still satisfying customer needs is the definition of
value engineering
income tax formula with depreciation
(cash flow - depreciation)* tax rate0.14*0.
net effect on pretax profit would be an increase of $25000
$45000 of cost avoided less $2000 of contribution margin lost.
A company's rate of return on investment (ROI) is equal to the
% of profit on sales multiplied by the capital employed turnover rate
Price Variance Formula
(AP - SP) x AQ
Material price variance formula
(AP-SP) X actual quantity
Quantity Variance Formula
(AQ - SQ) x SP
formula to calculate economic rate of return on common stock
(dividends + change in price) / beginning price
In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variables? 1.03 − .02 − .89 .75
-0.89, correlation coefficient cannot be greater than 1
Which of the following statements concerning the discounted payback period method of evaluating capital projects is/are correct? I. It is useful in evaluating the liquidity of a project. II. It measures total project profitability. III. It results in a longer computed payback period than does the undiscounted payback period method.
1 and 3, discounted payback period only measures the time to takes to get your money back.
advantage of IRR over the accounting rate of return in evaluating a project
1 emphasis of cash flow 2. recognition of the time value of money.
as used in capital budgeting analysis, the internal rate of return uses these items in computation
1 net incremental investment 2. net annual cash flow.s
overhead will be underapplied if
1, overhead cots are underestimated 2 normal capacity if greater than actual activity, making the application rate too small
activity-based costing is more likely result in major differences from traditional costing systems if the firm manufactures only one product rather multiple products
1. ABC is useful for allocating marketing and distribution costs 2. in activity based costing, cost drivers are what caused to be incurred 3. abc differs from traditional costing systems in that products are less likely to be cross-subsidized.
items that can provide short term financing
1. AP 2. AR 3. inventory
aspects of supply chain management
1. IT 2. accurate forecasts 3. communications supply chain is primarily designed to manage the firm's relationships with suppliers by sharing key info all along the supply chain, the area of customer relations is not a primary focus of supply chain management.
limitations of ROI are
1. It could cause managers to postpone critical expenditures. ROI can be improved in the short run by postponing critical expenditures, such as repairs and maintenance. 2 It could cause managers to not accept projects that would be advantageous to the firm. ROI can cause managers of profitable divisions to decline projects that have an ROI above the cost of capital for the firm. 3 It could be affected arbitrarily by allocation of indirect costs. ROI can be affected by allocation of indirect costs.
5 steps of data analysis
1. analytics design 2. data collection 3. data organization and calculation 4. data analysis 5 findings, observations and remediation
a digital signature is equivalent to a handwritten signature, it is an electronic verification of the sender and serves 3 purposes
1. authentication: a digital signature gives the receiver reason to believe the message was created and sent by the claimed sender 2. non-repudiation: with digital signature, the sender cannot deny having sent the message later on. 3. integrity: a digital signature ensures that the message was not altered in the transit
a shift in supply curve is caused by
1. change in production tech 2. changes in resource prices 3. changes in the prices of other goods. 4. changes in taxes or subsidies 5. change in the number of sellers in the market 6. expectations about the future price of the product.
most client/service applications operate on a three-tiered architecture consisting of which of the following layers
1. desktop client, 2. application 3. database
Work in progress account balance is consisted of
1. direct material cost 2. direct labor cost 3. overhead cost
the purposes of general agreement on tariffs and trade are
1. eliminating import quotas 2. harmonizing intellectual property laws 3. eliminating subsidies to export industries.
this would serve to mitigate risks associated with outsourcing
1. include an arbitration clause in the contract with the foreign suppliers
political risk of an investment may be hedged by
1. insurance 2. finance the operations with local-country capital 3. enter into joint ventures with local-country firms. (buying futures contracts for future delivery of the country's currency is designed to hedge transaction risks relating to foreign exchange rates. Not political risks)
a measure of asset utilization includes
1. inventory turnover 2. avg AR collection period 3. fixed asset turnover
A company is considering exchanging an old asset for a new asset. Ignoring income tax considerations, which of the following is economically relevant to the decision?
1. original cost : no (this is a sunk cost) 2. FMV of old asset: yes, ( if the company decides to exchange the old asset, its FMV could represent a reduction of the investment of cash outlays to acquire the new asset
technique for considering the risk of an investment
1. probability analysis 2. risk adjusted discount rate 4. simulation techniques.
limitations of enterprise risk management systems
1. risk related to the future that is uncertain 2. collusion among two or more individuals can result in enterprise risk management failure 3. enterprise risk management is subject to management override companies cannot avoid risk, the fact that there is risk is why we have enterprise risk management systems.
in calculating the breakeven point for a multiproduct company, these assumptions are commonly made
1. sales volume equals production volume 2. variable costs are constant per unit 3.a given sales mix is maintained for all volume changes
according to SOX 2002, anyone who knowingly tampers with records with the intent to influence the investigation may be fined or imprisoned for up to
20 years.
Haufinger buys one widget each day for use in his factory and pays for the widget using one bitcoin. On three recent days, the value of one bitcoin was: Day 1: $2,200 US Day 2: $2,400 US Day 3: $2,500 US According to the IRS, what is the cost of the widgets purchased for these three days for tax purposes?
2367, you take the average cost, since bitcoins are treated as intangible assets.
the maximum period for which commercial paper may be used for financing purposes is
270 days
average collection period (AR)
365/ AR turnover
a coefficient of elasticity of demand of 1.5 would mean that a 5% increase in the price of the substitute would result in a
7.5% (5*1.5) increase in demand for tower's products
six sigma is described as
99.999997% perfect with a 3.4 defects per million parts
multiplier effect formula
=initial change in spending x (1/(1-mpc))
Which of the following changes would result in the highest present value? A $100 decrease in taxes each year for four years. A $100 decrease in the cash outflow each year for three years. A $100 increase in disposal value at the end of four years. A $100 increase in cash inflow each year for three years.
A $100 decrease in taxes each year for four years,
a dash board
A dashboard is a collection of views of data that allows a user to understand, and often monitor, a process. Typical examples of business dashboards are designed to monitor sales and revenue, accounts receivable balances, cash, human resource productivity and absenteeism, and loan and interest rates.
What is the purpose of a scatterplot?
A scatterplot shows the relationship between two variables. Scatterplots can also be used (e.g., with color or shapes) to show differences in categories of observations (e.g., of divisions in a company).
What is the purpose of a stacked bar chart?
A stacked bar chart can show both changes (often over time) and the relation of parts to a whole (e.g., sales by divisions in a company).
the length of time between the acquisition of inventory and payment for it is called the
AP deferral period
Which of the following is an advantage of using a value-added network for EDI transactions?
Ability to deal with differing data protocols. This answer is correct because a value-added network is a privately owned network that routes EDI transactions and alleviates problems related to differences between various organizations' hardware and software.
Susan has a tendency to forget the inventory ID for some of the items that they don't sell too frequently. She tries to look them up every time, but sometimes she gets in a hurry and makes a guess. This results in some sales orders having the wrong inventory ID for what was actually sold.
All items that are sold should have a bar code that can be scanned. Input and Origination Controls
Since Paul still has a lot to learn, he sometimes makes mistakes on his purchasing documentation and doesn't realize it until after the documents have been printed. When this happens, he hasn't really been trained on what to do, and he also doesn't want to advertise the mistakes. He's gotten into the habit of hiding any of the papers with errors, and just re-printing the corrected forms.
All reports and documentation that may contain sensitive data should be disposed of using secure disposal techniques. Output Controls
Susan and Sarah are the only sales reps at ABC company, but when they get behind, they ask Paul, the purchasing intern to help take customer calls and create sales orders. He's not on their team, but they figure that it's good experience for Paul, and they need the help, anyway.
All workstations should have authorization and identification controls, and employees should be trained to not share passwords Input and Origination Controls
Susan and Sarah are the only sales reps at ABC company, but when they get behind, they ask Paul, the purchasing intern to help take customer calls and create sales orders. He's not on their team, but they figure that it's good experience for Paul, and they need the help, anyway.
All workstations should have authorization and identification controls, and employees should be trained to not share passwords. Input and Origination Controls
this is most likely to pose a direct risk that the dollar value of a foreign direct investment by a U.S. investor will suffer a loss?
Appreciation in the value of the dollar against the currency of the country in which the investment is located. An appreciation in the value of the dollar against the currency of the country in which the investment is located would reduce the dollar value of the foreign direct investment, thus increasing the likelihood of the investment suffering a loss.
Bloomsdale wants to determine if the company from whom she buys seafood is buying only sustainable seafood. Bloomsdale may be able to use ____________ to find this information.
Blockchain. Correct! A transaction record that is stored in blockchain can be designed to contain this information.
The process of developing plans for a company's expected operations and controlling the operations to help carry out those plans is known as
Budgetary control. budgetary control includes budgeting and use of the budgets to control operations
An American importer of English clothing has contracted to pay an amount fixed in British pounds three months from now. If the importer worries that the US dollar may depreciate sharply against the British pound in the interim, it would be well advised to
Buy pounds in the forward exchange market. the firm protects itself against depreciation in the value of the dollar in relation to the pound.
the materials manager of a warehouse is given a new product line to manage with new inventory control procedures,
COSO: change management and control baseline are affected.
Consumer price index and producer price index
CPI is for consumers while PPI is the measure used by companies.
