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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
Which of the following individuals would be most hurt by an
unanticipated increase in inflation?
Question 1 (FINM-0082)
Which of the following statements is correct regarding the weighted-
average cost of capital (WACC)?
The benefits of debt financing over equity financing are likely to be
highest in which of the following situations?
Question 3 (RMCB-0027)
Which of the following describes an option?
A company has $1,500,000 of outstanding debt and $1,000,000 of
outstanding common equity. Management plans to maintain the same
proportions of financing from each source if additional projects are
undertaken. If the company expects to have $60,000 of retained earnings
available for reinvestment in new projects in the coming year, what
dollar amount of new investments can be undertaken without issuing
new equity?
Value of equity
Value of debt + Value of equity
Since the question states that the firm will maintain the same weight of
each financing source, each dollar invested is composed of 40 cents of

equity and 60 cents of debt. The first $60,000 of equity used in financing
new projects is sourced from retained earnings. This source of equity is
exhausted when the firm reaches an investment level of
$60,000 / .4 = $150,000.When the level of investment exceeds this
amount, equity financing must be raised externally.
DQZ Telecom is considering a project for the coming year that will cost
$50,000,000. DQZ plans to use the following combination of debt and
equity to finance the investment:
Which of the following describes a normal yield curve?
Which of the following types of bonds is most likely to maintain a
constant market value?
Which of the following is an advantage of net present value modeling?
The calculation of depreciation is used in the determination of the net
present value of an investment for which of the following reasons?
Net present value as used in investment decision-making is stated in
terms of which of the following options?
Essex Corporation is evaluating a lease that takes effect on March 1,
2012. The company must make eight equal payments, with the first
payment due on March 1, 2012. The concept most relevant to the
evaluation of the lease is
On January 1, 2012, Colt Company issued 10-year bonds with a face
amount of $1,000,000 and a stated interest rate of 8% payable annually
on January 1. The bonds were priced to yield 10%. Present value factors
are as follows:
Present value of 1 for 10 periods
Present value of an ordinary annuity of 1 for 10 periods
The total issue price (rounded) of the bonds was

Net working capital is the difference between
Assume that management of Trayco has generated the following data
about an investment project that has a five-year life:
Initial investment
Additional investment in working capital
Cash flows before income taxes for years 1 through 5
Yearly depreciation for tax purposes
Terminal value of machine
Cost of capital
Present value of $1 received after 5 years discounted at 8%
Present value of an ordinary annuity of $1 for 5 years at 8%
Assume that Trayco's marginal tax rate is 30% and all cash flows come
at the end of the year. Calculate the net present value of the investment
of the project.
Which one of the following statements correctly compares bond
financing alternatives?
A client wants to know how many years it will take before the
accumulated cash flows from an investment exceed the initial
investment, without taking the time value of money into account. Which
of the following financial models should be used?
Harvey Co. is evaluating a capital investment proposal for a new
machine. The investment proposal shows the following information:
Initial cost
Life
Annual net cash inflows
Salvage value
If acquired, the machine will be depreciated using the straight-line
method. The payback period for this investment is

Which of the following statements is correct regarding financial decision
making?
Which of the following formulas should be used to calculate the
economic rate of return on common stock?
All of the following are features of just-in-time (JIT) systems except
Because log-on procedures may be cumbersome and tedious, users often
store log-on sequences in their personal computers and invoke them
when they want to use mainframe facilities. A risk of this practice is
that
Employee numbers have all numeric characters. To prevent the input of
alphabetic characters, what technique should be used?
An organization's computer help desk function is usually a responsibility
of the
First Federal S&L has an online real-time system, with terminals
installed in all of its branches. This system will not accept a customer's
cash withdrawal instructions in excess of $1,000 without the use of a
"terminal audit key." After the transaction is authorized by a supervisor,
the bank teller then processes the transaction with the audit key. This
control can be strengthened by
A brokerage firm has changed a program so as to permit higher
transaction volumes. After proper testing of the change, the revised
programs were authorized and copied to the production library. This
practice is an example of
In a daily computer run to update checking account balances and print
out basic details on any customer's account that was overdrawn, the
overdrawn account of the computer programmer was never printed.

Which of the following control procedures would have been most
effective in detecting this fraud?
In which of the following locations should a copy of the accounting
system data backup of year-end information be stored?
A computer input control is designed to ensure that
Which of the following would lessen internal control in a computer
processing system?
A value-added network (VAN) is a privately owned network that
performs which of the following functions?
Which of the following is usually a benefit of using electronic funds
transfer for international cash transactions?
The machine language for a specific computer
Securing client/server systems is a complex task because of all of the
following factors except:
A data warehouse in an example of
Compared to batch processing, real-time processing has which of the
following advantages?
Which of the following is not a characteristic of a batch processed
computer system?
Which of the following is an advantage of a computer-based system for
transaction processing over a manual system? A computer-based system
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?
In a large multinational organization, which of the following job
responsibilities should be assigned to the network administrator?
Today organizations are using microcomputers for data presentation
because microcomputer use, compared to mainframe use, is more
Question 1 (COST-0056)
The following is selected information from the records of Ray, Inc.:
Purchases of raw materials
Raw materials, beginning
Raw materials, ending
Work-in-process, beginning
Work-in-process, ending
Cost of goods sold
Finished goods, beginning
Finished goods, ending
What is the total amount of conversion costs?
Question 2 (PLAN-0049)
A defense contractor for a government space project has incurred
$2,500,000 in actual design costs to date for a guidance system whose
total budgeted design cost is $3,000,000. If the design phase of the
project is 60% complete, what is the amount of the contractor's current
overrun/savings on this design work?
A company with three products classifies its costs as belonging to five
functions: design, production, marketing, distribution, and customer
services. For pricing purposes, all company costs are assigned to the
three products. The direct costs of each of the five functions are traced
directly to the three products. The indirect costs of each of the five
business functions are collected into five separate cost pools and then
assigned to the three products using appropriate allocation bases. The

