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Cost of Equity Capital

(D1/Po) +g D1 = Current Dividends Multiplied by 1 P = Current market price per share of common stock g = Expected growth rate in dividends

What are the five components of COSO's Enterprise Risk Management framework?

(GO PRO) Governance and Culture Objective-Setting and Strategy Performance Review and Revision (Ongoing) Information, Communication, and Reporting

What are the different components of The Committee of Sponsoring Organizations (COSO)

3 objectives - (ORC) 5 Components - (CRIME) 17 Principles

Payment Discounts Equation Wyley inc purchases an item on credit with terms of 3/10, net 45 based on a 360 day year, wyley's annual interest cost of if they dont take the discount is?

31.81% 360/35 X .03/.97 = .3181 or 31.81% APR of quick payment discount = 360/pay period - discount period x discount %/100% - Discount % MCQ 3458 & MCQ 4014

Which is true concerning operating leverage? A. A company with relatively high fixed costs has high operating leverage. B. A company that increases debt to finance its operation is increasing its operating leverage. C. A company with high operating leverage is less profitable than another company with the same amount of sales and lower operating leverage.

A. A company with relatively high fixed costs has high operating leverage. Operating leverage is the degree to which a firm uses fixed, as opposed to variable operating costs. A firm that has high operating leverage has relatively high fixed costs and relatively low variable operating costs.

Which of the following costs includes all the product costs? A. Direct material and conversion costs B. Direct labor and prime costs C. Manufacturing overhead and conversion costs

A. Direct material and conversion costs. Product costs consist of direct materials, direct labor, and factory (manufacturing) overhead. Materials and labor added together are prime costs, while labor and overhead are conversion costs. Direct materials plus conversion costs compromise all product costs.

A manager has be tasked with implementing controls over expense accounts. Which is detective supervisory and monitoring control to ensure ongoing monitoring of performance of expenses? A. Expense budgets B. Clear organizational hierarchy charts D. Input validation

A. Expense budgets Budgets and forecasts are detective supervisory and monitoring controls. Comparing budgets an forecasts to actual results can assist in detecting anomalies in business processes.

What is strategic planning? A. It establishes the general direction of the organization B. It establishes the resources that the plan will require C. I consists of decisions to use parts of the organization's resources in specified ways.

A. It establishes the general direction of the organization Strategic planning is the creation of an overall strategic plan for an organization to achieve its overall business objectives. The strategic plan will establish the general direction of the organization.

Which of the following analysis of production processes to ensure that resource uses stay within target costs? A. Kaizen B. Activity-based Costing C. Value Chain Analysis

A. Kaizen Kaizen, or continuous improvement, occurs at the manufacturing state where the ongoing search for cost reductions takes the form of analysis of production processes to ensure that resource uses stay within target costs.

According to COSO, who identifies the group responsible for implementation and development of ERM framework? A. Management B. Internal Auditors C. The board of directors D. External Auditors

A. Management Management is responsible for this task. Its easy to try and choose The board of directors, but the board is responsible for the oversight of management, not implementing ERM.

Three elements needed to estimate the cost of equity capital for use in determining a firm's weighted-average cost of capital are: A. Current Dividends per share, expected growth rate in earnings per share, and current market price per share of common stock. B. Current dividends per share, expected growth rate in dividends per share, and current market price per share of common stock. C. Current earnings per share, expected growth rate in dividends per share, and current market price per share of common stock.

B. Current dividends per share, expected growth rate in dividends per share, and current market price per share of common stock.

Scrambling plaintext found in the message into ciphertext to make it unreadable for anyone other than the recipient is: A. A digital certificate B. Data encryption C. Network intrusion detection

B. Data encryption The intended recipient uses a digital key to decrypt or decipher the ciphertext back into plaintext.

The manufacturer of a high priced car emphasizes the prestige, performance, and safety of the vehicle. This strategy is: A. Differentiation focused on a narrow range (niche) of buyers. B. Differentiation focused on a broad rang of buyers

B. Differentiation on focused on a broad range of buyers. The manufacturer's attempt to appeal to prestige, performance, and safety targets a broad range of motivations in the automotive market and markets to wealthy individuals, corporations, etc. Since it is not focusing on ONE feature, it is marketing towards a BROAD range of buyers rather than a niche.

