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ACC 576 Final Exam Guide
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ACC 576 Final Exam Study
Question 1 (IFTC-0112)
Controls in the information technology area are classified into the
preventive, detective, and corrective categories. Which of the following
is a preventive control?
An organization relied heavily on e-commerce for its transactions.
Evidence of the organization’s security awareness manual would be an
example of which of the following types of controls?
Which of the following types of control plans is particular to a specific
process or subsystem, rather than related to the timing of its occurrence?
Question 4 (CGIC-0032)
Which of the following is true about the Sarbanes-Oxley requirements
regarding the audit committee financial expert?

Which of the following is not a component of COSO’s enterprise risk
management framework?
Which of the following is not required by the Sarbanes-Oxley Act of
2002?
Which of the following is not an advantage of the employment of an
enterprise risk management (ERM) system?
A financial statement audit performed under the requirements of the
Sarbanes-Oxley Act of 2002 must include an examination and report
upon
An important benefit of an enterprise risk management system is
Which of the following bodies has developed a framework for enterprise
risk management?
Which of the following executives of an issuer corporation must certify
to the accuracy and truthfulness of financial reports filed with the SEC?
Which of the following is not a responsibility that should be assigned to
the audit committee of the board of directors?

Which of the following components of internal control are characterized
by ongoing activities and separate evaluations?
Which of the following can be the most effective monitoring device for
effective corporate governance?
From a corporate governance standpoint which of the following best
describes the main goal of a form of executive compensation?
Which of the following components of internal control encompass
policies and procedures that ensure that management’s directives are
carried out?
Which of the following forms of compensation is more likely to result in
shirking by management?
In the COSO framework, individuals within the company that monitor
internal controls are referred to as
The COSO definition of internal control considers control activities a(n):

If internal control is properly designed, the same employee should not be
permitted to
Question 1 (ECON-0036)
If a government were to use only fiscal policy to stimulate the economy
from a recession, it would
Disposable income is calculated as
Which of the following changes would create pressure for the Japanese
yen to appreciate relative to the U.S. dollar?
If a group of consumers decide to boycott a particular product, the
expected result would be
The movement along the demand curve from one price-quantity
combination to another is called a(n)
In the long run, a firm may experience increasing returns due to
Which of the following is not accurate about product differentiation?
Which of the following segments of the economy will be least affected
by the business cycle?

What is the effect when a foreign competitor’s currency becomes
weaker compared to the U.S. dollar?
Some economic indicators lead the economy into a recovery or
recession, and some lag it. An example of a lag variable would be
If the U.S. dollar declines in value relative to the currencies of many of
its trading partners, the likely result is that
The rate of unemployment caused by changes in the composition of
employment opportunities over time is referred to as the
To address the problem of a recession, the Federal Reserve Bank most
likely would take which of the following actions?
Which of the following is a direct effect of imposing a protective tariff
on an imported product?
What does the consumer price index measure?
The discount rate of the Federal Reserve System is

A company that produces 10,000 units has fixed costs of $300,000,
variable costs of $50 per unit, and a sales price of $85 per unit. After
learning that its variable costs will increase by 20%, the company is
considering an increase in production to 12,000 units. Which of the
following statements is correct regarding the company's next steps?
Question 18 (PLAN-0087)
Which of the following listings correctly describes the order in which
the four types of budgets must be prepared?
All else being equal, the breakeven point in units will be higher if
Relevant information for material A follows:
Quantity purchased
Standard quantity allowed
Actual price
Standard price
What was the direct material price variance for material A?
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ACC 576 Week 1 Quiz (All Possible Questions)
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Week 1 Quiz
Question 1
The first general standard requires that an audit of financial statements is
to be performed by a person or persons having
Question 2
Which of the following standards requires a critical review of the work
done and the judgment exercised by those assisting in an audit at every
level of supervision?
Question 3
An auditor uses the knowledge provided by the understanding of the
internal control structure and the final assessed level of control risk
primarily to determine the nature, timing, and extent of the
Question 4
An auditor's primary consideration regarding an entity's internal control
structure policies and procedures is whether the policies and procedures
Question 5
To obtain evidential matter about control risk, an auditor selects tests
from a variety of techniques including
Question 6
Prior to commencing fieldwork, an auditor usually discusses the general
audit strategy with the client's management. Which of the following
matters does the auditor and management agree upon at this time?
Question 7
Which of the following factors most likely would cause a CPA to
decline to accept a new audit engagement?
Question 8
Which of the following factors would least influence an auditor's
consideration of the reliability of data for purposes of analytical
procedures?
Question 9
A previously communicated significant deficiency ordinarily should be
communicated again if
Question 10

Which of the following statements concerning analytical procedures is
correct?
Question 11
Which of the following is the authoritative body designated to
promulgate attestation standards?
Question 12
As the acceptable level of detection risk decreases, an auditor may
change the
Question 13
A CPA in public practice must be independent in fact and appearance
when providing which of the following services?
Question 14
The primary objective of procedures performed to obtain an
understanding of the internal control structure is to provide an auditor
with
Question 15
Which of the following statements is correct concerning an auditor's
required communication of significant deficiencies?
Question 16
Which of the following procedures would an auditor most likely perform
in planning a financial statement audit?
Question 17
When an auditor increases the planned assessed level of control risk
because certain control procedures were determined to be ineffective,
the auditor would most likely increase the
Question 18
An auditor concludes that a client has committed an illegal act that has
not been properly accounted for or disclosed. The auditor should
withdraw from the engagement if the
Question 19
In performing an attestation engagement, a CPA typically
Question 20
Which of the following characteristics most likely would heighten an
auditor's concern about the risk of material misstatement arising from
fraudulent financial reporting?

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This Tutorial contains More than 150 Question Test Bank (we have
listed some of the Questions below)
Week 2 Quiz
Question 1
The most likely result of ineffective internal control policies and
procedures in the revenue cycle is that
Question 2
An entity with a large volume of customer remittances by mail could
most likely reduce the risk of employee misappropriation of cash by
using
Question 3
Which of the following statements is generally correct about the
reliability ofaudit evidence?