allocation base that would most likely be the best for allocating the
indirect costs of the distribution function is
Which of the following is assigned to goods that were either purchased
or manufactured for resale?
A company manufactures a product that has the direct material standard
cost presented below. Budgeted and actual information for the current
month for the manufacture of the finished product and the purchase and
use of the direct material are also presented.Standard cost for direct
material1.60 lb. @ $2.50 per lb. = $4.00
Finished goods (in units)
Direct material usage (in pounds)
Direct material purchases (in pounds)
Total cost of direct material purchases
The direct material price variance for the current month is
A favorable material price variance coupled with an unfavorable
material usage variance would most likely result from
Question 7 (PERM-0001)
A strategy map in the balanced scorecard framework is
Comparing actual results with a budget based on achieved volume is
possible with the use of a
The cash receipts budget includes
A company is attempting to determine if there is a cause and effect
relationship between scrap value and output produced. The following
exhibit presents the company's scrap data for the last fiscal year:
Scrap Value as a Percent of Standard Dollar Value of Output Produced
Month
Nov. 11
Dec. 11

Jan. 12
Feb. 12
Mar. 12
Apr. 12
May-12
Jun. 12
Jul. 12
Aug. 12
Sep. 12
Oct. 12
Based on the above data, the company's scrap value in relation to the
standard dollar value of output produced appears to be
In preparing its cash budget for July 2012, Reed Company made the
following projections:
Sales
Gross profit (based on sales)
Decrease in inventories
Decrease in accounts payable for inventories
For July 2012 what were the estimated cash disbursements for
inventories?
The following selected data is for the Consumer Products Division of
Gerriod Corp.
Sales
Average invested capital (total assets)
Net operating profit
Cost of capital
Calculate the spread between the return on investment and the required
rate of return for the Consumer Products Division.
A company is considering exchanging an old asset for a new asset.
Ignoring income tax considerations, which of the following is
economically relevant to the decision?

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?
In the cost of quality, liability claims are examples of
The following selected data is for the Consumer Products Division of
Gerriod Corp.
Sales
Average invested capital (total assets)
Net operating profit
Cost of capital
Calculate the asset turnover ratio for the Consumer Products Division.
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?
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)
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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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

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
Question 18

An accountant's report expressing an opinion on a nonissuer's internal
control over financial reporting should state that
Question 19
In a state jurisdiction having an accountant-client privilege statute, to
whom may a CPA turn over work papers without a client's permission?
Question 20
Mell Corp. engaged Davis & Co., CPAs. to audit Mell's financial
statements. Mell's management informed Davis it suspected that the
accounts receivable were materially overstated. Although the financial
statements did include a materially overstated accounts receivable
balance, Davis issued an unqualified opinion.Mell relied on the financial
statements in deciding to obtain a loan from County Bank to expand its
operations. County relied on the financial statements in making the loan
to Mell. As a result of the overstated accounts receivable balance, Mell
has defaulted on the loan and has incurred a substantial loss.
If County sues Davis for fraud, must Davis furnish County with the audit
working papers?
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ACC 576 Study Week 6
Which of the following did SOX NOT do to protect whistleblowers?
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?
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?
Which of the following did Dodd-Frank do regarding a whistleblower's
right to sue for retaliation accorded by SOX?
A public company audit committee's "financial expert" must have all of
the following except:
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?
Public company audit committees must contain which of the following?
Under SOX, it is a crime to punish a public company whistleblower who
provides truthful information relating to which of the following:
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:
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.
Maintenance of the backup files is an example of
Review of the audit (also called transaction) log is an example of which
of the following types of security control?
Which of the following statements presents an example of a general
control for a computerized system?
categories of preventive, detective, and corrective. Which of the
following is a preventive control?
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?
Which of the following is an example of a detective control?
In the COSO "cube" model, each of the following is a control objective
except
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.
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.
This fundamental component of internal control is the core or foundation
of any system of internal control.
This component of internal control concerns testing the system and its
data.
According to COSO, which of the following is a compliance objective?
This is the process of identifying, analyzing, and managing the risks
involved in achieving the organization's objectives.
In the COSO (2011) "cube" model, each of the following are
components of internal control except
According to the 17 COSO control principles, risk reduction primarily
relates to which fundamental component of internal control:
According to the 17 COSO control principles, establishing a whistle-
blower hot line contributes to:
According to the 17 COSO control principles, information quality
primarily relates to which fundamental component of internal control:
According to the 17 COSO control principles, organizational objectives
primarily relate to which fundamental component of internal control:
According to the 17 COSO control principles, addressing control
deficiencies primarily relates to which fundamental component of
internal control:
According to the 17 COSO control principles, change management
primarily relates to which fundamental component of internal control:
According to the 17 COSO control principles, fraud primarily relates to
which fundamental component of internal control:

The original COSO model has _____ control components, while the
COSO ERM model has _____ control components.
Strategic, operations, reporting, and compliance objectives are a part of
which of the following models of internal control?
Which of the following items is one of the eight components of COSO's
enterprise risk management framework?
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?
Activities that can be useful in monitoring control system effectiveness
include all of the following except
The goals of risk management include:
According to COSO, which of the following is the most effective
method to transmit a message of ethical behavior throughout an
organization?
Each of the following is a limitation of enterprise risk management
(ERM) except
Which of the following control activities should be taken to reduce the
risk of incorrect processing in a newly installed computerized
accounting system?
Recognizing potential impediments to communication between system
user and system designer can be useful in
A senior executive of an international organization who wishes to
demonstrate the importance of the security of company information to
all team members should
In which of the following organizations might segregation of duties be
easiest to achieve?
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?
Which of the following is most useful when risk is being prioritized?
According to COSO, the two primary attributes of effective evaluators
are

Which of the following are reasons that internal controls need to be
monitored?
Which of the following is the best definition of a compensating control?
Within the COSO Internal Control-Integrated Framework, which of the
following components is designed to ensure that internal controls
continue to operate effectively?
According to COSO, an effective approach to monitoring internal
control involves each of the following steps,except
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?
Internal control monitoring is considered
Which of the following is not a major step in the COSO model of
control monitoring?
In a large public corporation, evaluating internal control procedures
should be the responsibility of
The system of internal control begins with
The IIA's International Professional Practices Framework includes
among its "mandatory" guidance each of the following elements except
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?
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
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?
What term identifies the type of internal auditing standards used to
describe the characteristics associated with organizations and individuals
who provide internal audit services?