A US company has a significant amount and number of A/R in foreign currencies. To mitigate exchange risk the company will: A. Futures contract to buy the foreign currency at a specific rate B. Forward contract to sell the foreign currency at a specific rate

B. Forward contract to sell the foreign currency at a specific rate. This will hedge the risk that the currency collected in satisfaction of a receivable may have weakened in relation to the dollar at the settlement date. **Forward contracts are used for larger groups of transactions (such as a large volume of A/R) and Futures contracts hedge a specific transaction.

Performance of quality assurance occurs in which of the following processes? A. Authorization B. Implementation C. Close D. Planning

B. Implementation Quality assurance takes place in the implementation process, after the standard of quality has been defined.

Which of the following metrics equates the present value of a project's expected cash inflows to the present value of the project's expected cash outflows? A. Economic value-added B. Internal rate of return C. Net present value D. Return on assets

B. Internal rate of return. The internal rate of return (IRR) focuses the decision maker on the discount rate at which the present value of a project's cash inflows equals the present value of the cash outflows. The IRR is the rate used to arrive at the net present value of zero.

Each of the following are appropriate cost drivers for activity based costing except: A. Behavioral Effects B. Volume-based production C. Cost of measurement

B. Volume-based production Volume-based production (and the associated usage of each cost driver activity) will determine HOW you allocate costs once cost drivers have already been established. It will not be considered as a means for determining WHAT the appropriate cost drivers are for specific activities.

An American importer expects to pay a British supplier 500,000 British pounds in three months. Which of the following hedges is best for the importer to fix the price in dollars? A. Buying British pound put options B. Selling British pound put options D. Buying British pound call options

Buying British pound call options. If the price goes up the purchaser would exercise the options, if not, the purchaser would buy the British pounds in the market and let the options expire. Futures could also work.

COSO's enterprise risk management framework encompasses each of the following, EXCEPT: A. Enhancing risk response decisions B. Seizing opportunities C. Decreasing inherent risk appetite D. Decreasing inherent risk appetite

C. Decreasing inherent risk appetite. Inherent risk is the risk that exists to an entity when management takes no action to alter the severity of the risk. Decreasing inherent risk appetite is not a component of ERM.

Review of the audit log is an example of which security control? A. Preventive B. Corrective C. Detective D. Governace

C. Detective Audit logs are detective security controls. They are generally chronological records that provide documentary evidence of the sequence of activities that can be used to detect errors or irregularities

A cost that bears an observable and known relationship to a quantifiable activity base is a(n): A. Target Cost B. Indirect Cost C. Engineered Cost D. Fixed Cost

C. Engineered Cost An engineered cost bears an observable and known relationship to a quantifiable activity base.

A firm with a higher degree of operating leverage when compared to the industry average implies that the: A. Firm uses a significant amount of debt financing B. firm has higher variable costs C. Firm's profits are more sensitive to changes in sales volume.

C. Firms profits are more sensitive to changes in sales volume. Operating leverage is the presence of fixed costs in operations, which allows a small change in sales to produce a larger relative change in profits.

A company's average collection period is used to evaluate what? A. Return on Equity B. Operating Profitability C. Liquidity

C. Liquidity A company's average collection period is used to evaluate the liquidity of the firm through the calculation of the cash conversion cycle. Liquidity measures focus on the ability of the company to me obligations as they come due.

According to COSO, an executives deliberate misrepresentation to a banker who is considering giving a loan to an enterprise is which of the following internal control limitations? A. Breakdown B. Collusion C. Management Override

C. Management override. This indicates that whatever internal control put in place by the company was overridden by the executive's deliberate misrepresentation to the banker.