Question 4
Which of the following audit procedures would an auditor most likely
perform to test controls relating to management's assertion concerning
the completeness of sales transactions?
Question 5
The audit working paper that reflects the major components of an
amount reported in the financial statements is the
Question 6
Which of the following most likely would indicate the existence of
related parties?
Question 7
Which of the following procedures would an auditor most likely perform
during an audit engagement's overall review stage in formulating an
opinion on an entity's financial statements?
Question 8
In auditing accounts receivable the negative form of confirmation
request most likely would be used when
Question 9
Before applying substantive tests to the details of asset accounts at an
interim date, an auditor should assess:
Question 10
"There have been no communications from regulatory agencies
concerning noncompliance with, or deficiencies in, financial reporting

practices that could have a material effect on the financial statements."
The foregoing passage is most likely from a
Question 11
"We have disclosed to you all known instances of noncompliance or
suspected noncompliance with laws and regulations whose effects
should be considered when preparing financial statements." The
foregoing passage most likely is from a(n)
Question 12
Which of the following controls would be most effective in assuring that
recorded purchases are free of material errors?
Question 13
An auditor should request that an audit client send a letter of inquiry to
those attorneys who have been consulted concerning litigation, claims,
or assessments. The primary reason for this request is to provide
Question 14
To which of the following matters would materiality limits not apply in
obtaining written management representations?
Question 15
In which of the following circumstances is substantive testing of
accounts receivable before the balance sheet date most appropriate?
Question 16
The purpose of segregating the duties of hiring personnel and
distributing payroll checks is to separate the
Question 17

An auditor's purpose in reviewing credit ratings of customers with
delinquent accounts receivable most likely is to obtain evidence
concerning management's assertions about
Question 18
The objective of tests of details of transactions performed as substantive
tests is to
Question 19
Which of the following documentation is not required for an audit in
accordance with generally accepted auditing standards?
Question 20
An auditor should design the written audit program so that
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ACC 576 Week 3 Quiz
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Week 3 Quiz
Question 1

In designing written audit programs, an auditor should establish specific
audit objectives that relate primarily to the
Question 2
Which of the following procedures is least likely to be performed before
the balance sheet date?
Question 3
In determining whether transactions have been recorded, the direction of
the audit testing should be from the
Question 4
Which of the following combination of procedures would an auditor
most likely perform to obtain evidence about fixed asset additions?
Question 5
An auditor may achieve audit objectives related to particular assertions
by
Question 6
The sampling unit in a test of controls pertaining to the existence of
payroll transactions ordinarily is a(an)
Question 7
The risk of incorrect acceptance and the likelihood of assessing control
risk too low relate to the
Question 8
Which of the following audit procedures probably would provide the
most reliable evidence concerning the entity's assertion of rights and
obligations related to inventories?

Question 9
When an auditor tests a computerized accounting system, which of the
following is true of the test data approach?
Question 10
An auditor is determining the sample size for an inventory observation
using mean-per-unit estimation, which is a variables sampling plan. To
calculate the required sample size, the auditor usually determines the
Question 11
Processing data through the use of simulated files provides an auditor
with information about the operating effectiveness of control policies
and procedures.
One of the techniques involved in this approach makes use of
Question 12
An auditor should trace bank transfers for the last part of the audit period
and first part of the subsequent period to detect whether
Question 13
The primary responsibility of a bank acting as registrar of capital stock
is to
Question 14
An auditor most likely would perform substantive tests of details on
payroll transactions and balances when
Question 15

Cutoff tests designed to detect credit sales made before the end of the
year that have been recorded in the subsequent year provide assurance
about management's assertion of
Question 16
In performing tests of controls over authorization of cash disbursements,
which of the following sampling methods would be most appropriate?
Question 17
In evaluating the adequacy of the allowance for doubtful accounts, an
auditor most likely reviews the entity's aging of receivables to support
management's financial statement assertion of
Question 18
Which of the following courses of action would an auditor most likely
follow in planning a sample of cash disbursements if the auditor is aware
of several unusually large cash disbursements?
Question 19
Which of the following characteristics most likely would be an
advantage of using classical variables sampling rather than probability-
proportional-to-size (PPS) sampling?
Question 20
Which of the following statements is correct concerning statistical
sampling in tests of controls?
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Week 4 Quiz
Question 1
Comfort letters ordinarily are addressed to
Question 2
When compiling a nonpublic entity's financial statements, an accountant
would be least likely to
Question 3
Comfort letters ordinarily are signed by the entity's
Question 4
Which of the following matters is covered in a typical comfort letter?
Question 5
Green, CPA, was engaged to audit the financial statements of Essex Co.
after its fiscal year had ended. The timing of Green's appointment as
auditor and the start of field work made confirmation of accounts
receivable by direct communication with the debtors ineffective.
However, Green applied other procedures and was satisfied as to the
reasonableness of the account balances.
Green's auditor's report most likely contained a(an)
Question 6
When engaged to audit a not-for-profit organization in accordance with
Government Auditing Standards, an auditor is required to prepare a
written report on compliance with laws and regulations that includes
Question 7
(NOTE: This is a CPAexcel simulated Exam Question, not AICPA
licensed Material)

The effects of financial leverage result when a firm finances assets
using:
Question 8
Which of the following statements is correct concerning both an
engagement to compile and an engagement to review a nonpublic
entity's financial statements?
Question 9
Which of the following representations does an accountant make
implicitly when issuing the standard report for the compilation of a
nonpublic entity's financial statements?
Question 10
Which of the following statements is correct regarding a review
engagement of a nonpublic company's financial statements performed in
accordance with the Statements on Standards for Accounting and
Review Services (SSARs)?
Question 11
In which of the following situations would an auditor ordinarily choose
between expressing an "except for" qualified opinion or an adverse
opinion?
Question 12
When engaged to compile the financial statements of a nonpublic entity,
an accountant is required to possess a level of knowledge of the entity's
accounting principles and practices.
This requirement most likely will include obtaining a general
understanding of the
Question 13
When a qualified opinion results from a limitation on the scope of the
audit, the situation should be described in an explanatory paragraph
Question 14
The standard report issued by an accountant after reviewing the financial
statements of a nonpublic entity states that
Question 15
Which of the following phrases would an auditor most likely include in
the auditor's report when expressing a qualified opinion because of
inadequate disclosure?