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
What term is used in the IIA's International Standards to identify the
person responsible for managing an organization's internal audit
activity?
The Attribute Standards related to an internal audit activity's Quality
Assurance and Improvement Program must include periodic external
assessments. How often is an external assessment required?
The Attribute Standards focus on four primary themes around which the
remaining Attribute Standards are organized. Each of the following key
words or phrases is associated with those four primary themes except
Standard 1300, "Quality Assurance and Improvement Program," states,
"The chief audit executive must develop and maintain a quality
assurance and improvement program that covers all aspects of the
internal audit activity." Six additional Attribute Standards provide
further requirements on that topic. Which of the following is an accurate
statement regarding the standards applicable to the required Quality
Assurance Improvement Program?
The Performance Standards focus on seven primary themes around
which the remaining Performance Standards are organized. Each of the
following key words or phrases is associated with these seven primary
themes except
The Performance Standards focus on seven primary themes around
which the remaining Performance Standards are organized. Each of the
following key words or phrases is associated with these seven primary
themes except
What term identifies the guidance in the International Standards for the
Professional Practice of Internal Auditing that distinguishes between
requirements for "assurance" services and "consulting" services?
There are seven additional Performance Standards that relate to Standard
2000, "Managing the Internal Audit Activity." The general theme of
these standards associated with Managing the Internal Audit Activity is
best characterized by which of the following statements?
Quiz 6

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?
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
********************
ACC 576 Week 7 Assignment 1 Economic and
Monetary Policy

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.
********************
ACC 576 Week 7 Study
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?

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"?
Which of the following statements regarding the use of graphs to depict
economic relationships is not correct?
Graphs are a means of depicting the relationship between two variables.
These variables are usually identified as
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?
Measures of the economic activity of an entire nation would be included
in the study of
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.
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?
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.
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?
Which of the following are considered economic resources?
In a free-market economy, which of the following should be the least
significant factor in determining resource allocation and use?
Which of the following is not a characteristic of a free-market economy?
The demand for a commodity would increase when the price of a
When a demand schedule is plotted on a graph, the resulting demand
curve will be
In the statement "quantity demanded is a function of price," are the
variables quantity and price dependent or independent variables?

The demand curve for a product reflects which of the following?
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?
Which one of the following would not cause an increase in demand for a
commodity?
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?
Which one of the following factors would not cause an increase in the
supply curve of a commodity?
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
If a change in market variables causes a supply curve to shift inward,
which one of the following will occur?
When the cost of input factors to the production process increases,
which one of the following will occur?
In the statement "quantity supplied is a function of price," are the
variables quantity and price dependent or independent variables?
An increase in taxes on cigarette production would cause which one of
the following to occur?
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?
A city ordinance that establishes a price ceiling on rent may cause
If both demand and supply have traditional curves, a higher equilibrium
price may be caused by which one of the following?
If the price for a good is fixed by government fiat below market
equilibrium price, which one of the following will occur?
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?
Which of the following characteristics would indicate that an item sold
would have a high price elasticity of demand?

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?
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?
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?
In which of the following situations would there be inelastic demand?
The elasticity of demand is measured by
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?
As an individual acquires (or consumes) more units of a commodity over
a given time period, what is the effect on the individual's total utility and
marginal utility?
The following graph shows four curves: A-A, B-B, C-C, and D-D.
Which one of these curves could depict a total utility curve?
Allen buys only beer and pizza. When the price of beer is $2.00 per
bottle and the price of pizza is $10.00, Allen maximizes his total utility
(satisfaction) by buying 5 beers and 4 pizzas. If the marginal utility of
the 5th beer is 100 utils, which one of the following would be the
marginal utility of the 4th pizza?
The following graph shows four curves: A-A, B-B, C-C, and D-D.
Which of these curves depict variables that are not interdependent?
Allen has the following schedule of marginal utility for slices of pizza
and bottles of beer: If Allen maximizes his total utility by consuming 3
slices of pizza and 3 bottles of beer, which one of the following is the
ratio of the price of a slice of pizza to the price of a bottle of beer?
Which one of the following cost curves does not have a general "U-
shape"?
In the long run, if all input factors to a production process are increased
by 100%, but total output increases by only 75%, this indicates
Which one of the following statements regarding periods of analysis is
correct?

According to the law of diminishing returns, which one of the following
is correct?
In a macroeconomic free-market flow model, which of the following
would be considered leakages?
Which of the following forms of economic activity is considered in
macroeconomics, but not in microeconomics?
In a macroeconomic free-market flow model, which one of the following
would not be considered an "injection?"
Which of the following issues is least likely to be relevant to the study of
macroeconomics?
The foreign sector plays a role in a macroeconomic free-market flow
model because of
Which of the following sectors is most likely to be relevant in both
microeconomic and macroeconomic models of free-market flows?
Potential GDP is a measure of an economy's ability to produce goods
and services. Which of the following is assumed in estimating potential
GDP?
Which of the following graphs shows the maximum combination of
goods and services that can be produced at a given time, if all available
resources are used efficiently?
A positive gross domestic product (GDP) gap exists when
Gross domestic product (GDP) is a measure of
Adjustment from gross national product (GNP) to net national product
(NNP) would require which one of the following?
A good produced in 2008 that was in the finished goods inventory on
December 31, 2008, and was sold in January 2009 would be included in
whole or in part in the GDP of which year(s)?
The following information is available for economic activity for year 1:
What amount is the gross domestic product for year 1?
Which of the following indicates that the economy is in a recessionary
phase?
If the U.S. economy is experiencing a 9% total unemployment rate and
the natural rate of unemployment is 5.5%, which of the following is the
cyclical rate of unemployment?

