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BEC_CPA > BEC_MISC1 > Flashcards

BEC_MISC1 Flashcards

1
Q

What is the main purpose of COSO’s Internal Control Framework?

A

Assist organizations in DEVELOPING COMPREHENSIVE ASSESSMENTS OF INTERNAL CONTROL.

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2
Q

What does the INFORMATION AND COMMUNIATION component of IC entail?

A

FACT

Fair, Accurate, Complete, Timely

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3
Q

What principles govern the CONTROL ENVIRONMENT

A

EBOCA

  • Commitment to Ethical values and Integrity
  • Board independence and oversight
  • Organizational structure
  • CommitmenttoCompetence
  • Accountability
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4
Q

What principles govern RISK ASSESSMENT?

A

SAFR

Specify Objectives

Consider the potential of _F_raud

Identify and Asses changes

Identify and analyze Risks

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5
Q

What principles govern INFORMATION AND COMMUNICATION?

A

OIE

OBTAIN and use information

INTERNALLY communicate information

Communicate with EXTERNAL parties

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6
Q

What principles govern MONITORING ACTIVITIES?

A

SO D

ONGOINGand/orSEPARATE Evaluations

Communication of DEFICIENCIES

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7
Q

What principles govern (EXISTING) Control Activities?

A

CA T P

  • Select and Develop CONTROLACTIVITIES
  • Select and Develop TECHNOLOGY CONTROLS
  • Deploy through POLICIESandPROCEDURES
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8
Q

What are PRESENT and FUNCTIONING of effective IC mean?

A

PRESENT (DESIGN): Relevant IC controls are INCLUDED IN THE DESIGN

FUNCTIONING (Operating Effectively): Demonstrates that the commponents and relevant principles are OPERATING AS DESIGNED

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9
Q

What does an INEFFECTIVE INTERNAL CONTROL mean according to COSO?

A

“MAJOR DEFICIENCY”

This means a significant deficiency that REDUCES THE LIKELIHOOD** THAT AN ORGANIZATION **CAN ACHIEVE ITS OBJECTIVES

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10
Q

How could management add value to a company?

A

CPER

  • Creation
  • Preservation
  • Erosion
  • Realization
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11
Q

How does VALUE-REALIZATION for a company takes place?

A

Value is realized when benefits created by the organization are distributed to the shareholders (e.g. dividend payment).

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12
Q

When an organization responses to risk by disposing a business unit, product line, or geographical segment, what type of risk response is that?

A

RISK AVOIDANCE

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13
Q

When a business buys insurance against losses or enter a joint venture to address risk, what type of risk response is that?

A

RISK SHARING

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14
Q

When a firm responses to risk by diversifying product offering, rather than eliminating the product, what type of risk response is that?

A

RISK REDUCTION

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15
Q

According to COSO ERM framework, RISK ASSESSMENT includes what types of risks?

A
  • Inherent Risk
  • Target Residual Risks
  • Actual Residual Risks
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16
Q

How does a firm SHARE RISK?

A

Involving an outside party (e.g. insurance company) to share some risk burden.

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17
Q

What principles does the strategy and objective setting component of COSO’S ERM follow?

A

SOAR

Strategies

Objectives

Analyze business context

Risk Appetite

18
Q

What is the link between RISK APPETITE and RESIDUAL RISKS?

A

It is considered that an organization’s risk appetite has been EXCEEDED, whent the COMBINED LIKELIHOOD OF NEGATIVE exceeds the RESIDUAL RISKS.

19
Q

What is ORGANIZATIONAL SUSTAINABILITY?

A

ABILITY of an enterprise to WITHSTAND THE IMPACT OF LARGE-SCALE EVENTS.

20
Q

What is a value EROSION?

A

Value EROSION takes place when FAULTY STRATEGY and INEFFICIENT/INEFFECTIVE operations CAUSE VALUE TO DECLINE.

21
Q

What type of RISK RESPONSE is relevant when AN ORGANIZATION ONLY MONITORS POLITICAL EVENTS WITHOUT TAKING ANY ACTIONS?

A

RISK ACCEPTANCE

22
Q

When does WORKING CAPITAL policy become more CONSERVATIVE?

A

A bigger percentage of a company’s long-term assets, permanent current assets and temporary current assets are funded by long-term financing.

23
Q

What ratio should investors consider for a START UP company?

A

Price Sales Ratio

This is especially helpful if the company does not have earnings data unavailable.

24
Q

How do you calculate stock price when you know the dividend growth rate and the discount rate?

A

P=Dt+1/(r-g)

25
Q

How do you calculate FCF?

A

FCF=NET INCOME + NONCASH EXPS - INCREASE IN WC

26
Q

How do you calculate PRICE EARNINGS GROWTH (PEG) ratio?

A

PEG=(P0/E1)/G

=P0/(E1*G)

27
Q

What are some of the relevant factors to estimate the useful life of a permanent asset?

A
  1. Expected Usage
  2. Market Information
  3. Historical Information
28
Q

What is the main difference between BLACK-SCHOLES and BINOMIAL (Cox-Ross-Rubinstein) model?

A

Bionamial model is actually a variation of Black-Scholes Model. Two main differences:

  1. Black Scholes use American-Style Option, where the option can only be exercised after the maturity date.
  2. Unline Black-Scholes model, Binomial can be used for stocks that pay PERIODIC DIVIDENDS without modifying the model.
29
Q

What are the factors considered into a Black-Scholes Model?

A
  1. Current price of the underlying stock
  2. Option exercise price
  3. Risk-free interest (discount rate)
  4. Time until expiration
  5. Risk tied to the underlying stock.
30
Q

What is the best way to ensure physical access control in a computer system?

A

To not let unauthorized individuals go near the coumputer resources.

31
Q

What factors should a company consider to evaluate the data security of a CLOUD SYSTEM?

A
  • The provider’s multi-tenant architecture
  • The provider’s third-party suppliers
  • The provider’s cloud-to-cloud agreements?
32
Q

What is VERTICAL SCALABILITY?

A

It means adding more memory, computer power and resources to the cloud.

33
Q

When a company COMMUNICATES BASELINE EXPECTATIONS for performance of employees….this is relevant to which specific component of COSO Internal control framework?

A

Control Environment

34
Q

When a CFO updates the audit committee about the status of internal control…..this is the evidence of what?

A

This indicates reporting of deficiencies….NOT ONGOING MONITORING.

35
Q

According to COSO what are the main functions of a WRITTEN CODE OF CONDUCT?

A
  1. It helps management set the tone of the top.
  2. it promotes (among other things) (1) honest/ethical conduct, (2) teamwork, (3) compliance and (4) appropriate disclosure.
36
Q

What CONCEPT can best explain an OLIGOPOLY BEHAVIOR?

A

GAME THEORY MODEL.

37
Q

What is the main objectice of an EIS?

A

It presents a MACRO BIG PICTURE of the operations. It is tailored to the need to the top management and can be used only be a very few designated users.

So it is NOT WIDELY USED throughout the orgination.

It is likely to be one of the smallest subsystems in terms of usage.

38
Q

What kind of control does PERIODIC RECONCILIATION support?

A

DETECTIVE CONTROL

39
Q

What is the main objective of THEORY OF CONSTRAINTS management philosophies?

A

Maximizing throughput by identifying alleviating constraints.

40
Q

What does an ASSESS-AND-REPORT phase of the MONITORING phase of the COSO Internal control mainly do?

A

First there are some findings, that result from the monitoring process.

Once the findings are identified, they must be prioritized to help management address the MOST CRITICAL ISSUES associate with the INTERNAL CONTROL.

BEC_CPA (5 decks)

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