If an organization decides to use regression, which is a forecasting model, what type of data analytic process would it be implementing? A Descriptive Analytics B. Prescriptive Analytics C. Predictive Analytics

C. Predictive Analytics. Predictive analytics use statistical techniques and forecasting models to predict what could happen.

Responsibility accounting defines an operating center that is responsible for revenue and costs as a(n): A. Revenue center. B. Operating unit C. Profit center D. Investment center

C. Profit center A profit center is responsible for revenue and costs. Try to think of it as an equation (revenue - cost = profit)

Which of the following is NOT one the of five steps found in the manufacturing process? A. Product design and engineering B. Manufacturing forecasting and scheduling C. Purchase raw materials d. Product development

C. Purchase raw materials. Purchasing raw materials is part of the expenditure process. The rest are steps in the manufacturing process

All of the following measure operation efficiency, EXCEPT: A. Inventory turnover B. Days' sales in accounts receivables C. Residual income D. Operational leverage

C. Residual income Residual income measures profitability in excess of a target rate of return. Operational efficiency is not considered.

Which of the following would NOT be considered a carrying cost associated with inventory? A. Cost of obsolescence B. Insurance costs C. Shipping costs

C. Shipping costs Shipping costs are selling costs.

The benefit of traditional costings includes: A. Streamlines production processes by reducing non-value-adding activities, e.g., reduced set-up times, optimal plant layout, and improved quality management. B. Provides management with a more thorough understanding of product costs and product profitability for strategies and pricing decisions. C. Uses a common departmental or factory wide measure of activity, such as direct labor hours or dollars to distribute manufacturing overhead to products.

C. Uses a common departmental or factory-wide measure of activity, such as direct labor hours or dollars to distribute manufacturing overhead to products. Answers A. & B. are both characteristics of activity-based costing.

Cost of Goods Manufactured (COGM)

COGS + Ending finished goods inventory - beginning finished goods inventory

Inventory Turnover

COGS/Average Inventory MCQ 7009

What are the 5 components of internal controls and each of the 17 principles within the components?

CRIME Control Environment - EBOCA 1. Ethical Values and Integrity 2. Board independence and oversight 3. Organizational structure 4. Commitment to Competence 5. Accountability Risk Assessment - SAFR 1. Specify objectives 2. Assess changes and identify 3. Fraud (consider the potential for fraud) 4. Risks (identify and analyze risks) Information and Communication - OIE 1. Obtain and use information 2. Internally communicate information 3. External Parties (communicate with external parties) Monitoring Activities - SO D 1. Separate and/or Ongoing evaluations 2. Deficiencies of communication Existing Control Activities - CA T P 1. Control Activities (select and develop 2. Technology Controls (select and develop) 3. Policies and Procedures

What are the 5 components of Internal Control?

CRIME Control Environment - Tone at the top (ethics) Risk Assessment - FS misstated, not efficient, breaking law Information and Communication - (FACT) Fair, Accurate, Complete, Timely Monitoring - Effectiveness of controls & Report deficiencies (Existing) Control Activities - Policies/procedures to mitigate risks

Easy way to remember put vs sale options

Call UP = BUY Put DOWN = SELL A put option give its owner the right to sell a specific security at fixed conditions of price and time.

Working Capital

Current Assets - Current Liabilities

Quick Ratio

Current Assets - Prepaids & Inventory/Current Liabilities

Current Ratio

Current Assets/Current Liabilities

All are rates used in net present value analysis EXCEPT: A. Cost of capital B. Hurdle rate C. Discount rate D. Accounting rate of return

D. Accounting rate of return The accounting rate of return is a capital budgeting technique, not a rate.

Which of the following steps is not found in existing product and business process improvements under Six Sigma? A. Control B. Define the problem C. Analyze data D. Design optimization

D. Design optimization Design optimization is one of the steps involved in new product or business process development under Six Sigma, not the existing product and business process improvements.