Jason, 14 years old, has been working delivering newspapers for the past
two years. Because he just entered high school, he has had to give up his
newspaper delivery job. Although he has been seeking a new job, he has
not been able to find one. Jason would be considered
There can be official full employment when there is which of the
following kinds of unemployment? I. Structural unemployment.II.
Frictional unemployment.III. Seasonal unemployment.
As a result of the recession in 2009 and the related decline in tourism,
several thousand hospitality industry workers in Florida became
unemployed. These workers were
Which of the following changes in unemployment is most likely to be
associated with a period of economic contraction?
Which of the following types of unemployment typically results from
technological advances?
Which of the following is not included in what is considered the natural
rate of unemployment?
Which of the following is most likely to decrease aggregate demand?
In macroeconomics, which one of the following would not be considered
investment spending?
During 2008, Roy's disposable income was $100,000 and he spent
$90,000 on consumable goods. During 2009, Roy's disposable income
increased to $200,000 and he spent $150,000 on consumable goods. For
2009, when compared to 2008, what is Roy's marginal propensity to
consume?
An increase in spending on imported goods would most likely cause
which one of the following?
Which of the following is most likely to result in an increase in
aggregate demand in the U.S. economy?
Which of the following is most likely to increase aggregate demand?
During 2008, Roy's disposable income was $100,000 and he spent
$90,000 on consumable goods. During 2009, Roy's disposable income
increased to $200,000 and he spent $150,000 on consumable goods.
During 2009, what is Roy's average propensity to consume?
The full-employment gross domestic product is $1.3 trillion, and the
actual gross domestic product is $1.2 trillion. The marginal propensity to

consume is 0.8. When inflation is ignored, what increase in government
expenditures is necessary to produce full employment?
Which of the following theoretical aggregate supply curves has a "kink"
at the level of output at which there is full employment?
The war in Iraq substantially reduced the working population, as well as
other economic resources, of that country. Which one of the following
most likely occurred in the Iraqi economy as a result of the reduced
working population?
Which of the following effects is most likely to accompany an
unexpected reduction in aggregate supply, assuming a conventional
supply curve?
An increase in the minimum wage rate would likely result in which one
of the following?
Assuming a conventional supply curve, which one of the following
factors will not cause a shift in the aggregate supply curve for a good?
An increase in the value of the Chinese currency (the RMB) relative to
the U.S. dollar would most likely cause which of the following?
Assume increased capital investment results in higher levels of output of
goods, but demand remains unchanged. What will be the likely effect on
aggregate equilibrium quantity and price if a conventional supply curve
is assumed?
A rise in a country's exports would most likely cause which one of the
following shifts?
aggregate equilibrium quantity and price if a classical supply curve is
assumed?
aggregate equilibrium quantity and price if a Keynesian supply curve is
assumed and the level of aggregate demand is at greater than full
employment?
The aggregate demand and aggregate supply curves intersect at a price
and quantity that are

Which one of the following statements concerning the business cycle is
correct?
The business cycle in the U.S. is measured in terms of changes in
Which of the following measures is most likely to indicate a
forthcoming recessionary period?
Which of the following segments of the economy will be least affected
by the business cycle?
Which of the following statements concerning the business cycle, if any,
is correct? I. Business cycles recur with a consistent pattern of length
and magnitude. II. Business cycles impact individual industries at
different times and with different degrees of severity.
Variations between business cycles are most likely attributable to which
of the following factors?
Which of the following changes is most likely to be a lagging indicator
of a change in the business cycle?
Which of the following typically is not a reason for international
economic activity by a U.S. entity?
Which of the following typically is not a reason for international
economic activity by a U.S. entity?
Which one of the following concepts underlies the benefits of
international economic activity (i.e., international trade)?
The concept of comparative advantage in international business activity
is based on which one of the following?
Which one of the following would not be an argument made by U.S.
unions in favor of trade protectionism?
In the long run, the imposition of an import quota on a commodity is
likely to provide the greatest direct benefit to
Which of the following is not an account used by the U.S. to account for
transactions and balances with other nations (i.e., those not in the U.S.
balance of payments statement)?
What is the effect when a foreign competitor's currency becomes weaker
compared to the U.S. dollar?
A statement expressed in the form of "1 euro = $1.20" expresses a/an
A company manufactures goods in Esland for sale to consumers in
Woostland. Currently, the economy of Esland is booming and imports

are rising rapidly. Woostland is experiencing an economic recession and
its imports are declining. How will the Esland currency, $E, react with
respect to the Woostland currency, $W?
A country's currency conversion value has recently changed from 1.5 to
the U.S. dollar to 1.7 to the U.S. dollar. Which one of the following
statements about the country is correct?
Freely fluctuating exchange rates perform which of the following
functions?
Platinum Co. has a receivable due in 30 days for 30,000 euros. The
treasurer is concerned that the value of the euro relative to the dollar will
drop before the payment is received. What should Platinum do to reduce
this risk?
Assume a U.S. company purchases shares of a French company for
1,000,000 euros on March 1, 2003, when the exchange rate was 1 E =
$1.10. The investment is classified as available-for-sale by the U.S.
company. After holding the shares for eight months, it sold the entire
investment in the foreign market for 1,200,000 euros when the exchange
rate was 1 E = $1.23.What dollar amount of total investment gain or loss
would the U.S. company recognize?
Assume a U.S. company purchases shares of a French company for
1,000,000 euros on March 1, 2003, when the exchange rate was 1 E =
$1.10. The investment is classified as available-for-sale by the U.S.
company. After holding the shares for eight months, it sold the entire
investment in the foreign market for 1,200,000 euros when the exchange
rate was 1 E = $1.23.Which of the following type(s) of gain or loss
would be recognized as a result of this investment in and subsequent sale
of shares in the French company?
A put is an option that gives its owner the right to do which of the
following?
A domestic entity may be exposed to foreign currency exchange rate risk
if it engages in which, if any, of the following kinds of transactions that
are denominated in a foreign currency?
Which of the following types of exchange risk derives from changes in
currency exchange rates that alter the value of future transactions?