Question 16
A client has capitalizable leases but refuses to capitalize them in the
financial statements. Which of the following reporting options does an
auditor have if the amounts pervasively distort the financial statements?
Question 17
Wolf is auditing an entity's compliance with requirements governing a
major federal financial assistance program in accordance with
Government Auditing Standards. Wolf detected noncompliance with
requirements that have a material effect on the program.
Wolf's report on compliance should express
Question 18
General Retailing, a nonissuer, has asked Ford, CPA, to compile its
financial statements that omit substantially all disclosures required by
GAAP. Ford may comply with General's request provided the omission
is clearly indicated in Ford's report and the
Question 19
Moore, CPA, has been asked to issue a review report on the balance
sheet of Dover Co., a nonpublic entity. Moore will not be reporting on
Dover's statements of income, retained earnings, and cash flows.
Moore may issue the review report provided the
Question 20
Reporting standards for financial audits under Government Auditing
Standards (the Yellow Book) differ from reporting under generally
accepted auditing standards in that Government Auditing Standards
require the auditor to
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Week 5 Quiz
Question 1
An accountant's compilation report on a financial forecast should
include a statement that the
Question 2
When a CPA examines a client's projected financial statements, the
CPA's report should
Question 3
At a confidential meeting, an audit client informed a CPA about the
client's illegal insider-trading actions. A year later, the CPA was
subpoenaed to appear in federal court to testify in a criminal trial against
the client. The CPA was asked to testify to the meeting between the
CPA and the client.
After receiving immunity, the CPA should do which of the following?
Question 4
licensed Material)
XYZ Corporation is having financial difficulties. Its CFO has ordered
subordinates to pump up revenues artificially and hide that fact from the
external auditor. If an internal auditor of XYZ intentionally misleads
XYZ's outsider auditor from the ABC Accounting firm, the internal
auditor has:
Question 5 (AICPA.080962REG-1B)
licensed Material)
Duncan, an accounting firm, is auditing Alchemy Inc. Regarding
commissions and referral fees, which of the following arrangements
would be permissible?
Question 6

A CPA who is not in public practice is obligated to follow which of the
following rules of conduct?
Question 7
Under the Statements on Standards for Consulting Services, which of the
following statements best reflects a CPA's responsibility when
undertaking a consulting services engagement?
The CPA must
Question 8
Under the Code of Professional Conduct of the AICPA, which of the
following is required to be independent in fact and appearance when
discharging professional responsibilities?
Question 9
Locke, CPA, was engaged to perform an audit for Vorst Co. During the
audit, Locke discovered that Vorst's inventory contained stolen
goods. Vorst was indicted and Locke was validly subpoenaed to testify
at the criminal trial. Vorst has claimed accountant-client privilege to
prevent Locke from testifying.
Locke may be compelled to testify
Question 10
licensed Material)
Ron is a partner in the Houston office of KPMG. A partner in Ron's
office is the lead partner on the team that audits Midstream Pipeline,
which operates intrastate oil and gas pipelines, but Ron is not on the
engagement team. Which of the following scenarios represents an
independence violation of the AICPA Code of Conduct?
Question 11
licensed Material)
The CPA firm, where Joanna is currently a tax partner, is auditing
Bubbles Corp. in Austin. Her mother, Teresa, has been working as a
receptionist for Bubbles for the last 30 years. Her best friend since grade
school, Maggie, is currently serving as CFO at Bubbles. Joanna knows
that her brother, Jonathan, sank most of his savings into a purchase of

6% of Bubbles outstanding stock, which he currently owns. Does Joanna
have an independence issue?
Question 12
An accountant may accept an engagement to apply agreed-upon
procedures to prospective financial statements provided that
Question 13
licensed Material)
In order to preserve independence, the PCAOB requires:
Question 14
According to the standards of the profession, which of the following
activities would most likely not impair a CPA's independence?
Question 15
According to the standards of the profession, which of the following
circumstances will prevent a CPA performing audit engagements from
being independent?
Question 16
Which of the following is a term for an attest engagement in which a
CPA assesses a client's commercial Internet site for predefined criteria
that are designed to measure transaction integrity, information
protection, and disclosure of business practices?
Question 17
A CPA in public practice is required to comply with the provisions of
the Statements on Standards for Attestation Engagements (SSAE) when
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ACC 576 Study Week 6
1. Which of the following did SOX NOT do to protect
whistleblowers?
2. Dan provided original information to authorities regarding a
securities fraud in his company. It led the SEC to impose penalties
of $2 million. Which of the following is most likely to be Dan's
award under Dodd-Frank?
3. Which of the following is necessary to be an audit committee
financial expert, according to the criteria specified in the Sarbanes-
Oxley Act of 2002?
4. Which of the following did Dodd-Frank do regarding a
whistleblower's right to sue for retaliation accorded by SOX?
5. A public company audit committee's "financial expert" must have
all of the following except:
6. Fang provided original information to authorities regarding a
securities fraud in his company. The information led to an
imposition of penalties of $500,000. It also led to Fang being fired
in retaliation by his public company employer. Which of the
following is true?
7. Public company audit committees must contain which of the
following?
8. Under SOX, it is a crime to punish a public company
whistleblower who provides truthful information relating to which
of the following:
9. Mar has been complicit in her public company's accounting fraud.
She consults a lawyer as the time comes to file her firm's 10-K