A marketing manager at Hubert Humbert Fashion Designers is using a component of its organization-wide ERP system to determine which accounts generate the most profitable returns to the company. The manager is most likely using the _________ component of the system.
CRM
Buff Co. is considering replacing an old machine with a new machine. Which of the following items is economically relevant to Buff's decision?
Carrying amount of old machine : no, this is sunk cost disposal value of new machine: yes (this is an element that gets entered into the determination of the net cost of the new machine
System programmers
Computer programmers who specialize in developing operating systems and utilities rather than applications.
servers
Computers that exist only to provide things to others. generally in isolated locations and do not include a mouse and keyboard for access. servers are accessed from client computers
online-analytical processing systems
Credit Card International developed a management reporting software package that enables members interactively to query a data warehouse and drill down into transaction and trend information via various network set-ups. What type of management reporting system has Credit Card International developed?
Risk identification should be mapped to An organization's industry.
Cyber risks are often planned by hackers to exploit specific weaknesses, and achieve specific outcomes, in an industry—for example, targeting financial services firms to steal money.
Devon Company is using an enterprise risk management system. Management of the company has set the company's objectives, identified events, and assessed risks. What is the next step in the enterprise risk management process?
Determine responses to the risks. The next step in the process is to determine the risk responses to the assessed risks.
Prime Cost
Direct Materials + Direct Labor ( a variable cost)
An information technology director collected the names and locations of key vendors, current hardware configuration, names of team members, and an alternative processing location. What is the director most likely preparing?
Disaster recovery plan, this info would be useful in reconstructing a database in the event of a disaster
some vendor invoices are paid more than once.
Double-paying vendor invoices (problem) will inflate the costs of purchases (consequences). Requiring vendors to include purchase orders on all invoices will allow the purchasing clerk(s) to better match payments to invoices to reduce or eliminate the likelihood of double-paying invoices.
this represents the residual income that remains after the cost of all capital, including equity capital, has been deducted?
Economic value-added.
Form 941
Employer's Quarterly Federal Tax Return, use to determine if payroll taxes have been properly withheld and paid.
Simon Corp., a U.S. company, has made a large sale to a French company on a 120-day account payable in euros. If management of Simon wants to hedge the transaction risk related to a decline in the value of the euro, which of the following strategies would be appropriate?
Enter into a futures contract to sell euros for delivery in the future. by selling euros in the futures market, the firm has locked in the exchange rate today.
the following would help prevent incorrect postings to the general ledger in a computerized accounting system, except 1.Validating the posting date of the transaction. 2. Restricting the ability to post directly to accounts with subsidiary ledgers. 3. Performing a range check on the general ledger account in the transaction.
Establishing a unique transaction number for each general ledger posting many accounting systems do not include transaction numbers for general ledger postings.
Which tool would most likely be used to determine the best course of action under conditions of uncertainty?
Expected value (EV). Because it is not always possible to make decisions under conditions of total certainty, decision makers must have a method of determining the best estimate or course of action where uncertainty exists. One method is probability analysis. Probabilities are used to calculate the expected value of each action. The expected value of an action is the weighted-average of the payoffs for that action, where the weights are the probabilities of the various mutually exclusive events that may occur.
What is ETL?
Extract, Transform, Load Extract (getting data), Transform (cleaning the data), Load (moving cleaned data to target system)
Fewer goods are received than ordered.
Inflates costs of purchases Receiving clerk uses "three-way" matching of vendor invoices, purchase orders, and receiving report.
Some vendor invoices are paid more than once.
Inflates costs of purchases Require vendors to include purchase orders on all invoices.
Large gifts from suppliers to purchasing agents.
Inflates costs of purchases Required disclosure of relationships between employees and suppliers.
What is a major disadvantage of using economic value added (EVA) alone as a performance measure?
It fails to reflect all of the ways that value may be created. Many times value creation activities do not immediately increase return, and EVA (in the short run) does not reflect the value of these activities.
A tire company has created a dashboard to evaluate the following measures: Customer Lifetime Value (CLV) (i.e., the value realized to the company from each customer), Customer Acquisition Cost (CAC) (costs of acquiring each customer), Customer Satisfaction & Retention, and the number of new and existing customers. Which of the following best describes this initiative:
KPIs The company is identifying its most critical measures of customers as a part of managing these measures.
A multiperiod project has a positive net present value. Which of the following statements is correct regarding its required rate of return?
Less than the project's internal rate of return. if the project has a positive net present value it has a return greater than the required return.
Returned goods are recorded but missing.
Losses due to inventory theft or misplacement Physical controls over parts inventory.
If a government were to use only fiscal policy to stimulate the economy from a recession, it would
Lower consumer taxes and increase government spending.
s equal to the market value of the firm minus the original investment.
Market value-added.
A multinational company operates a production facility in country A and a distribution outlet in country B. The tax rates are 40% in country A and 50% in country B. The production facility sells the goods to the distribution outlet, both of which are wholly owned by the multinational company. The internal sale of goods occurs at a "transfer" price set by the multinational company. Assuming no nontax considerations and no interference from the tax authorities of the two countries, the company should
Maximize the transfer price.
Key risk indicators (KRIs)
Metrics that provide an early signal of increasing risk exposures in the various areas of an enterprise. e.g. It analysis indicates a 5% probability of a level 2 system breach within the next 3 months
Offered vendor discounts are lost.
Missing vendor discounts (problem) will increase the cost of purchases (consequence). Having the system identify and route payment (and discount) due dates to the accounts payable clerk will reduce the cost of purchases.
In an activity-based costing system, what should be used to assign a department's manufacturing overhead costs to products produced in varying lot sizes?
Multiple cause-and-effect relationships. (e.g setup cost and other overhead cost drivers)
NPR and internal rate of return differ in that
NP assumes reinvestment of project cash flows at the cost of capital while IRR assumes reinvestment of project cash flows at the internal rate of return. This underlying assumption is considered to be a weakness of the IRR technique.
net present value formula
NPV=(PV future cash flows)- (investment)
Profitability Index
Net Present Value / Investment Required, the higher the better
return on sales is
Net profit divided by sales.
A company with three products classifies its costs as belonging to five functions: design, production, marketing, distribution, and customer services. For pricing purposes, all company costs are assigned to the three products. The direct costs of each of the five functions are traced directly to the three products. The indirect costs of each of the five business functions are collected into five separate cost pools and then assigned to the three products using appropriate allocation bases. The allocation base that would most likely be the best for allocating the indirect costs of the distribution function is
Number of shipments. The number of shipments would be an appropriate base because there could be a cause and effect relationship between the number of shipments and distribution costs.
The preparation of a simple payroll report is an application of an
OLAP
This answer is correct because in an EDI environment transactions are communicated in standard format to help ensure completeness and accuracy.
OLAP. Correct! This is an example of a data mining application within an online analytical processing (OLAP) system.
First Federal S&L has an online real-time system, with terminals installed in all of its branches. This system will not accept a customer's cash withdrawal instructions in excess of $1,000 without the use of a "terminal audit key." After the transaction is authorized by a supervisor, the bank teller then processes the transaction with the audit key. This control can be strengthened by
Online recording of the transaction on an audit override sheet. This answer is correct because documentation of all situations in which the "terminal audit key" has been used will improve the audit trail.
Market most likely to face government regulation
Perfect monopoly Because a monopoly exists when a single firm provides the total output for an industry, there is no competition and, therefore, there are no normal market forces on the setting of price. As a consequence, government generally imposes regulations that restrict the setting of price by a monopoly firm.
In a daily computer run to update checking account balances and print out basic details on any customer's account that was overdrawn, the overdrawn account of the computer programmer was never printed. Which of the following control procedures would have been most effective in detecting this fraud?
Periodic recompiling of programs from documented source files, and comparison with programs currently in use. this would allow the auditor to detect the modification in the program that has permitted the fraud to occur.
James Victor's Snickers Joke House hires illegal workers. Which of the core activities of the HR department should have identified and prevented this violation of law?
Recruiting and hiring employees.
A basic assumption of activity-based costing (ABC) is that
Products or services require the performance of activities, and activities consume resources. two assumptions of ABC are First, activities consume resources. Second, these resources are consumed by products, services, or other cost objectives (output). ABC allocates overhead costs to products on the basis of the resources consumed by each activity involved in the design, production, and distribution of a particular good.
what is the primary disadvantage of using Return on investment rather than residual income (RI) to evaluate the performance of investment center managers
ROI may lead to rejecting projects that yield positive cash flows. you may not want to undertake a project with a lower ROI than its current average even though the project has positive
Fewer goods are received than ordered.
Receiving fewer goods received than ordered (problem) inflates costs of purchases (consequence). Having the receiving clerk use a "three-way" matching of vendor invoices, purchase orders, and receiving report will reduce or eliminate this problem.
At Multimedia Associates, there is some awareness of cybersecurity risks but not an organization-wide approach to managing these risks. In addition, the chief risk officer has assessed cybersecurity roles and risks but has not formalized these findings or shared them with critical stakeholders. Multimedia Associates evidences a ____________ implementation tier.
Risk-informed the case evidences a risk-informed implementation tier, since the organization has some level of cybersecurity risk and has assessed roles and risks, but without sharing this information with relevant stakeholders.
. Greg, the database administrator, is supposed to be responsible for implementing a disaster recovery plan, but he's been extremely short-staffed lately. Even though the disaster recovery plan is documented and the sales system should be backed up weekly, the logs haven't been updated in a month.