CompCo., a U.S. computer maker, imported a supply of computer chips
from ChipCo., a Japanese supplier, and agreed to pay ChipCo. in yen,
with terms of net 90. CompCo. is concerned that the dollar will weaken
against the yen during the next three months and decides to hedge its
liability. Which one of the following contract transactions would
CompCo. initiate to hedge its exchange rate risk?
Which of the following is not a common basis for establishing a transfer
price between affiliated entities?
Which of the following examples involves transfer pricing?
Globalco, a U.S. parent, has subsidiaries in Germany (Gerco) and in
England (Engco). Gerco produces products that are sent to Engco for
final assembly and packaging. Engo then sends the goods to Globalco
for retail sales in the U.S. The effective income tax rates faced by each
of the companies is: If the objective of transfer prices is to minimize
income taxes, which of the following policies, within legally acceptable
ranges, should Globalco adopt with respect to the transfer prices?
Which of the following statements regarding international transfer
pricing is/are correct? I. Firms with operations in multiple nations can
manipulate earnings through transfer pricing.II. The transfer price
preferred by a foreign subsidiary manager may be different than the
transfer price that maximizes consolidated profits.
Which of the following best describes "transfer pricing?"
Which of the following is not a kind of economic crisis that could be
addressed by the International Monetary Fund?
Foreign direct investment occurs when a domestic entity invests in
If a country with a developed economy faces a debt crisis that makes it
unable to satisfy its foreign debt obligations, which of the following
international organizations is most likely to be called upon to help
resolve the debt crisis?
Which one of the following would not be a purpose of the General
Agreement on Tariffs and Trade (GATT)?
Which one of the following international organizations has the
promotion of economic development through loans to developing
countries as a primary purpose?

Which of the following enters into the determination of gross domestic
product of a country?
Which of the following countries is the world's largest exporter of
goods/services?
The long-term trend in the dollar value of U.S. exports and imports
reflects
Which of the following statements regarding international trade is/are
correct? I. International trade has been facilitated by regional trade
agreements.II. International trade benefits both exporters and importers.
Over the past 50 years, how has the share of total U.S. purchases and
output represented by imports and exports, respectively, changed?
Which of the following goods, if any, does the U.S. export more of than
it imports (i.e., has net exports)? I. Manufactured goods. II. Industrial
materials. III. Agricultural goods.
Which of the following statements regarding international trade over the
last 50 years is/are correct? I. International trade accounts for an
increasing share of worldwide economic activity.II. International trade
accounts for an increasing share of U.S. economic activity.
International trade is measured by a country's
Which of the following is least likely to be a risk encountered when
goods are outsourced to a foreign supplier and payment is denominated
in the foreign supplier's currency?
Outsourcing may involve the acquisition of
Which of the following, if either, would serve to mitigate risks
associated with outsourcing? I. Negotiate for payment to the foreign
supplier be made in the foreign currency.II. Include an arbitration clause
in the contract with the foreign supplier.
Outco, Inc., a U.S. firm, has a contract to acquire spare parts from a
foreign supplier. The contract provides that the parts are to be
manufactured to Outco's specifications and Outco is to pay in U.S.
dollars. Which of the following risks will Outco encounter as a direct
result of the contract?
Outsourcing of goods may involve acquisition of
Which of the following, if either, may be a reason a firm elects to
outsource production of a subassembly used in its final product? I. To

Improve quality of subassembly.II. To reduce the time needed to have
the subassembly available.
Which of the following statements regarding the Eurodollar market, if
either, is/are correct? I. Eurodollars can be either EEU Euros or U.S.
dollars.II. The Eurodollar market provides long-term loans.
The currency or currencies of the Eurodollar market (Euromarket)
include(s):
Bigo, Inc., a U.S. entity, decided to build a production facility in
Mexico. To finance construction, it borrows one million pesos from
Banco Uno, a Mexican bank. Which of the parties is exposed to
currency exchange risk?
Capital markets facilitate the trading of
In which of the following circumstances, as the dollar changes against
the foreign currency, would an investment in a foreign currency result in
fewer dollars and a borrowing in a foreign currency cost more dollars?
Which of the following statements regarding globalization of capital
markets, if either, is/are correct? I. Globalization permits reduced
investment portfolio risk.II. Globalization permits a lower cost of
capital.
Parco, Inc., a U.S. entity, has a 100% owned subsidiary, Subco, Inc.,
located in the country of Eastlaco. In which one of the following
arrangements would there be no foreign currency exchange risk
associated with borrowing by either Parco or its subsidiary, Subco, prior
to consolidation?
Which one of the following sets identifies the two countries that are
most likely the world's largest export countries?
In which of the following geographical areas has the greatest decline in
share of worldwide output occurred over the past 40 years?
Which one of the following is most likely the U.S. share of worldwide
exports?
Which of the following most closely represents the U.S. share of
worldwide GDP (output)?
Which one of the following countries is not one of the world's largest
exporters of goods and services?