with the SEC. She is a little uncomfortable with what she might
have to do. The lawyer will likely tell her that she will have to
certify (and be potentially criminally liable for lying about) these
matters:
10. Milo Corp. maintains daily backups of its accounting system
in a fireproof vault in the file library. Weekly, monthly, and annual
backups are stored in a secure, fireproof vault at an off-site
location.
11. Maintenance of the backup files is an example of
12. Review of the audit (also called transaction) log is an
example of which of the following types of security control?
13. Which of the following statements presents an example of a
general control for a computerized system?
14. Controls in the information technology area are classified
into the categories of preventive, detective, and corrective. Which
of the following is a preventive control?
15. A company's new time clock process requires hourly
employees to select an identification number and then choose the
clock-in or clock-out button. A video camera captures an image of
the employee using the system. Which of the following exposures
can the new system be expected to change the least?
16. Which of the following is an example of a detective control?
17. In the COSO "cube" model, each of the following is a control
objective except
18. In the COSO "cube" model, this component of internal
control enables an organization's people to identify, process, and
exchange the information needed to manage and control
operations.
19. This component of internal control concerns the policies and
procedures that ensure that actions are taken to address the risks
related to the achievement of management's objectives.
20. This fundamental component of internal control is the core or
foundation of any system of internal control.
21. This component of internal control concerns testing the
system and its data.

22. According to COSO, which of the following is a compliance
objective?
23. This is the process of identifying, analyzing, and managing
the risks involved in achieving the organization's objectives.
24. In the COSO (2011) "cube" model, each of the following are
components of internal control except
25. According to the 17 COSO control principles, risk reduction
primarily relates to which fundamental component of internal
control:
26. According to the 17 COSO control principles, establishing a
whistle-blower hot line contributes to:
27. According to the 17 COSO control principles, information
quality primarily relates to which fundamental component of
internal control:
28. According to the 17 COSO control principles, organizational
objectives primarily relate to which fundamental component of
internal control:
29. According to the 17 COSO control principles, addressing
control deficiencies primarily relates to which fundamental
component of internal control:
30. According to the 17 COSO control principles, change
management primarily relates to which fundamental component of
internal control:
31. According to the 17 COSO control principles, fraud primarily
relates to which fundamental component of internal control:
32. The original COSO model has _____ control components,
while the COSO ERM model has _____ control components.
33. Strategic, operations, reporting, and compliance objectives
are a part of which of the following models of internal control?
34. Which of the following items is one of the eight components
of COSO's enterprise risk management framework?
35. Which component of the COSO ERM framework is
concerned with management's decision to avoid, accept, reduce, or
share risk and to develop a set of actions to align risk with the
entity's risk preferences?

36. Activities that can be useful in monitoring control system
effectiveness include all of the following except
37. The goals of risk management include:
38. According to COSO, which of the following is the most
effective method to transmit a message of ethical behavior
throughout an organization?
39. Each of the following is a limitation of enterprise risk
management (ERM) except
40. Which of the following control activities should be taken to
reduce the risk of incorrect processing in a newly installed
computerized accounting system?
41. Recognizing potential impediments to communication
between system user and system designer can be useful in
42. A senior executive of an international organization who
wishes to demonstrate the importance of the security of company
information to all team members should
43. In which of the following organizations might segregation of
duties be easiest to achieve?
44. A manufacturing firm noted that it would have difficulty
sourcing raw materials locally, so it decided to relocate its
production facilities. According to COSO, this decision represents
which of the following responses to the risk?
45. Which of the following is most useful when risk is being
prioritized?
46. According to COSO, the two primary attributes of effective
evaluators are
47. Which of the following are reasons that internal controls need
to be monitored?
48. Which of the following is the best definition of a
compensating control?
49. Within the COSO Internal Control-Integrated Framework,
which of the following components is designed to ensure that
internal controls continue to operate effectively?
50. According to COSO, an effective approach to monitoring
internal control involves each of the following steps,except

51. According to COSO, the use of ongoing and separate
evaluations to identify and address changes in internal control
effectiveness can best be accomplished in which of the following
stages of the monitoring-for-change continuum?
52. Internal control monitoring is considered
53. Which of the following is not a major step in the COSO
model of control monitoring?
54. In a large public corporation, evaluating internal control
procedures should be the responsibility of
55. The system of internal control begins with
56. The IIA's International Professional Practices Framework
includes among its "mandatory" guidance each of the following
elements except
57. One of the Rules of Conduct in the IIA's Code of Ethics
states, "Internal auditors shall perform internal audit services in
accordance with the International Standards for the Professional
Practice of Internal Auditing." To which Principle of the Code of
Ethics does this Rule of Conduct relate?
58. The IIA's Code of Ethics identifies four "Principles" around
which the 12 Rules of Conduct are organized. Each of the
following key words or phrases is associated with these Principles
except
59. What term identifies the type of internal auditing standards
used to measure the quality of the internal auditor's conduct in
delivering internal audit services?
60. What term identifies the type of internal auditing standards
used to describe the characteristics associated with organizations
and individuals who provide internal audit services?
61. The IIA's Definition of Internal Auditing specifically
mentions each of the following terms among the organizational
objectives to be improved by internal auditing except
62. What term is used in the IIA's International Standards to
identify the person responsible for managing an organization's
internal audit activity?
63. The Attribute Standards related to an internal audit activity's

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ACC 576 Week 7 Assignment 1 Economic and Monetary Policy
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ACC 576 Week 7 Assignment 1
Assignment 1: Economic and Monetary Policy
Using the Internet and Library, research the economies and monetary
policies of two (2) countries.
Write a four to five (4-5) page paper in which you:
Choose one (1) of the two (2) countries that you have researched, and
give your opinion on the degree to which the chosen country manages its
economy and monetary policy well. Provide support for your opinion.
Compare and contrast the economies and monetary policies of the two
(2) countries that you have researched. Make at least two (2)
recommendations as to the primary manner in which both countries
could improve their economy and / or monetary policies.
Analyze the impact that economic and monetary policies of one (1) of
the chosen countries currently exerts upon its trade with other countries.
Make at least two (2) recommendations as to changes that the chosen
country should make to its policies to benefit its foreign trade.
Propose one (1) alternative economic and monetary policy that would
make one (1) of the chosen countries stronger over the longer term.
Support your proposal with anticipated outcomes related to the selected
alternative policy.