Sales transactions should be backed and logged immediately as transactions occur. Output Controls
Greg, the database administrator, is supposed to be responsible for implementing a disaster recovery plan, but he's been extremely short-staffed lately. Even though the disaster recovery plan is documented and the sales system should be backed up weekly, the logs haven't been updated in a month.
Sales transactions should be backed and logged immediately as transactions occur. Output Controls
Jim is responsible for setting system access parameters in Kentucky Fried Opossums' ERP system. Each month, he reviews any issues related to setting access parameters and writes a report about them. This type of monitoring is:
Self. this is self assessment or self monitoring no other party involved
Strobel Company has a large amount of variable rate financing due in one year. Management is concerned about the possibility of increases in short-term rates. Which of the following would be an effective way of hedging this risk?
Sell Treasury notes in the futures market. if interest rate increase, the value of the treasury notes will decline, resulting in a gain to the company, if the hedge is effective, the gain will offset the increase in the company's interest costs.
Which of the following statements best characterizes the function of a physical access control?
Separates unauthorized individuals from computer resources. physical access controls are those that limit the access to computer equipment, files and documentation
Return on Investment Formula
Simple ROI = Profit / Investment
Smart cards and biometrics are two ways companies may add security to computer systems.
Smart card a plastic card with built in microprocessor used for financial transaction and personal identification
in setting objectives, SMART stands for
Specific Measurable Attainable Relevant Time-bound
5. Which of the following best describes the role of the board of directors with respect to an organization's control environment?
The BOD has oversight responsibility for internal control
If the exchange rate has changed from 1 U.S. dollar being worth 1.00 Swiss francs to a rate of 1 U.S. dollar being worth 1.10 Swiss francs,
The U.S. dollar has appreciated by 10%. If the exchange rate changes $1 being worth 1.00 francs to $1 being worth 1.1 francs, the U.S. dollar has appreciated by 10% (1.10 - 1.00) ÷ 1.00.
Umbrella Corporation sells office and factory equipment. Company management is concerned that the company has not assumed sufficient risks in opening new offices. Which of the following results would best indicate that the company has not assumed sufficient risk?
The planning and logistics team, which is responsible for opening new offices, is operating below capacity. The availability of unused resources for opening new offices would indicate that the company has not assumed sufficient risk.
What is audit data analytics?
The process of "... discovering and analyzing patterns, identifying anomalies, and extracting useful information ... for planning or performing the audit." (AICPA 2018, p. iii).
Key Performance Indicators
The quantifiable metrics a company uses to evaluate progress toward critical success factors. e.g. It reports 17 incidents of denied attempts to access the system.
cross elasticity of demand
The ratio of the percentage change in quantity demanded of one good to the percentage change in the price of some other good. A positive coefficient indicates the two products are substitute goods; a negative coefficient indicates they are complementary goods.
Market Capitalization
The total value of a company's issued shares
Accounting return is often used as a performance evaluation measure
Therefore, if it is also used as an evaluation technique, the consistency may lead to better decisions.
In a competitive market for labor in which demand is stable, if workers try to increase their wage,
This answer is correct. If wages rise in a stable market, the quantity demanded for labor will decline and employment will fall. Since the wage rate is the price of labor, a change in that price would result in a change in quantity demanded for labor.
Winifred, an internal auditor, wants to access data about employee pay rates. She will go online and type in a(n) ______ on the ________, which is mostly written in ___________.
URL; www; HTML
The vertical axis of a bar chart should always start at zero.
Using nonzero axes in bar charts visually distorts the size of differences.
bond financing alternative
a call provision is usually considered detrimental to the investor, a call provision allows the corporation to call the bond even if the bondholder does not want to dispose of the investment
best characteristic concerning the capital budget
a capital budget forecasts future purchases and disposal of plant and equipment.
option description
a contract that allows the holder to buy a specified quantity of a financial instrument at a specified price
An increase in WACC may indicate?
a decrease in valuation and an increase in risk
how does the WACC affect a firm's ability to take on new capital investments
a high WACC limits the firm's ability to take on new capital investments
a strategy initiative in the balanced scorecard framework is
a key action program required to achieve strategic objectives.
Capital Asset Pricing Model (CAPM)
a model that evaluates the relationship between risk and expected return for assets, but usually stocks CAPM uses )1 risk-free rate of return (hypothetical rate of return) 2) beta (measure of volatility) 3) considers the time value of money
if a firm is just earning a normal profit, it is not earning a positive economic profit
a normal profit occurs when the total revenue is exactly equal to the sum of the explicit and implicit costs, in that case, economic profit is exactly zero. neither positive nor negative, so a firm that is just earning a normal profit is not earning a positive economic profit.
reasons for ERP system failures
a poor system development process lack of mgmt support underestimating system implementation time and complexity
an permanent increase in demand of a product will cause
a price increase in the short term but in the long term it will return to the equilibrium price for the market
enterprise risk management
a process used by a company to identify its risks and develop responses to them that enable it to be reasonably assured of meeting its goals
a depreciation tax shield is
a reduction in income taxes
1. Which of the following is likely to improve a company's credit rating?
a reduction in the debt to equity ratio
3. What is the most logical reason that operating income was good even though sales were poor?
a reduction in variable costs, fixed costs, such as factor rents, do not vary with output.
demand curve shifts to the left (indicates a decrease in demand) would be cause by
a rise in the price of a complementary commodity
A significant increase in the supply of money would not increase the equilibrium interest rate
a significant increase in the supply of money, as might occur as a result of the Federal Reserve buying debt in the market, would shift the supply of money curve shift outward. With no change in demand, the outward shift in the supply curve would reflect a decrease in the equilibrium interest rate, not an increase in the interest rate.
Which of the following is least likely to be a source of big data? 1. Wearables 2. A thermostat 3. A single-page pdf document 4. A cow
a single-page pdf document. this by itself, is hardly a likely or viable source of big data
Assuming exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation's currency to appreciate on the foreign exchange market?
a slower rate of growth in income than in other countries. which causes imports to lag behind exports if exports increase relative to imports, foreign buyers are increasing their purchase of the country's goods/services, which increases foreign demand for the domestic currency to pay for those goods/ services. this will cause the currency to appreciate relative to other currencies.
sentiment analysis
a technique that allows marketers to analyze data from social media sites to collect consumer comments about companies and their products
what is an internal rate of return
a time-adjusted rate of return from an investment
a curve on a graph with the rate of return on the vertical axis and time on the horizontal axis depicts
a yield curve showing the term structure of interest rates
logic test
an input control to make sure data has been entered correctly.
economic profit formula
accounting profit - implicit costs
job-order costing systems are designed to
accumulate costs for tasks or projects that are unique or nonrepetitive
ratio used to evaluate short-term liquidity
acid test ratio (quick current assets to current liabilities)
The IT Steering Committee at Henry Flower's Flower shop is assessing whether to purchase, or internally develop, a new CRM (customer relationship management) system. In the COBIT model, this is best classified as an example of
acquisition and implementation to make or buy decision, such as is described in this case, is a part of assessing how to acquire, implement, or develop IT solutions that address business objectives and integrate with critical business process.
the cost of debt most frequently is measured is
actual interest rate minus tax savings interest expense is deductible for tax purposes.
computing overtime requires a calculation and is independent of
adding a video camera to identify employee punching in and out.
eg of an expert system (gives expert advice to user)
an automated system that uses info obtained from travel agents to help customers find the best tours for their interests.
Probability (risk) analysis
an extension of sensitivity analysis
if both demand and supply have traditional curves, a higher equilibrium price may be caused by
an increase in demand, a higher equilibrium price(and quantity) would be caused by an increase in demand
what can you infer when two products have negative cross elasticity
an increase in price of one results in a decrease in the quantity demanded of the other
when the current ratio is greater than one,
an increase in the numerator and the denominator by an equal amount will decrease the ratio
Typography is the choice of _____ in a visual display while iconography is the choice of ______ in a visual display.
fonts icons
who is responsible for establishing, maintaining, and regularly evaluating the effectiveness of internal controls
an issuer's principal executive and financial officers
in this phase of the development life-cycle would a needs assessment most likely be performed
analysis, (the phase where the team attempts to get an understanding of the requirements of the system)
factoring of AR would reduce Net AR,
and also decrease of AR would increase AR turnover rator
discussion of risk appetite should include the board of directors at a minimum
and should include the management and risk management teams.
Free Cash Flow
another name for cash flow from assets NOPAT + depreciation - capital expenditure -change in working capital
master file
are the computerized counterparts of ledgers found in manual systems
a graph that plots beta would show the relationship between
asset return and benchmark return. beta shows the relationship between the return of an individual asset and the return of an entire class of asset, as reflected in a benchmark return for the class.
this is a benefit of transmitting transactions in an electronic data interchange (EDI) environment
assurance of the thoroughness of transaction data because of standardized controls. This answer is correct because in an EDI environment transactions are communicated in standard format to help ensure completeness and accuracy.
accounting standards require that receivables bearing an unreasonably low stated interest rate (here 3% while the market is 8%) should be recorded
at their pv using the current market rate of interest.