In which of the following geographical areas has the greatest increase in
share of worldwide output occurred over the past 30 years?
Which of the following is the most elementary form of international
business?
Which one of the following is least likely an advantage associated with
the acquisition of a pre-existing foreign entity?
Which of the following statements regarding foreign licensing and
foreign franchising, if any, is/are correct? I. Licensors typically remain
more involved with a licensee than a franchisor remains involved with a
franchisee.II. Franchising typically provides greater quality control than
does simple licensing.
Which one of the following is least likely an advantage associated with a
wholly owned foreign subsidiary?
Government-imposed trade barriers may restrict
Which of the following statements regarding importing and exporting, if
any, is/are correct? I. Goods with a low value-to-weight ratio are less
likely to be suitable for importing than goods with a high value-to-
weight ratio.II. In the exporting of goods, one may encounter import
restrictions imposed by the country of destination.
Which one of the following forms of international business is most
likely to give an entity the greatest control over an international business
activity?
The measurement of post-performance characteristics is most likely to
be associated with which one of the following activities of the strategic
planning process?
Which of the following activities is most likely to be the first step in the
strategic planning process?
Which of the following is not a generic strategy identified by Michael
Porter?
Which of the following identifies a framework for gauging the
attractiveness of the competitive environment of an industry?
Which of the following factors is explicitly included in PESTEL
analysis but is not explicitly in PEST analysis?
PEST is an acronym for

In the context of PEST analysis, the analysis of labor law would be most
likely to fall under which of the PEST categories?
Macro-environmental analysis is concerned with analysis of
Which of the following describes a form of analysis that is useful in
evaluating the characteristics of a macro-environment?
PEST analysis can be used when considering
Which one of the following sets of characteristics should have the
highest intensity of rivalry within an industry?
In which one of the following circumstances are customers most likely
to have the greatest ability to affect product prices?
Vico, Inc., is considering a horizontal expansion of its business into a
new industry. Vico is concerned that other businesses may be
considering moving into the same industry in the near future. Which one
of the following forms of analysis would Vico most likely use to assess
whether the industry is likely to be highly competitive in the near future?
Which one of the following features would not create a higher level of
competitive threat posed by substitute goods or services in an industry?
In which of the following independent circumstances would entry of
new competitors be most likely?
Which of the following is not a five forces factor used in determining the
operating attractiveness of an industry?
Which one of the following would not be an entity's strength in a
competitive environment?
A regulatory agency has been considering the imposition of stricter
regulations on an industry. Under SWOT analysis, the possibility of this
new regulation would be considered
Is SWOT analysis concerned with external environment, internal
characteristics, or both?
Which one of the following would be least likely to be a possible threat
to an entity?
Which of the following types of analysis is directly concerned with the
relationship between an entity and its environment?
Which of the following SWOT matrix relationship categories
(intersections) poses the greatest risk to an entity?

Targeting a niche market always involves which of the following
strategies, if either?
Which of the following is a characteristic of a cost leadership entity?
Under which of the following strategies, if either, would the strength and
dedication of an entity's marketing function be critical?
Entities that adopt a differentiation strategy will provide goods or
services that
Which one of the following is not a generic strategy identified by
Porter?
When an entity adopts a cost leadership strategy, which one of the
following might it use to help carry out this strategy?
Which of the following forms of analysis, if either, is concerned only
with analysis of the external environment of an entity?
Which one of the following is least likely to be useful in deciding in
which country an entity should operate?
Goals established in the strategic planning process should be
PEST analysis and SWOT analysis are assessment techniques used in
the strategic planning process. Are these forms of analysis primarily
concerned with "where" an entity should be located or with "how" an
entity should operate?
********************
ACC 576 Week 8 Study

Regarding financial resources, financial management is concerned with
the efficiency and effectiveness of which of the following?
Which of the following financial management-related areas are
considered long-term issues?
Which one of the following would be considered a long-term financial
management activity or concern?
Financial management involves decisions and activities that deal with
Which of the following "tools" are likely to be used in financial
management?
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?
A company has the following financial information: To maximize
shareholder wealth, the company should accept projects with returns
greater than what percent?
The measurement of the benefit lost by using resources for one purpose
and not another is
Which of the following statements is correct regarding the weighted-
average cost of capital (WACC)?
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?
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?
Which of the following is assigned to goods that were either purchased
or manufactured for resale?
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?
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?
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?
Which one of the following costs, if any, is relevant in making financial
decisions?
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.)
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?
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?
Which of the following statements is true regarding opportunity cost?
For the year ended December 31, 2004, Abel Co. incurred direct costs of
$500,000 based on a particular course of action during the year. If a
different course of action had been taken, direct costs would have been

$400,000. In addition, Abel's 2004 fixed costs were $90,000. The
incremental cost was
Pole Co. is investing in a machine with a 3-year life. The machine is
expected to reduce annual cash operating costs by $30,000 in each of the
first 2 years and by $20,000 in year 3. Present values of an annuity of $1
at 14% are:Using a 14% cost of capital, what is the present value of
these future savings?
Which one of the following kinds of tables most likely would be used to
determine the current worth of five equal amounts to be received at the
end of each of the next five years.
Which of the following changes would result in the highest present
value?
On August 31, 2004, Ashe Corp. adopted a plan to accumulate
$1,000,000 by September 1, 2008. Ashe plans to make four equal annual
deposits to a fund that will earn interest at 10% compounded annually.
Ashe will make the first deposit on September 1, 2004. Future value and
future amount factors are as follows: Which one of the following would
be the amount of annual deposits Ashe should make (rounded)?
Which one of the following sets of interest (or discount) rates will give
the greater present value of $1.00 and greater future value of $1.00?
On November 1, 2005, a company purchased a new machine that it does
not have to pay for until November 1, 2007. The total payment on
November 1, 2007 will include both principal and interest. Assuming
interest at a 10% rate, the cost of the machine would be the total
payment multiplied by what time value of money concept?
A corporation obtains a loan of $200,000 at an annual rate of 12%. The
corporation must keep a compensating balance of 20% of any amount
borrowed on deposit at the bank, but it normally does not have a cash
balance account with the bank. What is the effective cost of the loan?
A company has an outstanding one-year bank loan of $500,000 at a
stated interest rate of 8%. The company is required to maintain a 20%
compensating balance in its checking account. The company would
maintain a zero balance in this account if the requirement did not exist.
What is the effective interest rate of the loan?