An increase in the market supply of beef would result in a(n): A. Decrease in the quantity of beef demanded. B. Decrease in the demand for beef. C. Increase in the price of beef. D. Increase in the quantity of beef demanded.

D. Increase in the quantity of beef demanded. Increase in supply increases quantity demanded at equilibrium, and price decreases.

The profitability index is a variation of which of the following capital budgeting models? A. Internal Rate of Return B. Discount payback D. Net Present Value

D. Net present value The profitability index is a variation of the net present value capital budgeting model. The profitability index is usd for capital rationing. The profitability index is the ratio of the present value of net future cash inflows to the present value of the net initial investment.

Which of the following would be considered a detective control over standing data? A. Access and authorization control B. Read-only rights C. Change control D. Reconciliation of changes to the data

D. Reconciliation of changes to the data Periodic reconciliation of changes to the data is considered a detective control because it reviews changes. This control helps to verify that any changes made to the data follow the established policies and procedures, including appropriate review and approval.

Cost of Retained Earnings Discounted cash flow method

D/P + G D = Dividends P = Stock Price G = Growth

Cash Conversion Cycle

Days in Inventory + Days sales in A/R - Days of Payables Outstanding. Days in inventory = Inventory/(cogs/365) Days sales in A/R = Receivables/(sales/365) Days of payables outstanding = Payables/(COGS/365) Sometimes they will only give you numbers like COGS, Receivables, etc. and they want you to calculate the cash conversion cycle. See MCQ 4335

Times Interest Earned

EBIT/ interest expense

Internal Controls Control Environment (C in CRIME)

EBOCA Ethics & Integrity - Commitment to ethical values and overall integrity throughout the organization. Tone at the top. Board Independence and Oversight - The board is independent from management and oversees development and performance of internal controls. Organizational Structure - Reporting lines, defining, assigning, and limiting authorities and responsibilities that are appropriate to the organizations objectives. Commitment to Competence - Commitment to hire, develop, and retain competent employees. Addressing shortcomings in addition to succession planning. Accountability - Individuals are held accountable for their internal control responsibilities. Establishing performance measures, incentives, rewards, and evaluation those for ongoing relevance while considering excessive pressures.

Investors are likely to view a high price earnings (P/E) ratio as an indication that:

Earnings have growth potential. P/E Ratio = current market price/annual earnings per share

COSO defined definition of ERM (Enterprise Risk Management)

Enterprise risk management is the culture, capabilities, and practices, integrated with strategy-setting and performance, that organizations relay on to manage risk in creating, preserving, and realizing value.

Internals Controls Control Environment (I in CRIME)

Information and Communication - between internal and external parties. (OIE) Obtain and Use Information - The organization Obtains or generates and uses relevant, high-quality information to support the functioning of internal control. Management identifying and defining information requirements within the internal control component level. Internally Communicate Information - Organization internally communicates info necessary to support the functioning of internal controls, including relevant objectives and responsibilities. Flow of info up, down, and across the organization using a variety of methods and channels. (Internal audit, Audit committee, Management) External Parties Communication - The organization communicates with external parties regarding matters that affect the functioning of internal controls. Management having open, two-way external communication channels using a variety of methods and channels.

Black-Scholes Model Assumptions

Model used to determine fair values for call and put options. No taxes or transaction costs for buying or selling the option. Stock does not pay dividends - but can adapt to account for dividends paid Stock prices behave in a random manner European-style - meaning options can only be exercised on expiration date.

Internal Controls Control Environment (M in CRIME)

Monitoring Activities - Monitoring is the process of assessing the quality of internal control performance over time by assessing the design and operation of controls on a timely basis and taking the necessary corrective actions. (SO D) Separate/Ongoing Evaluations - The organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning. Frequency of testing dictating by risk (establishing baseline). Deficiencies (reporting communication of deficiencies) - The organization evaluates and communicates internal control deficiencies in a timely manner to parties responsible for taking corrective action. Monitoring corrective actions.