2. Who has the primary responsibility to oversee the organization's financial reporting and internal control processes?
audit committee
average accounting rate of return
average annual after-tax net income divided by average cost of the investment
this represent a firm's average gross receivable balances
average daily sales X average collection period
to determine the inventory reorder point, calculations normally include the
average daily usage. calculation of the reorder point includes consideration of the average daily usage, average delivery time and stockout costs.
purchase requisition is the best control to
avoid ordering unneeded goods is
when using the FIFO method of process costing, total equivalent units of production for a given period of time is equal to the number of units
based on the work done in the current period, In work in process at the beginning of the period times the percent of work necessary to complete the items, plus the number of units started during the period, less the number of units remaining in work in process at the end of the period times the percent of work necessary to complete the items. Work to complete BWIP + Units started and completed + Work to date on EWIP Equivalent units (FIFO) Work to complete BWIP + Units started - Work to complete EWIP Equivalent units (FIFO
Which of the following risks relates to the possibility that a derivative might not be effective at hedging a particular asset? Credit risk. Legal risk. Market risk. Basis risk.
basis risk: (risk related to ineffective hedge)
checkpoints are mostly used in
batch system
salvage value is ignored in the discounted payback period
because it represents cash flow at the end of year 4.
Work in process cost formula
beginning WIP + direct materials +direct labor +overhead applied less transferred out to finished goods.
a measure that describes the risk of an investment project relative to other investment in general is the
beta coefficient (the correlation between the stock's price and the price of the overall market, As an example, if the market goes up 5% and the individual stock's price, on average, goes up 10%, the stock's beta coefficient is 2.0.)
common sizeFS are useful in making comparisons
between entities yes over time: yes Common-size financial statements are prepared by converting each amount to a percentage of a total amount on each financial statement. For example, revenues and expenses are converted to a percentage of total revenues. Such percentages are useful in comparing financial statements between entities and over time for the same entity.
zero-coupon bonds
bonds that pay no annual interest but are sold at a discount below par, thus compensating investors in the form of capital appreciation increase in value each year as they approach maturity, providing the owner with the total payoff at maturity.
firms in a monopolistic competitive market tend to engage in
both price and nonprice forms of competition
the variance of an individual investment captures
both systematic(relates to market) and unsystematic risk(relates to a specific industry)
this budget provides info for preparation of the owner's equity section of a budgeted balance sheet
budgeted income statement, owner's equity is increased by net income
Bacchus, Inc. is a large multinational corporation with various business units around the world. After a fire destroyed the corporate headquarters and largest manufacturing site, plans for which of the following would help Bacchus ensure a timely recovery?
business continuity, this deals with recovery of business operations after a disaster
which is the following factors is inherent in a firm's operations if it utilizes only equity financing?
business risk, firms always face business risk
Economies often experience inflation but seldom experience long period of deflation. Which of the following is true about a deflationary economy?
businesses are hesitant to make investments when the prices of assets are falling consumers are also hesitant to make purchases when prices are declining interest rates are very low in the periods of deflation, ( no one is buying)
value-added-networks are good bc more secure reduce communication and data protocol problems partners establish less point-to-point connections when a VAN is involved
but VAN are often costly
a reduction in price of the commodity will not cause an increase in demand for a commodity,
but rather change the the quantity demanded (increase) an increase in demand causes a shift of the demand curve (up and to the right), a change in price causes movement along a specific demand curve
Intelligent agents (automated online assistant)
can discover underlying patterns, categories, and behaviors in large data sets. can learn
this the primary function of a database management system
capability to create and modify the database
residual value of a project counts as
cash inflow
a tool which identifies potential causes for failures and defects is
cause-and-effect diagram
The practice of authorizing changes, approving tests results, and copying developmental programs to a production library is program
change control
Marginal Propensity to Consume (MPC)
change in consumption divided by change in disposable income
marginal propensity to consume is calculated as
change in consumption/ change in income
movement along the demand curve from one-price quantity combination to another is called
change in the quantity demanded movement along the existing demand curve reflects an increase or decrease in the quantity demanded
The US dollar has a free-floating exchange rate. when the dollar has fallen considerably in relation to other currencies the
cheaper dollar helps US exporters of domestically produced goods.
Some economic indicators lead the economy into a recovery or recession, and some lag it. An example of a lagging indicator is
chronic unemployment
Cloud computing is an appropriate topic for a board of directors' discussion when
cloud computing risks are high
to maintain effective segregation of duties within the information technology function, an application programmer should have which of the following responsibilities
code approved changes to a payroll program. An appropriate function for an application programmer includes making code approved changes to a payroll program.
in porfolio analysis a measure that is used to express the extent of the relationship among a set of investments is the
coefficient of correlation
only very creditworthy firms can use this type of short term financing
commercial paper
book value per share formula
common stock +retain earnings divided by outstanding stocks
Assume that Company A and Company B are alike in all respects except that Company A utilizes more debt financing and less equity financing than does Company B. Which of the following statements is most likely to be true?
company A has more net earnings variability than company B company A is more highly leveraged, it has greater fixed charges in the form of interest, therefore, A will have more volatile net earnings than company B
eg of info, communication, and reporting processes
company issues a report on its investment philosophy and risk management culture, sharing info to facilitate and enhance ERM
this statement related to business analytics is true
company strategy should drive business analytics strategy
absolute advantage is the ability to produce a product for less than other nations,
comparative advantage is the ability to produce at a relatively lower opportunity cost than another nation.
a compensating balance
compensates a financial institution for services rendered by providing it with deposits of funds. A compensating balance compensates the financial institution for services.
field check
computer checks the characteristics of the character length, content, or sing of individual data fields
the use of a header label in conjunction with magnetic tape is most likely to prevent errors by the
computer operator. so he can pick the right magnetic type for mounting on the tape drive
2. What should the auditor do if the control risk is believed to be high?
conduct more audit testing or rely on testing that provides a higher quality of audit evidence
Flat File System
contains a high degree of data redundancy contain program independence, (a disadvantage because multiple programs must be used to read, access and process the data
the master budget
contains the operating budget
the organization selects and develops control activities that mitigate risk associated with achieving results at acceptable levels
control activities, e.g youtopia implements a policy that prohibits purchasing from organizations that employ child and forced labor
the organization selects and develops general control activities over technology to support the achievement of objectives
control activities, " an automated function in YouTopia's accounting system checks and edits entered data" illustrate the selection and adoption of a general control over technology. IT general controls apply to all or most system activities, this is a general control since it is performed for all data entering the system
The organization holds individuals accountable for their internal control responsibilities in the pursuit of objectives.
control environment eg a youtopia employee who is responsible for compliance with fair trade practices, files a quarterly report and meets with her manager to discuss its contents" illustrates the practice of holding individuals accountable for compliance with internal controls, the controls in this example are the fair trade practices that youtopia has adopted
According to COSO, the use of ongoing and separate evaluations to establish a new baseline after changes have been made can best be accomplished in which of the following stages of the monitoring-for-change continuum?
control management, this involves the design and implementation of changes and establishing a new baseline
the variable portion of the semivariable cost of electricity for a manufacturing plant is a
conversion cost. conversion cost is the cost involved in converting the direct materials into a finished product. it is composed of dm and moh. electricity cost, whether variable or fixed, would be included in mfg overhead and classified as conversion costs, and therefore cannot be classified as a period cost.
Multi National United Corporation is a private contractor that relocates aliens to temporary housing facilities. On its company home page, the company lists the following words: "integrity," professional," "teamwork," and "security." These words are probably part of the company's ____________
core values, These adjectives are most likely statements of the company's core values, which are the entity's beliefs and ideals about what is good or bad, acceptable or unacceptable, and are statements that influence the behavior of the organization.
4. Which of the following is not a component of an effective internal control system?
corporate culture
After experiencing a near-debilitating breach in which highly sensitive files were deemed intentionally damaged, Cloudy Carpet Company went into action to restore their data from their recovery system. This action represents a ___________ control to respond to ___________.
corrective, virus
economic order quantity formula (EOQ)
cost per PO: numerator inventory carrying cost: denominator
unlike the traditional full-absorption cost system, activity based costing assigns
costs to individual products based on various activities involved.
price ceilings
create prices below equilibrium prices
in the computation of mfg cost per equivalent unit, the weight average method of process costing considers
current costs plus cost of beginning work in process inventory
this balance scorecard perspectives examines a company's success in target market segments
customer
a direct manufacturing labor overtime premium should be charged to a specific job when the overtime is caused by the
customer's requirement for early completion of job
when you are building a national database of real estate sales transactions to help your sales staff identify trends, opportunities and risks in your market, this is an example of
data extracting.
they include models, policies, rules or standards that determine which data is collected and how it is stored, arranged, integrated, and used in systems and in the organization
data management architecture.
walmart analyzes point-of sale data to determine sales trends, develop marketing campaigns, and predict customer loyalty, walmart is engaged in ____ using ______
data mining; big data
the ability to add or update documentation items in data dictionaries should be restricted to
database administrators" access must be controlled to ensure integrity of documentation although read access should be provided to either parties as it is important for applications development and maintenance.
operating cycle
days in inventory +days in AR
cash conversion cycle formula
days in inventory+days in AR-days in AP
this ratio is appropriate for the evaluation of AR
days of sales outstanding, which provides a measure of the average age of AR
debt to total assets is a measure of
debt utilization (financial leverage) ratior
In calculating the net present value of benefits and costs, income taxes would:
decrease both the amount of benefits and costs. income taxes affect taxable income.