Josey maintained a $10,000 balance in his savings account throughout
2008, the first year of the account. The savings account paid 2% interest
compounded annually. For 2008, the inflation rate was 3%. For 2008,
what is Josey's real interest rate on the savings account?
Which one of the following is interest earned on both an initial principal
and the unpaid accrued interest that accumulated on that principal from
prior periods?
Beta Company has arranged to borrow $10,000 for 180 days. Beta will
repay the principal amount plus $600 in interest at the maturity of the
note.Which one of the following is the annual percentage rate (APR) of
interest that Beta is paying on the loan?
Which one of the following is the annual rate of interest applicable when
not taking trade credit terms of "2/10, net 30?"
The following information is available on market interest rates: What is
the market rate of interest on a one-year U.S. Treasury bill?
Which one of the following U.S. GAAP approaches to determining fair
value converts future amounts to current amounts?
Which of the following U.S. GAAP levels of inputs for valuation
purposes is/are based on observable inputs?
Conceptually, which one of the following U.S. GAAP approaches for
determining value is most likely to provide the best evidence of fair
value?
Which of the following characteristics, if any, should be taken into
account in valuing a specific item?
Under U.S. GAAP requirements, valuation may be based on an
Which of the following level(s) of input in the U.S. GAAP hierarchy of
inputs for fair value determination is/are likely to be most appropriate
for valuing basic agricultural commodities?
Assuming they are traded in an active market, which of the following
types of investments, if any, could be valued using level 1 inputs of the
U.S. GAAP hierarchy of inputs for determining fair value?
Quoted prices in which of the following types of markets could be level
2 inputs in determining fair value under the U.S. GAAP hierarchy of
inputs for fair value determination?

Which of the following levels of the U.S. GAAP hierarchy of inputs
used for determining fair value can be based on inputs not directly
observable for the item being valued?
Which of the following types of active markets, if any, would be
considered as providing level 1 inputs under the U.S. GAAP hierarchy
of inputs for fair value determination?
Which one of the following beta values indicates the least volatility?
Which one of the following is not a limitation of the capital asset pricing
model?
Assume the following rates exist in the U.S.: Prime interest rate =
6%
Fed discount rate = 4% U.S. Treasury Bond rate = 2% Inflation rate
= 1% which one of the following is most likely the nominal risk-free
rate of return in the U.S.?
Assume the following values for an investment: Risk-free rate of return
= 2% Expected rate of return = 9% Beta = 1.4 which one of the
following is the required rate of return for the investment?
Which one of the following is not an element in the capital asset pricing
model formula?
A graph that plots beta would show the relationship between
Which one of the following is not a factor routinely considered in
valuing a stock option?
Charles Allen was granted options to buy 100 shares of Dean Company
stock. The options expire in one year and have an exercise price of
$60.00 per share. An analysis determines that the stock has an 80%
probability of selling for $72.50 at the end of the one-year option period
and a 20% probability of selling for $65.00 at the end of the year. Dean
Company's cost of funds is 10%. Which one of the following is most
likely the current value of the 100 stock options?
Which one of the following is not a limitation of the basic Black-Scholes
option pricing model?
Which one of the following characteristics is not an advantage of the
Black-Scholes option pricing model?
Which one of the following options, A through D, is most likely to have
the greatest value (all other things being equal)?

Assume the following abbreviated Income Statement: In a common-size
income statement, which one of the following percentages would be
shown for Finance Expense?
Which one of the following approaches to valuing a business is most
likely to be appropriate when the business has been losing money and is
going to be sold in a distressed sale?
Which one of the following is least likely to be the reason an entity
would seek a valuation of the entity as a going concern?
Assume the following abbreviated Balance Sheet: In a common-sized
balance sheet, which one of the following percentages would be shown
for current liabilities?
A business with a net book value of $150,000 has an appropriate fair
value of $120,000.Charles Harvey, one of three owners, has decided to
sell his 10% interest in the business. Which one of the following is most
likely the amount at which Harvey can sell his interest?
Which one of the following is not a major approach for assigning a value
to an entire going business?
Which one of the following shows the basic approach used to capitalize
earnings to determine the value of a business?
Common-size financial statements are useful in making comparisons
Which of the following statements, if any, concerning the valuation of
business enterprises is/are correct? I. Nonpublic entities are likely to be
more difficult to value than publicly traded entities. II. The conditions in
the macroeconomic environment should be considered in valuing an
entity. III. The status of the industry in which a business operates should
be considered in valuing the entity.
The P/E ratio for a share of common stock is computed as:
Which one of the following is not an income approach to the valuation
of a business?
The land and building that constitute a strip shopping mall were valued
using the recent sales price of a comparable strip shopping mall located
across the street. The method of valuation would be an example of the
Which one of the following is not a qualitative forecasting method?
Business forecasting can use

Which one of the following sets shows each type of business forecasting
in the correct method classification?
Which one of the following sets best reflects the relationship between
the method of forecasting and the nature of forecasting?
Which one of the following forecasting methods is based on
extrapolation of past data?
Which one of the following sets shows the most likely method
appropriate for short-term and long-term forecasting?
Which one of the following statements describes a difference between
the simple moving average and the weighted moving average times
series models for forecasting?
Each month Fuco, Inc. forecasts its next three months sales using the
average of its actual sales for the most recent 12 months. Which one of
the following times series models is Fuco using to forecast sales?
Which one of the following would be a time series model for forecasting
that reduces random fluctuations in data?
Data patterns that reflect an upward movement over a long period of
time would describe which one of the following patterns?
Which one of the following is not a causal model approach to
forecasting?
Which one of the following is not a time series pattern?
Which one of the following identifies the rate of return required by
investors to compensate them for deferring current consumption when
making an investment?
A graph of the relationship between financial risk and expected financial
reward would show a curve that has a:
The presence of risk for a portfolio of projects means:
Which one of the following risks is least likely to be mitigated by project
diversification?
As the perceived risk of an undertaking increases, what would be the
expected effect on the risk-free rate of return and the risk premium rate
of return?
A project has an initial outlay of $1,000. The projected cash inflows
earned evenly over each year are: Year 1 $200 Year 2 200 Year
3 400 Year 4 400 what is the investment's payback period?