Is setting up internal control procedures to mitigate the risk of fraud covered by the Enterprise Risk Management Framework?

NO - Setting up internal control procedures is a part of the Internal Control-Integrated Framework, rather than enterprise risk management.

ROI Equation

Net Income/Investment

Return on equity (ROE) Equation

Net Income/Sales x Sales/Assets x Assets/Equity = ROE

Determining the appropriate level of wo

Offsetting the benefit of current assets and current liabilities against the probability of technical insolvency.

When a company offers credit terms of 2/10, net 30, Annual interest cost based on 360-day year, is?

36.7 percent 360/(total pay period - discount period) x Discount %/ (100% - Discount %) Or 360/(30-10) x .02/.98

Which ratio determines the liquidity of a company? A. Current Ratio B. Working Capital C. Quick Ratio

A. Current Ratio The best way to measure the liquidity position of a company is by using the current ratio.

What is included in the calculation of direct labor? A. Loom operators B. Factory Foremen C. Machine mechanics D. All of the above E. A & C

A. Loom Operators Direct labor represents the cost of labor directly associated with the manufacturing of the finished product. The loom operators would qualify as direct labor, while the factor foreman and the machine mechanics would qualify as indirect labor, or overhead.

Firms with a higher degree of financial leverage will experience: A. Once fixed interest costs are covered, additional EBIT will go straight to net income. B. Decision regarding financial leverage are often the result of industry characteristcs

A. Once fixed interest costs are covered, additional EBIT will go straight to net income. When issuing debt, the company must produce sufficient EBIT to cover its fixed interest costs. Once fixed interest costs are covered, additional EBIT will go directly to net income and EPS.

An entities risk appetite: A. Serves to balance risk willingness with return and growth goals. B. Is established by the board of directors C. Is a key element in the monitoring process

A. Serves to balance risk willingness with return and growth goals. ERM defines risk appetite as the theoretical balance between an entity's willingness to accept risk and the return/growth goals that the entity wishes to achieve.

If the dollar price of a Euro rises, which of the following will occur? A. The dollar depreciates against the euro. B. The euro will buy fewer European goods. C. The euro depreciates against the dollar. D. The euro will buy fewer U.S. goods.

A. The dollar depreciates against the euro. If the dollar price of the euro rises, then the euro is getting more expensive. That means that the dollar is getting less expensive, or the dollar is depreciating against the euro.

Under SOX, internal controls are evaluated: A. Within 90 days prior to the report B. Within 90 days after year end C. Throughout the audit process

A. Within 90 days prior to the report.

What is the correct order for these budgets? Production, Cash disbursements, sales, direct materials purchased.

Sales, production, direct materials purchases, cash disbursements. The order of budget prep begins with sales budget, which logically drives the production budget (so support sales, which drives the direct materials purchases (to support production), then cash disbursements budget is derived.

A/R Turnover

Sales/Average A/R

Asset Turnover

Sales/Average total assets

Economic order

Sq Root of 2 x annual sales (in units) times the cost per purchase order/carrying cost per unit.

Sales Volume Variance

Standard contribution margin x (actual quantity of units sold - standard quantity of units sold)

Direct materials quantity usage variance

Standard price x (actual quantity used - standard quantity allowed)

Direct materials usage variance

Standard price x (actual quantity used - standard quantity allowed) Direct labor efficiency variance is the same as the above but you substitute "quantity" with "hours" Standard price x (actual HOURS worked - Standard HOURS allowed)

Direct labor efficiency variance

Standard x (actual HOURS worked - Standard HOURS allowed) Direct materials usage variance is the same as the above but you substitute hours with quantity Standard price x (actual quantity used - standard quantity allowed)

Which is a true statement of the payback method A. It's the time required to recover the investment and earn a profit B. It does not consider the time value of money C. its a measure of how profitable one investment project is compared to another.