Net present value: depreciation expense and salvage value
depreciation expense: exclude salvage value: include NPV is the difference between the required investment and the present value of the future cash flows ) since all future cash flows are included in the analysis, the inflow of cash from the salvage value of the project is included in the calculation, depreciation expense does not enter directly into the NPV calculation, this is because depreciation is a non-cash flow. depreciation expense does result in cahs inflow if you take income tax into consideration.
payback period does not consider the
depreciation expense: no time value of money: no
Griswold Corp. is planning a data analytics program to manage the risk of vendor fraud in purchasing. Which of the following activities would occur last in this process?
determine reporting procedures for vendor anomalies this is the last step of designing a data analytics plan. this procedure is part of determining escalation procedures when a problem is identified in data analytics.
field check
determines whether the characters in a field are of the proper type
a strategy map in the balanced scorecard framework si
diagram of the cause-and-effect relationship between strategic objectives.
annual interest rate of forgoing the cash discount is calculated as
discount % /(1.00-discount %)* (360/(40-10)
blockchain key word
distributed ledger, imagine a spreadsheet stored in many different computers. distributed storage of information
rule based expert system
do not learn from experience, simply execute rules
Zhi is reading an online summary production cost report and wants to know why the cost of sprockets, used in constructing orbital sanders, is so high, Zhi most likely needs to
drill down, you need to move from summary to detail to determine the cause
this is an application input control
edit check an edit check is a check on the accuracy of data as it is inputted
brownout (reduced voltage) is an example of ____ risk
electrical system
a valid reason for the government to intervene in the wholesale electrical power market would include
electricity is an essential resource and the wholesale market is not competitive.
this characteristics is a primary benefit of a Just-in-time inventory system for raw materials
eliminates non-value-added operations
Which of the following measures creates the most restrictive barrier to exporting to a country?
embargoes (total ban on certain types of imports)
in a competitive market for labor in which demand is stable, if workers try to increase their wage
employment must fall. like any other good or service, if price is increased for labor, the demand will fall and employment will fall.
negative space
empty spaces surrounding shapes and forms
Portfolio view of risk
enables an organization to identify risks that are severe at the entity level,
encryption performed by physically secure hardware device is more secure than
encryption performed by software
Roger buys seashells from Sally's SeaShore Sales. A more secure way for Roger to access Sally's website is by
extranet ( a private network that uses internet technology and the public telecommunication system to securely share part of the business's information or operations with suppliers, vendors, partners, customers or other businesses
in a job-order cost system, the use of indirect materials would usually be reflected in the general ledger as an increase in
factory overhead control this would recorded by a credit to stores control and a debit to mfg overhead (moh) debiting MOH increases the balance of this account
this structure refers to the collection of data for all vendors in a relational data base
file
capital and operating leases differ in that the lessor
finances the transaction through the leased asset only under the capital lease
spontaneous financing
financing that arises during the natural course of business without the need for special arrangements' occurs in day to day operation, eg. accounts payable
Companies can reduce the potential loss from host-government expropriation of their foreign subsidiaries by
financing the subsidiary with local-country capital to protect their investment, local capital would be preferred, the parent company could then default on the local creditors in the vent that the subsidiary is expropriated( taken ) fro them , the creditor's claims would have to be satisfied by the expropriating host government.
this cost would decrease if production levels were decreased within the relevant range
fixed cost per unit.
breakeven point in sales dollars was
fixed costs divided by the contribution margin %
an average fixed cost curve does not have a general "U-shape".
fixed costs do not change with changes in output over the relevant range of production. the more unit produced, the lower the average fixed cost.
this type of bond is most likely to maintain a constant market rate
floating-rate, the rate of interest paid on floating-rate bonds (also called variable-rate bonds/debt) varies with the changes in some underlying benchmark, usually a market interest rate bench mark. because the interest rate changes in the market rate of interest, they maintain a relatively stable (constant) market rate
a defining characteristics of supply chain management
focuses on the sharing of information with supplies and customers. A key aspect of supply chain management is the sharing of key information from the point of sale to the consumer back to the manufacturer, the manufacturer's suppliers, and the supplier's suppliers.
There are several kinds of hardware and software for connecting devices within a network and for connecting different networks to each other. The kind of connection often used to connect dissimilar networks is a
gateway, often implemented via software, translates between two or more different protocol families and make connections between dissimilar networks possible
GAPP stands for
generally accepted privacy principles (these are 10 principles that govern the controls over privacy in an organization)
southwest airlines benchmarked the process of turning around an airplane with the pit stop process for formula racecars, this is an example of
generic benchmarking, best practices regardless of the industry
If an investment is expected to be held for a long period of time the preferred method of calculating the expected return is
geometric average depicts the compounding annual return earned by the investor, this method is preferred for evaluating long-term investment
nominal interest rate goes up but your dividends stay the same, your stock price should
go down, because higher interest rates mean higher interest returns. if your stock will not paying paying higher dividends, you need to lower your stock prices to stay competitive
machine operators should not be supervised by the programmer
good internal control in a computer system required that operators, programmers and the library functions be segregated.
adventureland, a startup pittsburgh theme park, has a series of meetings with its investors, management, and employees to help identify its risk culture, this initiative most likely occurs as a part of this component of ERM framework
governance and culture
you implemented an initiative to attract and retain web programmers and system analysts as a part of its expanded web development to support online sales, this initiative most likely occurs as a part of which component in the ERM framework
governance and culture, this is related to COSO ERM principle 5, attracting,retaining and developing capable individuals
Banner Electronics has subsidiaries in several international locations and is concerned about its exposure to foreign exchange risk. In countries where currency values are likely to fall, Banner should encourage all of the following except
granting trade credit wherever possible, this means that they will pay you back with currency with less value
a disadvantage of the internal rate of return as a method of evaluating investments
has limitation when evaluating mutually exclusive investments
if the central bank of a country raises interest rates sharply, the country's currency will most likely
increase in relative value. higher interest rates mean higher return on investment, therefore the demand for the currency will increase for investment purposes, and the relative value of the currency will increase
increase in the market supply of beef would result
increase in the quantity of beef demanded supply curve shifts to the right, results in a lower equilibrium price and therefore increase the demand for beef.
in any competitive market, an equal increase in both demand and supply can be expected to always
increase market-clearing quantity. (there will be more quantity sold) In a competitive market, the market will always clear at the equilibrium price. If there is an equal increase in both demand and supply, the equilibrium price may increase, decrease, or remain the same. However, there will be more units sold.
the most effective fiscal policy program to help reduce demand-pull inflation would be to
increase taxes and decrease government spending in order to reduce demand
One of the benefits of a single integrated database information system is
increased data accessibility
high beta means high risk
increases the overall risk of the portfolio, low beta means lower risk.
this action is acknowledged preventive measure for a period of delfation
increasing the money supply. govt wants to encourage borrowing and investment to promote economic growth.
as a business owner you have determined that the demand for your product is inelastic, based upon this assessment you understand that
increasing the price of your product will increase total revenue. If demand is inelastic an increase in price will increase total revenue. This statement accurately states this rule.
because of the existence of economies of scale business firms may find that
increasing the size of a factory will result in lower average costs.
an increase in production levels within a relevant range most likely would result in
increasing the total cost, variable costs increase within the relevant range, thus increasing total cost.
Management would need to calculate which figure when determining the time to pay back the initial cost of a project?
incremental cash flow is used to determine the time to pay back the initial cost of a project
cyber breaches are
inevitable
when actual GDP exceeds potential GDP
inflation will exist
the component of COSO's framework for internal control that includes the goal of proper measurement of transactions is
information and communication
payback period equation
initial investment / net annual cash inflow
the transfer price that will generally lead to optimal decisions for the mfg company would be transfer price equal to the
market price of the product
The primary target audience of COBIT includes ___________ while the primary target audience of COSO includes __________________.
internal auditors external auditors Internal and external auditors are part of the target audience for both statements. However, COBIT is primarily focused on internal organizational IT processes, and therefore includes internal auditors as a primary focus. In contrast, COSO is primarily focus on external processes, and therefore includes a primary focus on external auditors.
cash conversion cycle
inventory conversion-receivable collection + payable deferral periods
the first steps in assessing privacy issues in an organization is to
inventory data, determine relevant laws and regulations. before securing existing data, we must first inventory data
the market value of a firm's outstanding common shares will be higher, everything else equal if
investors have a lower required return on equity. because the they apply a lower discount rate to the expected future dividend stream of the company.
vertical financial statement analysis
involves presenting everything within a financial statement as a percentage of a base. e.g interest expense as a % of sales
the machine language for a specific computer
is determined by the engineers who designed the computer
the real risk-free rate
is the basic component of interests
Which of the following is a primary concern of the "transform" phase of ETL?
is the data correctly formatted
an advantage of net present value modeling
it accounts for compounding of returns
payback method
it does not consider the time value of money. simply determines when the initial investment is recovered on an undiscounted basis
a two sector, free-market model it is assumed that the factors of production are owned primarily by individuals, not business firms
it is further assumed that business firms acquired those factors of production from individuals in order to produce other goods and services.
if government decrease its purchase
it will result in a decrease in aggregate demand
difference between job order costing and process costing
job order costing allocates the applied overhead to the number of units in each job (generally a small number of unit) while process costing allocates overhead to the number units in each processing center (generally a much number of units factory overhead is averaged over production in both job-order costing and process costing
costs are accumulated by responsibility center for control purposes when using
job order costing yes process costing yes
net realizable value of by product = sales value less separate by-product cost =equal "NRV
joint product cost less NRV of by-product =adjusted production cost for main product less ending inventory of gasoline =equal COGS for gasoline
in the short run, a firm in monopolistic competition that produces where demand(which is also average revenue) is equal to average total cost will
just break even average revenue = average cost, so there is neither a profit nor a loss
conversion costs are equal to
labor and overhead costs used in production.. also equal to total production costs minus raw materials
the difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as this type of variance
labor usage
Gus McCrae, an accountant at Lonesome Dove Cattle Ranch, builds a spreadsheet to track cow movements between locations. However, there are so few movements of cattle between locations that the spreadsheet is unhelpful. This problem illustrates which of the following issues?