Use at least three (3) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not quality as academic
resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with
one-inch margins on all sides; citations and references must follow APA
or school-specific format. Check with your professor for any additional
instructions.
Include a cover page containing the title of the assignment, your name,
the professor’s name, the course title, and the date. The cover page and
the reference page are not included in the required assignment page
length.
The specific course learning outcomes associated with this
assignment are:
Analyze domestic microeconomic and macroeconomic principles that
impact businesses.
Analyze international economics and its impact on businesses,
globalization, and business strategy.
Use technology and information resources to research issues in business
law and tax.
Write clearly and concisely about business law and tax using proper
writing mechanics.
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ACC 576 Week 7 Study
1. A management accountant performed a linear regression of
maintenance cost vs. production using a computer spreadsheet. The
regression output shows an "intercept" value of $322,897. How
should the accountant interpret this information?
2. The equation for the graphic plot of a linear economic variable is D
= b + m(a). Which of the following represents the value of the
"intercept"?
3. Which of the following statements regarding the use of graphs to
depict economic relationships is not correct?
4. Graphs are a means of depicting the relationship between two
variables. These variables are usually identified as
5. The equation for the graphic plot of a linear economic variable is D
= b + m(a), where m > 0. Which of the following is the slope of the
economic "curve" represented by this equation?
6. Measures of the economic activity of an entire nation would be
included in the study of
7. The free-market economy flow model depicts four major
interrelated flows:I . Individuals provide economic resources to
business firms.II. Firms provide payment to individuals for
economic resources.III. Firms provide goods and services to
individuals.IV. Individuals provide payment to firms for goods and
services.
8. If the cost of imported oil declined suddenly and significantly,
which one of the above flows would be most likely to be the first
impacted?
9. The free-market economy flow model depicts four major
interrelated flows:I . Individuals provide economic resources to
business firms.II. Firms provide payment to individuals for
economic resources.III. Firms provide goods and services to
individuals.IV. Individuals provide payment to firms for goods and
services.
10. If financial institutions and businesses suddenly and severely
restrict the availability of consumer credit, which one of the above

flows would be most likely to be the first to be impacted
adversely?
11. Which of the following are considered economic resources?
12. In a free-market economy, which of the following should be
the least significant factor in determining resource allocation and
use?
13. Which of the following is not a characteristic of a free-
market economy?
14. The demand for a commodity would increase when the price
of a
15. When a demand schedule is plotted on a graph, the resulting
demand curve will be
16. In the statement "quantity demanded is a function of price,"
are the variables quantity and price dependent or independent
variables?
17. The demand curve for a product reflects which of the
following?
18. If there is an increase in the income of market participants,
which of the following is most likely to happen to the demand for
normal goods?
19. Which one of the following would not cause an increase in
demand for a commodity?
20. Concurrent with a significant downturn in the economy, the
sale of Scope's high-end electronics decreased dramatically. Which
of the following is the most likely direct cause of the decline in
demand for Scope's products?
21. Which one of the following factors would not cause an
increase in the supply curve of a commodity?
22. A supply schedule (or supply curve) shows the relationship
between the quantity of a commodity that will be supplied during a
period of time and
23. If a change in market variables causes a supply curve to shift
inward, which one of the following will occur?
24. When the cost of input factors to the production process
increases, which one of the following will occur?

25. In the statement "quantity supplied is a function of price," are
the variables quantity and price dependent or independent
variables?
26. An increase in taxes on cigarette production would cause
which one of the following to occur?
27. What is the effect on the quantity of a commodity supplied
relative to demand as a result of a government-mandated price
ceiling or price floor?
28. A city ordinance that establishes a price ceiling on rent may
cause
29. If both demand and supply have traditional curves, a higher
equilibrium price may be caused by which one of the following?
30. If the price for a good is fixed by government fiat below
market equilibrium price, which one of the following will occur?
31. A price ceiling that is below the market equilibrium price
would be expected to result in which one of the following sets of
effects on demand and supply?
32. Which of the following characteristics would indicate that an
item sold would have a high price elasticity of demand?
33. An increase in the price of Commodity Y from $50 to $60
resulted in an increase in the quantity supplied, from 80 units to 88
units. Which one of the following is the price elasticity of supply?
34. A company has a policy of frequently cutting prices to
increase sales. Product demand is significantly elastic. What
impact would this have on the company's situation?
35. If demand for a product is elastic, what would be the effect of
a price increase and a price decrease on total revenue (TR)
generated?
36. In which of the following situations would there be inelastic
demand?
37. The elasticity of demand is measured by
38. A 4% increase in the market price of Commodity X resulted
in an 8% increase in the quantity of Commodity X supplied. Which
one of the following statements is correct?

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listed all Questions below)
1. Regarding financial resources, financial management is concerned
with the efficiency and effectiveness of which of the following?
2. Which of the following financial management-related areas are
considered long-term issues?
3. Which one of the following would be considered a long-term
financial management activity or concern?
4. Financial management involves decisions and activities that deal
with
5. Which of the following "tools" are likely to be used in financial
management?
6. A company has the following target capital structure and costs:The
company's marginal tax rate is 30%. What is the company's
weighted-average cost of capital?
7. A company has the following financial information: To maximize
shareholder wealth, the company should accept projects with
returns greater than what percent?
8. The measurement of the benefit lost by using resources for one
purpose and not another is