B. It does not consider the time value of money. The payback method determines the number of years that it will take for a company to recoup or be paid back for its investment. In that calculation, the time value of money is not considered.

What is a common document found in the revenue process? A. Voucher B. Packing Slip C. Bill of Materials D. Bank Statement

B. Packing Slip A packing slip is a document that details the items and their quantities and is included in the shipment for verification. This document is part of the revenue process.

Unlike business process reengineering, business process management: A. Has a longer implementation time B. Seeks incremental change C. Seeks radical change

B. Seeks incremental change Business process management seeks incremental change by tweaking the existing process and design

Target costing requires: A. Sales levels above the breakeven point. B. knowledge of the selling price as a "given" so that the production costs can be determined.

B. knowledge of the selling price as a "given" so that the production costs can be determined. The objective of target costing is to set a target cost allowed to ensure both profitability per unit and total sales volume.

Conversion costs do not include: A. Indirect materials B. Indirect labor C. Direct Labor D. Direct materials

D. Direct materials Conversion costs consist of direct labor and overhead. Accordingly, conversion costs include all product costs except direct materials.

Direct labor usage variance

Direct labor usage variance = difference in standard and actual hours x standard rate See MCQ 05251

When calculating prime costs, what two things are needed?

Direct materials and direct labor.

Operating Profit

EBIT/Sales

What is the purpose of the capital asset pricing model (CAPM)?

The capital asset pricing model (CAPM) is a method used to estimate the cost of equity capital for an individual stock.

Is the control environment part of the Internal Control-Integrated Framework or part of enterprise risk management?

The control environment is a component of the Internal Control-Integrated Framework.

Cost of Retained Earnings Dividend Growth Model

When you see a questions that is asking for dividend growth model, and asking for the investors required rate of return, you are simply using the cost of equity capital formula. Cost of retained earnings/Cost of equity capital = D1/Po + g

What is the difference between a futures contract and a forward contract? When would you buy vs sell?

Forward contracts tend to be used for larger groups of transactions (such as a large volume of A/R) Futures contracts hedge a specific transaction. Contracts to BUY mitigate exchange rate risk of LIABILITIES. Contracts to SELL mitigate exchange rate risk of ASSETS.

Difference between Horizontal, vertical, circular, and Diagonal combination

Horizontal Combination - Two companies in the same industry that produce the same goods/services join together under single management. Vertical Combination - Combination of companies at different stages of production process. (if a burger company combined with a supplier of burger meat) Circular Combination - Different business units with remote connections come together under single management. (If a cell phone company bought a car manufacturing company) Diagonal Combination - Two companies that provide support services combine to make one company.

Residual Income Equation

Income - (investment x hurdle rate) OR Income - (Imputed interest rate x average invested capital)

What is the difference between inherent risk and residual risk?

Inherent risk is the risk that would result if management did nothing about the risk. Residual risk is the risk that remains after action has been taken to reduce inherent risk.

Payback Model Calculation

Initial cash outlay/increase in annual net after tax cash flows

What are the 3 objectives of COSO?

Operations Objectives - relate to effectiveness and efficiency of an entity's operation. Assets of the organization are safeguarded against losses. Reporting Objectives - Reliability, timeliness, and transparency of the entity's external and internal financial and non-financial reporting as established by regulators, accounting standards setters, or firm's internal policies. Compliance Objectives - ensure the entity is adhering to all applicable laws and regulations.