lack of strategic focus this spreadsheet was not needed and should not have been created
a distributed processing environment would be most beneficial in this situation
large volumes of data are generated at many locations and fast access is required. This answer is correct because a distributed data processing system is useful when processing is done in multiple locations. It enables processing of a large volume of transactions and fast access to data.
in the balanced scorecard framework, employee retention is a potential measure in which of the four perspectives
learning and growth, employee retention would appear in the learning and growth perspective which includes various employee measures
the derivative risk that relates to the possibility of loss from regulatory action
legal risk (possibility of loss from legal or regulatory action
this internal control procedure would prevent an employee from being paid an inappropriate hourly wage
limited access to employee master files to authorized employees in the personnel department
the purpose of a detailed analysis of average collection period is to evaluate
liquidity
the cash receipts budget includes
loan proceeds, bc these increase cash
these characteristics, should be taken into account in valuing a specific item
location and condition
the theory underlying the cost of capital is primarily concerned with the cost of
long term funds and new fund
when calculating the cost of capital, the cost assigned to retained earnings should be
lower than the cost of external common equity. newly issued or external common equity is more costly than retained earnings because the company incurs issuance costs when raising new funds
short term interest rates are usually ____than long term interest rates
lower, there is less risk involved in the short run and investors are willing to accept lower rates on short-term investments because of their liquidity, short term rates have ordinarily been lower than long term rates.
price/earning ratio is what kind of ratio
market ratio
advantage of using variable cost
makes cost-volume relationships more easily apparent
all control systems may fail due to
management override how matter how effective designed and implemented
audit trails tend to be more transparent in
manual rather than in automated accounting systems.
in a job-costing system, issuing indirect materials to production increases which account
manufacturing overhead control the cost of indirect materials used increases the manufacturing overhead control account and decreases materials control
monopolistic competition
many seller of differentiated products. (restaurants, hotels and pubs)
profit is maximized when marginal cost is equal to
marginal revenue
minimize transfer pricing to company a with the lowest tax rate (the lowest income tax would be achieved by the highest income by the company with the lowest tax rate)
maximum transfer price from company A to company b( highest tax rate) to maximum income, because company A have the lowest cost
adjusted R-squared (R^2)
measures the % of the variance in the dependent variable explained by the independent variable.
discount rate is the rate that
members banks may borrow short-term funds directly from federal reserve banks
lockbox most likely to provides what kind of benefits for receivables management
minimize collection float. payments are directly sent to the bank, thus collection float is minimized
the organization selects, develops, and performs evaluations to assess the extent to which internal control components are present and functioning
monitoring, e.g youtopia gathers, processes, and reports accident and injury records from its mfg sites.
this competition form describes an industry that has a relatively large number of firms operating noncollusively and producing differentiated products
monopolistic competition
a bond backed by fixed assets is an
mortgage bond
free cash flow is calculated as
net operating income after taxes + depreciation expense -change in net working capital -capital expenditures =free cash flow
residua income is
net operating profit- (cost of capital (%)* total assest)
the discount rate (hurdle rate of return) must be determined in advance for
net present value There are two capital budgeting methods which consider time value of money: internal rate of return and net present value. Under the net present value method, all cash inflows and outflows related to a capital project are discounted to a present value and netted to arrive at a net present value for the project. In order to discount the inflows and outflows, a discount rate must be determined in advance of the analysis of the project.
The discount rate (hurdle rate of return) must be determined in advance for the
net present value it calculates the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present using some predetermined minimum desired rate of return (hurdle rate)
Warren, Inc. is considering a number of methods to evaluate investment projects. Management of Warren is primarily concerned with maximizing shareholder value. Which of the following techniques would probably be the best method for management of Warren to select? Payback. Net present value. Discounted payback. Accounting rate of return.
net present value is the best in terms of considering profitability of the project payback method ignores total project profitability accounting rate of return does not adjust for the time value of money
profitability index
net present value of cash flows/ money invested
this techniques consistently gives the best answer when evaluating investment projects that are mutually exclusive
net present value, The net present value consistently provides the best solutions even when considering mutually exclusive projects.
the profitability index is a variation of this capital budgeting model
net present value. The profitability index is calculated as the ratio of the net present value of the project to its initial cost.
Asset Turnover Ratio
net sales/average total assets
technology risk structure risk
new sketchy
effects on project NPV using accelerated depreciation for project assets rather straight-line depreciation
no effect on NPV, because depreciation expense per se does not affect cash flows. provided that you ignore tax effects, any depreciation tax shield would not be considered
Using accelerated depreciation for project assets rather straight-line depreciation (effects on NPV)
no effect on the NPV of a project because depreciation expense per se does not affect cash flows. Therefore, there would no effect on the NPV of cash flows. (The facts say to ignore tax effects; therefore, any depreciation tax shield would not be considered.)
depreciation expense is a
non cash inflow
this would be a reasonable basis for allocating the material handling costs to the units produced in an activity-based costing system
number of components per completed unit there is a direct causal relationship between the number of components in a finished product and the amount of material handling costs incurred.
The machine-language program that results when a symbolic-language program is translated is called a(n)
object program
Market in which firm demand curve is most likely to be kinked
oligopoly, In an oligopoly market, there are few firms, each of which knows and responds to the actions of other firms. Thus, if one firm lowers it price, rival firms are likely to lower their price to keep from losing market share. However, if one firm raises its price, rival firms are not likely to raise their price and lose market share. Therefore, the demand curve will kink at the established current price. That demand curve reflects the fact that prices will be more elastic above the kink (if a firm raises its price, it loses a disproportionate number of customers) and more inelastic below the kink (if a firm lowers its price, others will too, so it won't gain a disproportionate number of customers).
horizontal mergers lead to the formation of
oligopoly, a combination of firms in the same line of business.
economic markets that are characterized by monopolistic competition have all the of characteristics but
one seller of the product, monopolistic competition is a market that has numerous sellers of similar but differentiated products.
this instrument of monetary policy is the most important means by which the money supply is controlled
open market operations. (through bond sales and purchases are flexible (govt securities can be purchased or sold in large or small amounts) cause prompt changes in bank reserves, and are more subtle than reserve ratio changes.
operating profit margin is
operating profit divided sales operating profit is sales minus COGS and general and admin expenses
systems programmers are given responsibility for maintaining system software, including
operating systems and compilers
this is the best description of the potential root cause of a risk
operator processing errors(root cause) will reduce the qualify of mfg unit (stated risk)
transfer price should equal the
opportunity cost if you're operating at full capacity,
a critical success factor in data mining a large data store
pattern recognition. benefit of data mining if the confirmation and exploration of data relationships
Most likely to employ public relations and lobbying as part of firm strategy
perfect monopoly Because a monopoly exists when a single firm provides the total output for an industry, there is no competition and, therefore, there are no normal market forces on the setting of price. As a consequence, government generally imposes regulations that restrict the setting of price by a monopoly firm. Monopolies employ public relations and lobbying as part of a strategy to sway government regulations that would be detrimental to those firms.
Most likely to use price discrimination to increase revenue in the short run
perfect monopoly The demand faced by a monopolistic firm is fixed in the short run. Therefore, the monopolistic firm can increase revenue only by selling at different prices to different customers, a concept known as price discrimination. For example, an electric utility might sell to residential customers at one rate and to commercial customers at a higher rate for essentially the same service.
assumption associated with economic order quantity formula
periodic demand is known. economic order quantity determines the order size that will minimize total inventory cost-both order cost and carrying cost. EOQ assumes that period demand, order cost, and carrying cost per unit are know and constant during the period.
electronic data interchange can also be used to
place material orders
COSo control activities (supervisor control, physical controls, verification)
policies and procedures security application change management business continuity outsourcing
during the recessionary phase of a business cycle
potential national income will exceed actual national income
NPV of a project equals
present value of after tax cash flows +terminal value of the investment at present value -initial cost of investment
a downward sloping yield curve depicting the term structure and interest rate implies that
prevailing short-term interest rates are higher than prevailing long-term interest rates. a downward sloping curve means short-term rates are higher than intermediate-term rates which are higher than long-term rates.
business analytics is useful in
preventing and detecting frauds
The Thin Apple Company doesn't have significant funding to spend on data security and protection, but they know they can do the bare minimum. Thin Apple is careful to make sure they always disable any network services when they are not being used. This activity represents a ____________ control to respond to __________.
preventive, Denial of service
people use data mining to discover
previously unknown information
material price variances are the responsibilities of the
purchasing manager, who negotiates purchases of materials.