9. Which of the following statements is correct regarding the
weighted-average cost of capital (WACC)?
10. Carter Co. paid $1,000,000 for land three years ago. Carter
estimates it can sell the land for $1,200,000,net of selling costs. If
the land is not sold, Carter plans to develop the land at a cost of
$1,500,000. Carter estimates net cash flow from the development
in the first year of operations would be $500,000.What is Carter's
opportunity cost of the development?
11. A company with a combined federal and state tax rate of 30%
has the following capital structure:What is the weighted-average
after-tax cost of capital for this company?
12. Which of the following is assigned to goods that were either
purchased or manufactured for resale?
13. Management at MDK Corp. is deciding whether to replace a
delivery van. A new delivery van costing $40,000 can be
purchased to replace the existing delivery van, which cost the
company $30,000 and has accumulated depreciation of $20,000.
An employee of MDK has offered $12,000 for the old delivery
van. Ignoring income taxes, which of the following correctly states
relevant costs when making the decision whether to replace the
delivery vehicle?
14. Alpha Corporation has the following capital structure and
related cost of capital for each source: Which one of the following
is Alpha's weighted average cost of capital?
15. A company uses its company-wide cost of capital to evaluate
new capital investments. What is the implication of this policy
when the company has multiple operating divisions, each having
unique risk attributes and capital costs?
16. Which one of the following costs, if any, is relevant in
making financial decisions?
17. Buff Co. is considering replacing an old machine with a new
machine. Which of the following items is economically relevant to
Buff's decision? (Ignore income tax considerations.)
18. The ABC Company is trying to decide between keeping an
existing machine and replacing it with a new machine. The old

machine was purchased just two years ago for $50,000 and had an
expected life of 10 years. It now costs $1,000 a month for
maintenance and repairs, due to a mechanical problem. A new
replacement machine is being considered, with a cost of $60,000.
The new machine is more efficient and it will only cost $200 a
month for maintenance and repairs. The new machine has an
expected life of 10 years. In deciding to replace the old machine,
which of the following factors, ignoring income taxes, should
ABC not consider?
19. Egan Co. owns land that could be developed in the future.
Egan estimates it can sell the land for $1,200,000, net of all selling
costs. If it is not sold, Egan will continue with its plans to develop
the land. As Egan evaluates it options for development or sale of
the property, what type of cost would the potential selling price
represent in Egan's decision?
20. Which of the following statements is true regarding
opportunity cost?
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1. Checkpoint auto leasing is a small company with six employees.
The best action that it can take to increase its internal control
effectiveness is
2. Morgan Property Management, Inc. recently switched from a
manual accounting system to a computerized accounting system.
The system supports online real-time processing in a networked
environment, and six employees have been granted access to
various parts of the system in order to perform their jobs. Relative
to the manual system, Morgan can expect to see
3. Which of the following statements is (are) true. I.A greater level
of control is necessary in automated than manual systems. II. The
uniformity of transaction processing is higher in automated than
manual systems.
4. In COBIT, the process of identifying automated solutions falls
within the ________ control process domain.
5. In COBIT, the process of reviewing system response time logs
falls within the _______ control process domain.
6. In COBIT, the process of developing tactics to realize the strategic
vision for IT falls within the _________ control process domain.
7. In COBIT, the process of ensuring security and continuous service
falls within the _______ control process domain.
8. One important purpose of COBIT is to
9. Which of the following is true of enterprise resource planning
(ERP) systems? I. The online analytical processing system (OLAP)
provides data warehouse capabilities for the ERP system. II. The
ability of an ERP system to provide an integrated view of
transactions in all parts of the system is a function of the online
transaction processing (OLTP) system.
10. An enterprise resource planning (ERP) system has which of
the following advantages over multiple independent functional
systems?
11. The fixed assets and related depreciation of a company are
currently tracked on a password-protected spreadsheet. The
information technology governance committee is designing a new
enterprise-wide system and needs to determine whether the current

fixed asset process should be included because the current system
seems to be working properly. What long-term solution should the
committee recommend?
12. What is an example of the use of the cloud to access software
and programs?
13. 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?
14. A client would like to implement a management information
system that integrates all functional areas within an organization to
allow information exchange and collaboration among all parties
involved in business operations. Which of the following systems is
most effective for this application?
15. What is an example of the use of the cloud to create software
and programs?
16. An enterprise resource planning system is designed to
17. Which of the following risks increases the least with cloud-
based computing compared with local server storage for an
organization that implements cloud-based computing?
18. What is an example of the use of the cloud to access
hardware?
19. 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?
20. 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?
21. In an e-commerce environment that requires that the
information technology (IT) system be available on a continuous

basis, more emphasis will be placed on which of the following
aspects of the planning than in a traditional organization?
22. A controller is developing a disaster recovery plan for a
corporation's computer systems. In the event of a disaster that
makes the company's facilities unusable, the controller has
arranged for the use of an alternate location and the delivery of
duplicate computer hardware to this alternate location. Which of
the following recovery plans would best describe this
arrangement?
23. The performance audit report of an information technology
department indicated that the department lacked a disaster recovery
plan. Which of the following steps should management take first to
correct this condition?
24. Which of the following tasks comes first in business
continuity management (BCM)?
25. In DRP, the lowest priority is given to which activities?
26. Which of the following terms refers to a site that has been
identified and maintained by the organization as a data processing
disaster recovery site, but has not been stocked with equipment?
27. In DRP, top priority is given to which activities?
28. To maintain effective segregation of duties within the
information technology function, an application programmer
should have which of the following responsibilities?
29. In business information systems, the term "stakeholder"
refers to which of the following parties?
30. In a large multinational organization, which of the following
job responsibilities should be assigned to the network
administrator?
31. IT people controls are mostly
32. What is the role of the systems analyst in an IT environment?
33. The position responsible for managing the flow of documents
and reports in and out of the computer operations department is the
34. Which of the following information technology (IT)
departmental responsibilities should be delegated to separate
individuals?