Which one of the following is not a technique or approach for evaluating
capital budgeting opportunities?
Major Corp. is considering the purchase of a new machine for $5,000
that will have an estimated useful life of five years and no salvage value.
The machine will increase Major's after-tax cash flow by $2,000
annually for five years. Major uses the straight-line method of
depreciation and has an incremental borrowing rate of 10%. The present
value factors for 10% are as follows: Ordinary annuity with five
payments 3.79 Annuity due for five payments 4.17 using the
payback method, how many years will it take to pay back Major's initial
investment in the machine?
Eval Co. is evaluating a major capital project to determine its economic
feasibility. The following data have been accumulated:
Eval Co. uses straight-line depreciation for capital investments of this
type.Excerpts from present value tables showed the following: Using the
information above, which one of the following is the payback period in
years for this project? (Ignore income tax.)
Which one of the following is a strength of the payback method of
evaluating an investment project?
A company invested in a new machine that will generate revenues of
$35,000 annually for seven years. The company will have annual
operating expenses of $7,000 on the new machine. Depreciation
expense, included in the operating expenses, is $4,000 per year. The
expected payback period for the new machine is 5.2 years. What amount
did the company pay for the new machine?
Which one of the following approaches to capital project evaluation is
primarily concerned with the relative economic ranking of projects?
Capital budgeting is concerned with capital investments that have which
one of the following characteristics?
Which of the following statements is correct regarding the payback
method as a capital budgeting technique?
The discounted payback period approach to project evaluation is better
than the payback period approach because I. It considers the time value
of money. II. It is useful in evaluating the liquidity of a project. III. It
uses expected cash flows.

A company purchases an item for $43,000. The salvage value of the
item is $3,000. The cost of capital is 8%. Pertinent information related to
this purchase is as follows: What is the discounted payback period in
years?
Which of the following statements concerning the discounted payback
period method of evaluating capital projects is/are correct? I. It is useful
in evaluating the liquidity of a project.II. It measures total project
profitability.III. It results in a longer computed payback period than does
the undiscounted payback period method.
Which one of the following is the capital budgeting evaluation approach
that determines the number of periods required for the discounted cash
inflows of a project to equal the discounted cash outflows?
Which of the following statements concerning the discounted payback
period approach to project evaluation is/are correct? I. It takes into
account cash flows received over the entire life of the project. II. Any
project economically acceptable under the payback period approach will
be acceptable under the discounted payback period approach. III. Any
project economically acceptable under the discounted payback period
approach will be acceptable under the payback period approach.
Which one of the following methods of evaluating potential capital
projects would take into account depreciation expense that was non-
deductible for tax purposes?
Which of the following statements concerning the accounting rate of
return approach to evaluating capital projects is/are correct? I. It
considers the entire life of a project. II. It considers the time value of
money. III. It assumes that the incremental net income is the same each
year.
Lin Co. is buying machinery it expects will increase average annual
operating income by $40,000. The initial increase in the required
investment is $60,000, and the average increase in required investment
is $30,000. To compute the accrual accounting rate of return, what
amount should be used as the numerator in the ratio?
Phillips Company is considering the acquisition of a new machine that
would cost $66,000, has an expected life of 6 years, and an expected
salvage value of $16,000. The company expects the machine to provide

annual incremental income before taxes of $7,200. Phillips has a tax rate
of 30%. If Phillips uses average values in its calculations, which one of
the following will be the average accounting rate of return on the
machine?
Tam Co. is negotiating for the purchase of equipment that would cost
$100,000, with the expectation that $20,000 per year could be saved in
after-tax cash costs if the equipment is acquired. The equipment's
estimated useful life is 10 years, with no residual value, and it would be
depreciated by the straight-line method. Tam's predetermined minimum
desired rate of return is 12%. Present value of an annuity of 1 at 12% for
10 periods is 5.65. Present value of 1 due in 10 periods at 12% is
.322.Accrual accounting rate of return based on initial investment is
Given a 10% discount rate with cash inflows of $3,000 at the end of
each year for five years and an initial investment of $11,000, what is the
net present value?
A company is considering two projects, which have the following
details: Which project would provide the largest after-tax cash inflow?
Net present value as used in investment decision-making is stated in
terms of which of the following options?
Which of the following is an advantage of net present value modeling?
A corporation is considering purchasing a machine that costs $100,000
and has a $20,000 salvage value. The machine will provide net annual
cash inflows of $25,000 per year and has a six-year life. The corporation
uses a discount rate of 10%. The discount factor for the present value of
a single sum six years in the future is 0.564. The discount factor for the
present value of an annuity for six years is 4.355. What is the net present
value of the machine?
Salem Co. is considering a project that yields annual net cash inflows of
$420,000 for years 1 through 5, and net cash inflow of $100,000 in year
6. The project will require an initial investment of $1,800,000. Salem's
cost of capital is 10%. Present value information is present below: What
was Salem's expected net present value for this project?
Yarrow Co. is considering the purchase of a new machine that costs
$450,000. The new machine will generate net cash flow of $150,000 per
year and net income of $100,000 per year for five years. Yarrow's

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