To meet its monthly budgeted production goals, Acme Mfg. Co. planned a need for 10,000 widgets at a price of $20 per widget. Acme's actual units were 11,200 at a price of $18.50 per widget. What amount reflected Acme's price variance?
price variance is actual units X (actual price-standard priced), or or $16,800 favorable [11,200 × ($18.50 − $20.00)].
the enterprise risk management-integrated framework of the committee of sponsoring organizations is best defined as a
process effected by the entity's board of diretors, management and other personnel
they help an entity create and maintain reliable data
processes and controls
this is assigned to goods that were either purchased or manufactured for resale
product cost
under a standard cost system, the material efficiency variances are the responsibility of
production and industrial engineering they have control over the usage of material.
revenue is a financial performance measure while
production yield is an operating performance measure
Sad Reginald wrote software for the Valencia Clown Revue. One fine day, however, having grown tired of computers and software, he became a juggler, fire eater, and fainting goat farmer. After his departure, the Valencia Clown Revue was unable to maintain and upgrade the systems that Sad Reginald had written. The best control for preventing this failure would be
program documentation this would allow sad reginald's successor to maintain the software
descriptive analytics
provide information about what happened
flexible budget
provides budgeted numbers for various activity levels
According to the framework for cybersecurity, protecting and securing the U.S. critical infrastructure requires a partnership between ___________ and __________.
public entities, private entities
SnowDrift Ski Resorts has many celebrity visitors. At a recent meeting, the CIO presented a plan to ensure the complete privacy of all visitors, including compliance with relevant laws and regulations related to privacy. This plan is likely to also be found in a (an)
regulatory compliance policy
for purposes of allocating joint costs to joint products, the sales price at point of sale reduced by cost to complete after split-off is assumed to be equal to the
relative sales value at split-off. This answer is correct because joint products that are not salable at the split-off point require additional processing to make them marketable. To allocate joint costs to this type of product, a hypothetical sales value, representing the relative sales value at split-off, is calculated. This is done by subtracting the after-split-off processing costs from the price at point of sale.
Smigly Construction builds large warehouses for many clients. Smigly is more likely than most other businesses to use _____________ in its revenue cycle billing processes.
remittance advice remittance advices help customers match payments with invoices, they are more likely to be used in complex businesses, such as construction and medical billing
a US parent company is reviewing the cash flows from its international subsidiaries, in addition to exchange rate risk, this items would be a primary consideration in the company's cash flow analysis
repatriation restrictions.
materials requisition
request for the transfer of raw materials to the production floor aka material transfer ticket
this is least likely to be a foreign exchange control that may be implemented by a country
requiring a floating exchange rate requiring a market-driven (floating) exchange rate involves no controls on the market
System Analyst Role
responsible for designing the computer system, including the goals of the system and means of achieving those goals, based upon the nature of the business and its information needs. outline the data processing system for the computer programmer with system flowchart
this ratio is used is compare the profitability of two electronics companies that differ in size
return on assets (this is a profitability ratio)
Minon, Inc. purchased a long-term asset on the last day of the current year. What are the effects of this purchase on return on investment and residual income?
return on investment: decrease residual income: decrease because purchasing an asset increased the average investment which reduces both return on investment and residual income
an investor has been given several financial ratios for a company but none of the financial reports, which combination of ratios can be used to derive return on investment
return on sales and asset turnover, these two ratios comprised the simple DuPont equation, ROI equals net operating profit divided by sales times sales divided by total assets.
which metric/approach should be used to evaluate product q with respect to comparable products sold by its competitors
revenue market share The revenue market share metric/approach should be used to evaluate Product Q with respect to comparable products sold by its competitors. Market share is a key indicator of market competitiveness—how well a company is doing against its competitors. Market share is the percentage of a market accounted for by a specific company. Revenue market share is the prices at which goods are sold by a particular company as a percentage of total market sales, measured in revenues (revenue market share % = sales revenue $ ÷ total market sales revenue $).
the capital budgeting techniques known as accounting rate of return uses
revenue over life of project: yes depreciation expense: yes
economic concept of normal profit equals
revenue-explicit costs-implicit costs =0
the equation for computing operating income is
revenue-variable costs-fixed costs= operating income
control group is responsible for providing a continuous review function by supervising and monitoring input, operations, and distribution of outs
review and follow up on wrong data by computer program controls
if you want to determine if employee pay rates are accurate, your best strategy for accomplishing this goal is to
review the cumulative earnings register
according to COSO, this addresses thee need to respond in an organized manner to significant changes resulting from international exposure, acquisitions, or executive transitions
risk assessment (identifying, analyzing, and managing the risks involved in achieving the organization's objectives,
assessment of information about fraud. this is related to which component of internal control?
risk assessment component
"According to the 17 COSO control principles, organizational objectives primarily relate to which fundamental component of internal control."
risk assessment, relates to organizational objectives, risk assessment, fraud and change management, organizational objectives link to risk assessment since objectives help to define the risks that are to be assessed.
expected rate of return on equity
risk free interest rate + (the market rate - risk free interest rate) X beta eg. 0.05 +(12-0.5) x 0.6= 0.092
rate of return required by investors to compensate them for deferring current consumption when making an investment
risk-free rate.
At what stage of the capital budgeting process would management most likely apply present value techniques? Identification stage. Search stage. Selection stage. Financing stage.
selection stage Present value techniques will most likely be used in the selection stage in which management evaluates various alternatives. Commonly used present value techniques include net present value and the internal rate of return.
Lyle Corporation has sold a large quantity of goods to a Japanese company on a 90-day account that is payable in Japanese yen. If management of Lyle is concerned about the transaction risk related to changes in the value of the yen, how might management hedge this risk?
sell yen using the forward contract for delivery in 90 days, by selling the yen, the management has locked in the purchase price, when the customer pays in 90 days. the firm can delivery the yen on the forward contract with no significant gain or loss.
an assessment of the likelihood and severity of cyber risk impacts should be led by ____ and should include_____
senior management, individual who know the organization's cyber risk profile
An accountant at Henry Higgins Language Lessons must sort the master file before processing recent transactions to update the master file. Henry Higgins uses ______ file storage.
sequential, A file that contains records or other elements that are stored in a chronological order based on account number or some other identifying data.
ROI is highly related to stock price and therefore,
shareholder value
buying insurance is a form of managing risk
sharing risk, which involves reducing risk likelihood or impact by transferring or sharing a portion of the risk.
a decrease in the price of a complementary good will
shift the demand curve of the joint commodity to the right if the price of a complementary good decreases, demand for the joint commodity will increase, this is due to the fact that the total cost of using the two products decreases. if the demand for a product increases, the demand curve will shift to the right.
this is most likely not considered when computing the weighted average cost of capital
short-term debt, short term debt is not part of the capital structure.
3. The control environment of an organization is influenced by the effectiveness of the board of directors or its audit committee. For this reason, the audit committee?
should be composed of independent directors
cost of moving, handling. and storing products is a non-value-added cost and
should be minimized
3. Why is it important to consider internal controls prior to testing transactions?
so an assessment can be made of the risk of material misstatements within the financial statement whether due to error or fraud
investment's beat measures
the investment's systematic risk, beta is the covariance of the asset's returns with the returns of the overall portfolio, therefore, it measures the systematic risk of the investment.
relative risk is measured as
standard deviation/ expected return
relational database
store data in table form are flexible and useful for unplanned, ad hoc queries are maintained on direct access devices (hard disk drives, optical drives and most magnetic storage devices)
this procedure is most likely included in the disaster recovery plan of an entity
store duplicate copies of files in a location away from the computer center, this would allow recovery of contaminated original files
an increase in the margin requirement for security purchase would increase the % cost of such an investment which the investor cannot use borrowed funds, thus requiring a higher money investment to acquire securities.
such a change would be a monetary policy action. and the higher margin requirements would be expected to lower investments in securities, because investors must pay a larger amount of the initial cost of the securities, and decrease economic activities and GDP
conversion cost
sum of direct manufacturing labor and applied factory overhead
AR equals
sums of the cash deposits plus the discount taken by the customers
this management techniques is the most important to a firm in a purely competitive market
supply chain management, to be successful in a purely competitive market, the firm needs to focus on decreasing costs, supply chain management can be effective at reducing costs
this is a significant deficiency in internal control The systems programmer designs systems for computerized applications and maintains output controls.
system programmer should not maintain custody of output in a computerized system. At minimum, the programming, operating, and library functions should be segregated in such computer systems.
Jody's Hardware Store developed a new module for the accounting system to monitor and forecast contractor purchases by vendor month. The old system was manual. The most important risk related to the new system is
systematic processing errors. systematic processing errors are an important risk of a new system
heat mapping
technology to track how people move through a web page. Heat mapping tells you where people are looking on youe website by showing where they click on site:
ABC, Inc. assessed overall risks of MIS systems projects on two standard criteria: technology used and design structure. The following systems projects have been assessed on these risk criteria. Which of the following projects holds the highest risk to ABC?
technology: new (more risky than current) structure: sketchy (more risky than well defined)
the primary advantage of value added network is
that it provides increased security data transmission bc VAN uses private networks
normal scrap
the lost unis have minimal value and can be sold as is without any work, then they are classified as scrap, scrap can be sold, disposed of, or reused.
the annual cost of carrying inventory is
the average inventory level X the cost per unit of inventory X the cost of capital
governance is primarily the responsibilities of
the board
overall responsibility for overseeing the management of risks, compliance with our risk management framework and risk appetite lies with
the board of directors
company strategy should drive business analytics strategy
the business strategy, goals, and mission should drive business analytics, business analytics must support and integrate with company strategy
open market operations
the buying and selling of government securities to alter the supply of money
implementation of a government's monetary policy in most major industrial countries is managed by
the central bank
The fixed portion of the semivariable cost of electricity for a manufacturing plant is a
the cost of electricity for a mfg plant, whether fixed or variable, is included in factory overhead and , therefore, is a product cost. (product costs are costs that can be associated with the production of specific revenue)
The call center manager of Wholly Parts Chicken Supply manages all unit resources using an MS Access database that only she has access to. She is not trained in accounting or systems development. The most important concern with this situation is
the database likely has never been tested or validated, Correct! This is an important problem with end user-developed applications and spreadsheets.