35. Who is responsible for granting users access to specific data
resources?
36. When a client's accounts payable computer system was
relocated, the administrator provided support through a dial-up
connection to a server. Subsequently, the administrator left the
company. No changes were made to the accounts payable system
at that time. Which of the following situations represents the
greatest security risk?
37. In a large firm, the custody of an entity's data is most
appropriately maintained by which of the following personnel?
38. In which of the following stages of computer system
development would training occur?
39. Which of the following roles is responsible for prioritizing
systems development proposals?
40. At this stage, we purchase hardware:
41. Which of the following is responsible for overall program
logic and functionality?
42. Data conversion occurs at this stage:
43. Which of the following implementation approaches has been
described as "sink or swim?"
44. Which of the following is responsible for identifying
problems and proposing initial solutions?
45. Which of the following is responsible for designing, creating,
and testing programs?
46. In which of the following implementation approaches is the
system divided into modules for implementation?
47. In which of the following implementation approaches do the
new and old systems run concurrently until it is clear that the new
system is working properly?
48. In which of the following implementation approaches are
users divided into smaller groups and trained on the new system,
one group at a time?
49. The requirements definition document is signed at this stage:

50. In a small business with only microcomputers, which
documentation would be most useful to an untrained user to learn
how to correct data errors in a database application?
51. Rose and McMullin, a regional public accounting firm, has
recently accepted a contract to audit On-the-Spot, Inc., a mobile
vending service that provides vending machines for large events.
On-the-Spot uses a computerized accounting system, portions of
which were developed internally to integrate with a standard
financial reporting system that was purchased from a consultant.
What type of documentation will be most useful to Rose and
McMullin in determining how the system as a whole is
constructed?
52. Which of the following types of documentation would a
computer operator use to determine how to set up and run a
specific computer application.
53. Management of a company has a lack of segregation of
duties within the application environment, with programmers
having access to development and production. The programmers
have the ability to implement application code changes into
production without monitoring or a quality assurance function.
This is considered a deficiency in which of the following areas?
54. After changes to a source program have been made and
verified, it moves to
55. Which of the following controls in not usually found in batch
processing systems?
56. Which of the following is considered an application input
control?
57. An employee mistakenly enters April 31 in the date field.
Which of the following programmed edit checks offers the best
solution for detecting this error?
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1. Wages earned by machine operators in producing the firm's
product should be categorized as
2. Which of the following is assigned to goods that were either
purchased or manufactured for resale?
3. In a traditional job order cost system, the issue of indirect materials
to a production department increases
4. The accountant for Champion Brake, Inc. applies overhead based
on machine hours. The budgeted overhead and machine hours for
the year are $260,000 and 16,000, respectively. The actual
overhead and machine hours incurred were $275,000 and 20,000.
The cost of goods sold and inventory data compiled for the year is
as follows: Direct Materials $ 50,000, COGS 450,000, WIP
(units) 100,000, Finished Goods (units) 150,000. What is the
amount of over/under applied overhead for the year?
5. If a product required a great deal of electricity to produce, and
crude oil prices increased, which of the following costs most likely
increased?
6. Fab Co. manufactures textiles. Among Fab's 2004 manufacturing
costs were the following salaries and wages: Loom operators

$120,000, Factory foremen 45,000, Machine mechanics 30,000.
What was the amount of Fab's 2004 direct labor?
7. In a process cost system, the application of factory overhead
usually would be recorded as an increase in
8. Jonathan Mfg. adopted a job-costing system. For the current year,
budgeted cost driver activity levels for direct labor hours and direct
labor costs were 20,000 and $100,000, respectively. In addition,
budgeted variable and fixed factory overheads were $50,000 and
$25,000, respectively. The actual costs and hours for the year were
as follows: Direct labor hours 21,000, Direct labor costs $110,000,
Machine hours 35,000. For a particular job, 1,500 direct labor
hours were used. Using direct labor hours as the cost driver, what
amount of overhead should be applied to this job?
9. Indirect labor is a
10. Hoyt Co. manufactured the following units: Saleable 5,000,
Unsalable (normal spoilage) 200, Unsalable (abnormal
spoilage) 300, the manufacturing cost totaled $99,000. What
amount should Hoyt debit to finished goods?
11. In the past, four direct labor hours were required to produce
each unit of product Y. Material costs were $200 per unit, the
direct labor rate was $20 per hour, and factory overhead was three
times the direct labor cost. In budgeting for next year, management
is planning to outsource some manufacturing activities and to
further automate others. Management estimates that these plans
will reduce labor hours by 25%, increase the factory overhead rate
to 3.6 times the direct labor costs, and increase material costs by
$30 per unit. Management plans to manufacture 10,000 units.
What amount should management budget for the cost of goods
manufactured?
12. During the month of March 2005, Nale Co. used $300,000 of
direct materials. On March 31, 2005, Nale's direct materials
inventory was $50,000 more than it was on March 1, 2005. Direct
material purchases during the month of March 2005 amounted to
13. Based on the following data, what is the gross profit for the
company? Sales $1,000,000, Net purchases of raw materials

600,000, Cost of goods manufactured 800,000, Marketing and
administrative expenses 250,000, Indirect manufacturing costs
500,000.
14. On January 1 Maples had two jobs in process: #506 with
assigned costs of $10,500 and #507 with assigned costs of
$14,250. During January three new jobs, #508 through #510, were
started and three jobs, #506, #507, and #508, were completed.
Materials and labor costs added during January were as follows:
Manufacturing overhead is assigned at the rate of 200 percent of
labor. What is the January cost of goods manufactured and
transferred from work-in-process?
15. In June, Delta Co. experienced scrap, normal spoilage, and
abnormal spoilage in its manufacturing process. The cost of units
produced includes
16. In its April 2005 production, Hern Corp., which does not use
a standard cost system, incurred total production costs of $900,000,
of which Hern attributed $60,000 to normal spoilage and $30,000
to abnormal spoilage. Hern should account for this spoilage as
17. Mat Co. estimated its material handling costs at two activity
levels as follows: What is Mat's estimated cost for handling
75,000 kilos?
18. When using a flexible budget, a decrease in production levels
within a relevant range
19. A delivery company is implementing a system to compare
the costs of purchasing and operating different vehicles in its fleet.
Truck 415 is driven 125,000 miles per year at a variable cost of
$0.13 per mile. Truck 415 has a capacity of 28,000 pounds and
delivers 250 full loads per year. What amount is the truck's
delivery cost per pound?
20. Sender, Inc. estimates parcel mailing costs using the data
shown on the chart below. What is Sender's estimated cost for
mailing 12,000 parcels?
21. When production levels are expected to increase within a
relevant range, and a flexible budget is used, what effect would be
anticipated with respect to each of the following costs?