Weighted Average Cost of Capital (WACC)

WACC Formula WACC = (E/V)(Re) + (P/V)(Rp) + (D/V)[Rd(1-T)] E = Common stock P = Preferred stock D = Debt V = The Summed market values of the individual components of the firm's capital structure R = Required rate of return (also known as "cost") of the various components T = The corporate tax rate

The 5 components of ERM are supported by 20 principles. What are the 5 components and what are the 20 principles? (GO PRO = 5 components)(Within GO PRO you have (G=DOVES)(O=SOAR)(P=VAPIR)(R=SIR)(O=TIP)

(GO PRO) Governance and Culture Objective-Setting and Strategy Performance Review and Revision Ongoing Information, Communication, and Reporting Governance and Culture = DOVES Defines the desired culture Oversight - board exercises oversight Values - demonstrate commitment to core Values Employees - Attracts, retains, develops Structure - Establishes operating structure Objective-Setting and Strategy = SOAR Strategies - evaluates alternative strategies Objectives - formulates business objectives Analyzes business context Risk appetite - defines Performance = VAPIR View - develops portfolio View Assesses severity of risk Prioritizes risk Identifies Risks (events) Responses - implements risk responses Review and Revision = SIR Substantial change assessment Improvement in ERM Review Risk and Performance Ongoing info/communication/reporting = TIP Technology & Information leverage Information - communicates risk information Performance - Reports on risk, culture, and performance

Internal Rate of Return (IRR)

the discount rate that makes the NPV of an investment zero. It's also a time-adjusted rate of return from an investment. Rate of interest that equates the PV of cash outflows and PV of cash inflows To compute the IRR: Investment/Cash flows = Present Value Factor

Contribution margin

Sales - variable costs

Materials price variance

Actual quantity x (actual price - standard price)

Assumptions of Cost-Volume-Profit Analysis

All costs can be divided into fixed and variable elements selling prices are to be unchanged Volume is the only relevant factor affecting cost Something NOT part of cost-volume-profit is: total costs are directly proportional to volume over the relevant range.

An American importer expect to pay a British supplier 500K Pounds in 3 months. Which is the best hedge to fix the price in dollars? A. Buying British pound put options B. Buying British pound call options

B. Buying British pound call options Call options will fix a price in dollars to buy British pounds. Call would allow but not require the purchaser to acquire the currency for a specified price at or before a specified time in the future. If the price goes up, the importer would exercise the options. If not, they will let the options expire.

Internal Controls Control Environment (E in CRIME)

Existing Control Activities - Control activities are set forth by an entity's policies and procedures to ensure that the directives initiated by management to mitigate risks are performed. Control activities may be detective or preventive in nature and may include automated and manual activities. Segregation of duties is usually part of control activities developed by an organization, alternate controls may need to be developed. ( CAT P) Control Activities (select and develop) - The organization selects and develops control activities that contribute to the mitigation of risks to acceptable levels. Integrating with risk assessment when selecting activities and considering entity-specific factors. Technology Controls (Select and Develop) - The organization selects and develops general control activities over technology to support the achievement of objectives. Determining dependencies between the use of technology in business processes and establishing relevant technology infrastructure control activities. Policies and Procedures (Deployment of Policies and Procedures) - The organization deploys control activities through policies that establish what is expected and procedures that put policies into action. Establishing responsibility and accountability for executing policies and procedures and taking corrective action.

Breakeven in units

Fixed cost/Contribution Margin per unit

Capital Asset Pricing Model (CAPM) formula

R = RF + b(RM - RF)] R = Required return rate on equity RF = Risk-free rate earned on U.S. Treasury Bonds B = Beta Coefficient RM = Expected market return (earnings)

Internal Controls Control Environment (R in CRIME)

RISK assessment - entity's identification and analysis of risks to the achievements of its objectives. (SAFR) Specify Objects - Objectives created to allow for identification and assessment of the risks related to those objectives. Assess Changes - Identify and assess changes that could significantly affect the system of internal control. Assessing changes in the external environment, business model, and leadership. Fraud (consider potential fraud) - Assessing risks to consider potential fraud. Assessing incentives and pressures, opportunities and attitudes, and rationalizations. Risks (Identify and Analyze Risks) - Identify Risks across the entity and analyze risks in order to determine how the risk should be managed. Analyzing internal/external factors, involving appropriate levels of management and determining how to respond to risks.

In managerial account, the term relevant range is used to describe:

The range over which cost relationships are valid.


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