What does it mean when a product is described as "highly price elastic?"
the demand for the product will decrease at a much larger percentage than the increase in price
when an economy is at the peak of the business cycle
the economy will be at the natural rate of unemployment this is achieved when there is no cyclical unemployment. at the peak of a business cycle, the level of employment is at its highest, and there would be no unemployment caused by a lack of business activity. therefore, at the peak of the business cycle, there would be only frictional, structural, and seasonal unemployment, the components of natural unemployment.
least likely to be useful in deciding in which country an entity should operate
the entity's strategy, it s more likely that an entity's strategy will have to be adapted to the country in which it decides to operate, that decision would be based on the economic system of alternative country locations and an analysis of the macro-environmental and industry characteristics of these alternative locations.
variance of a portfolio is a measure of the variation or fluctuation of the returns on that portfolio over time. covariance among the returns of assets in the portfolio measures how the price of one asset moved in the relation to the movement of another assets
the expected market rate (of interest) plays no roles in the historic value of an asset and, there fore, does not affect the variance of a profolio (set) of assets
this is central to determining the nature of market structure in a free-market economy
the extent of competition in the market
Kode Co. manufactures a major product that gives rise to a by-product called May. May's only separable cost is a $1 selling cost when a unit is sold for $4. Kode accounts for May's sales by deducting the $3 net amount from the cost of goods sold of the major product. There are no inventories. If Kode were to change its method of accounting for May from a by-product to a joint product, what would be the effect on Kode's overall gross margin? if you have a by product with a selling cost of $1 and you switch to joint product cost
the gross margin increased by $1 for each unit. shift expense below the gross margin instead of reducing the COGS
Internal rate of return is the cost of capital percentage at which the net present value profile crosses the horizontal axis
the higher the cost of capital percentage the higher the internal rate of return.
What risk should be assessed by the auditing team if Iona's industry is experiencing a significant, unexpected downturn in prices due to deregulation?
the increased risk of material misstatements in the financial statements.
in analyzing a special order,
the incremental revenue less the incremental cost is considered. fixed cost is ignored
one important advantage of issuing debt instead of equity is that
the interest expense is tax deductible
Business Analytics (BA)
uses data and statistical methods to gain insight into the data and provide decision makers with information they can act on
management has reviewed the standard cost variance analysis and is trying to explain an unfavorable labor efficiency variance of $8000, this is the most likely cause of the variance
the maintenance of machinery has been inadequate for the past few months. if machine breaks down, machine will be less efficient
in a perfect monopoly, the relationship between the marginal revenue curve and the demand curve is
the marginal revenue curve is below the demand curve an the curves diverge as the quantity increases . the reason is that facing a down ward sloping demand curve, the firm must continuously lower its selling price in order to sell more units, therefore, marginal revenue must be below demand.
Residual Income
the net operating income that an investment center earns above the minimum required return on its operating assets
in a risk aware organization
the organization culture is closely linked to the organization's strategy, objectives and business context.
the producer price index measures
the price of a basket of commodities at the point of first commercial sale (the combined price of a selected group of goods and services for a specified period in comparison with the combined price of the same or similar goods for a base period.
data mining
the process of analyzing data to extract information not offered by the raw data alone
If an investment project has a profitability index of 1.15 computed using cash flows only, then the net present value of the project is positive
the profitability index is computed as present value of future cash flows divided by the amount of initial investment. If the index is greater than 1.00 the net present value of the investment is positive.
a firm's credit criteria is defined as
the required financial strength of acceptable customers. whether customer should be extended credit
joint costs should be ignored when deciding whether to sell or process a product further,
the sell or process further decision should be based on incremental revenues and costs.
Coefficient of Variation (CV)
the standardized measure of the risk per unit of return; calculated as the standard deviation divided by the expected return the higher means the investment is riskier
sensitivty analysis
the study of how the uncertainty in the output of a mathematical model or system (numerical or otherwise) can be divided and allocated to different sources of uncertainty in its inputs.
collection float
the time the check is in the mail, the time it takes the firm to process the check when it is received time it takes for the processed check to clear the bank and the related funds deposited in the receiving firm's account
in macroeconomics, aggregate demand is
the total expenditures on consumer goods and investment, including government and foreign expenditures, during a given period. Aggregate demand is the total amount of expenditures for consumer goods and investment for a period of time. It includes purchases by consumers, businesses, government, and foreign entities.
multimodal authentication
the use of multiple authentication credentials of the same type to achieve a greater level of security
within a relevant range for the application activity base
the variable cost per unit and the total fixed cost would be *constant*
expected return of the porfolio is
the weighted-average of the individual investment
pledging of AR as a security for a two year loan would not affect the AR shown as a current asset
there would be no change in AR turnover calculation
an increase in government spending causes an increase in domestic interest rates and international capital inflows
these capital inflows cause the domestic currency to appreciate, which has a negative effect in net exports.
public company CEOs and CFOs must certify that
they are responsible for establishing and maintaining their firm's internal financial controls.
a common limitation of payback period, discounted cash flow, internal rate of return, and net present value
they rely on the forecasting of future data
a good description of the potential impact of risk? the risk of denial of service attacks impacts the company's ability to retain the confidentiality of customer data
this a precisely stated risk (DOS attack) that includes a precisely stated potential impact of risk ( i.e inability to keep customer data confidential)
Identify and assess changes that could significantly impact the system of internal control.
this is a principle of the risk assessment component
A small accounting firm buys SaaS from a third-party CSP. As a part of this process, the accounting firm regularly requests and receives data about the system's performance of the CSP. This is an example of managing which of the following cloud-computing risks?
this is an example of manageing lack of CSP (communication service provider) transparency.
software as a service (SAAS) is a cloud base software that is externally hosted and usually comes with an ongoing fee instead of buying software on a CD and installing it
this is an example of use of the cloud to access software and programs.
4. Internal controls exist within an organization to encourage efficient and effective use of available resources to optimize the company's goals. What is the primary objective of these controls?
to ensure accurate financial and nonfinancial information about the entity's operation for internal decision making
this is a compliance objective of COSO
to maintain a safe level of carbon dioxide emissions during production
risk appetite applies to the development of strategy
tolerance applies in the implementation of strategy key risk indicators apply at any level of business.
breakeven analysis assumes over the relevant range that
total costs are linear
The two main variables that contribute to increases in a nation's real gross domestic product (GDP) are labor productivity and
total worker hours. these are the two major components of real GDP
Stretch (delay) payments on its trade accounts payable would reduce cash conversion cycle. t/f
true, this would increase number of days in AP and lower the cash conversion cycle
Mutually exclusive investments
two investments for which the acceptance of one automatically excludes the acceptance of the other. one of the other
a digital signature is used primarily to determine that a message is
unaltered in transmission, digital signature assures that the recipient that the message came from a certain individual and it was not modified
the ultimate purpose of competitor analysis is to
understand and predict the behavior of the competition
an unfavorable direct labor efficiency variance could be caused by an
unfavorable material usage variance. An unfavorable material usage variance may be caused by defective materials, which also may cause an unfavorable labor efficiency variance.
in computing the reorder point for an item of inventory, these are used (when)
usage per day, lead time lead time times the usage per day expected during lead time yields the reorder point. cost is determine the amount to be ordered, not when.
PaaS (Platform as a Service)
use cloud to create software (SAAS is the use of the cloud to use software)
diagnostic analytics
used to understand why something happened
when a client's AP computer system was relocated, the administrator provided support through a dial-up connection to a server, no changes were made to the AP system at that time, this situation represents the greatest security risk
user accounts are not removed upon termination of employees
Reggie Sloanback, the operations manager, writes a spreadsheet to keep track of fixed assets at Mason's Masonry and Stoneworks, a manufacturer of stone structures and sculptures. His spreadsheet does not link to the ERP used at Mason's. The most serious internal control concern about this situation is
user-created systems can create multiple control issues, users often inadequately test and review the system that they develop
for a mfg company, this is an example of a period rather a product cost?
wages of salesperson, salespersons' wages are not associated with the production process and, therefore, would not be considered a product cost, the wages of salesperson are considered a period cost and expensed in the period incurred.
the expected return of a portfolio is measured by the
weighted average, the weighted average of the expected returns of the assets in the portfolio is equal to the expected return of the portfolio
this rate is most commonly compared with the internal rate of return to evaluate whether to make an investment
weighted-average cost of capital (provides a measure of cost of the funds that the company is considering investing in the project)
the primary concern of the extract phase of ETL is
what data do we need
predictive analytics
what will happen
the symbol for independent variable of y=a+bx
x
in a linear regression intercept is equal to
y
The capital structure of a firm includes bonds with a coupon rate of 12% and an effective interest rate is 14%. The corporate tax rate is 30%. What is the firm's net cost of debt?
you use effective rate 14*0.7=0.098 This answer is correct because the cost of debt is equal to the effective rate less the tax advantage, or 9.8% [14% × (1-.3)].