22. Day Mail Order Co. applied the high-low method of cost
estimation to customer order data for the first 4 months of 2005.
What is the estimated variable order filling cost component per
order?
23. When production levels are expected to decline within a
relevant range, and a flexible budget is used, what effect would be
anticipated with respect to each of the following?
24. In an activity-based costing system, cost reduction is
accomplished by identifying and eliminating
25. Book Co. uses the activity-based costing approach for cost
allocation and product costing purposes. Printing, cutting, and
binding functions make up the manufacturing process. Machinery
and equipment are arranged in operating cells that produce a
complete product starting with raw materials. Which of the
following are characteristic of Book's activity-based costing
approach? I. Cost drivers are used as a basis for cost allocation. II.
Costs are accumulated by department or function for the purposes
of product costing. III. Activities that do not add value to the
product are identified and reduced to the extent possible.
26. What is the normal effect on the numbers of cost pools and
allocation bases when an activity-based cost (ABC) system
replaces a traditional cost system?
27. 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?
28. Gram Co. develops computer programs to meet customers'
special requirements. How should Gram categorize payments to
employees who develop these programs?
29. Where one part of an organization provides an essential
business process where previously it had been provided by
multiple parts of that same organization, this is called
30. Which of the following items often provides a significant risk
with off-shore operations?
31. A manufacturing company has several product lines.
Traditionally, it has allocated manufacturing overhead costs

between product lines based on total machine hours for each
product line. Under a new activity-based costing system, which of
the following overhead costs would be most likely to have a new
cost driver assigned to it?
32. Nile Co.'s cost allocation and product costing procedures
follow activity-based costing principles. Activities have been
identified and classified as being either value-adding or nonvalue-
adding as to each product. Which of the following activities, used
in Nile's production process, is nonvalue-adding?
33. Which of the following items is a process management
approach that involves radical change?
34. In an income statement prepared as an internal report using
the direct (variable) costing method, fixed selling and
administrative expenses would
35. The absorption costing method includes in work in process
and finished goods inventories:
36. In an income statement prepared as an internal report using
the direct (variable) costing method, fixed selling and
administrative expenses would
37. Cay Co.'s 2005 fixed manufacturing overhead costs totaled
$100,000, and variable selling costs totaled $80,000. Under direct
costing, how should these costs be classified?
38. Using the variable costing method, which of the following
costs are assigned to inventory?
39. A manufacturing company prepares income statements using
both absorption and variable costing methods. At the end of a
period, actual sales revenues, total gross profit, and total
contribution margin approximated budgeted figures, whereas
income was substantially greater than the budgeted amount. There
was no beginning or ending inventories. The most likely
explanation of the income increase is that, compared to budget,
actual
40. Which of the following statements is correct regarding the
difference between the absorption costing and variable costing
methods?

41. A manufacturing company prepares income statements using
both absorption and variable costing methods. At the end of a
period, actual sales revenues, total gross profit, and total
contribution margin approximated the budgeted figures, whereas
income was substantially below the budgeted amount. There was
no beginning or ending inventories. The most likely explanation
for the income shortfall is that, compared to budget, actual
42. A single-product company prepares income statements using
both absorption and variable costing methods. Manufacturing
overhead cost applied per unit produced in 2005 was the same as in
2004. The 2005 variable costing statement reported a profit,
whereas the 2005 absorption costing statement reported a loss. The
difference in reported income could be explained by the units
produced in 2005 being
43. At the end of Killo Co.'s first year of operations, 1,000 units
of inventory remained on hand. Variable and fixed manufacturing
costs per unit were $90 and $20, respectively. If Killo uses
absorption costing rather than direct (variable) costing, the result
would be a higher pretax income of
44. Lynn Manufacturing Co. prepares income statements using
both standard absorption and standard variable costing methods.
For 2005, unit standard costs were unchanged from 2004. In 2005,
the only beginning and ending inventories were finished goods of
5,000 units. How would Lynn's ratios using absorption costing
compare with those using variable costing?
45. A direct labor overtime premium should be charged to a
specific job when the overtime is caused by the
46. In a job cost system, manufacturing overhead is
47. Birk Co. uses a job order cost system. The following debits
(credits) appeared in Birk's work in process account for the month
of April 2005: Birk applies overhead to production at a
predetermined rate of 80% of the direct labor cost. Job No. 5, the
only job still in process on April 30, 2005, was charged with direct
labor of $2,000. What was the amount of direct materials charged
to Job No. 5?

47.
48. A job order cost system uses a predetermined factory
overhead rate based on expected volume and expected fixed cost.
At the end of the year, under applied overhead might be explained
by which of the following situations?
49. A standard cost system may be used in
50. During the current year, the following manufacturing activity
took place for a company's products: Beginning work in process:
10,000 units, 70% complete, Units started into production during
the year: 150,000 units, Units completed during the year: 140,000
units, Ending work in process: 20,000 units, 25% complete. What
was the number of equivalent units produced using the first-in,
first-out method?
51. Yarn Co.'s inventories in process were at the following stages
of completion on April 30, 2004:
52. The forming department is the first of a two-stage production
process. Spoilage is identified when the units have completed the
forming process. The costs of spoiled units are assigned to units
completed and transferred to the second department in the period
when spoilage is identified. The following information concerns
forming's conversion costs in May 2005: Using the weighted
average method, what was forming's conversion cost transferred to
the second production department?
53. Weighted average and first in, first out (FIFO) equivalent
units would be the same in a period when which of the following
occurs?
54. In computing the current period's manufacturing cost per
equivalent unit, the FIFO method of process costing considers
current period costs

55. Black, Inc. employs a weighted average method in its process
costing system. Black's work in process inventory on June 30
consists of 40,000 units. These units are 100% complete with
respect to materials and 60% complete with respect to conversion
costs. The equivalent unit costs are $5.00 for materials and $7.00
for conversion costs. What is the total cost of the June 30 work in
process inventory?
56. A process costing system was used for a department that
began operations in January 2005. Approximately the same
number of physical units, at the same degree of completion, were
in work in process at the end of both January and February.
Monthly conversion costs are allocated between ending work in
process and units completed. Compared to the FIFO method,
would the weighted average method use the same or a greater
number of equivalent units to calculate the monthly allocations?
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