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BEC – CPA Exam Questions & Answers 2023/2024
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BEC – CPA Exam Questions & Answers 2023/2024 COSO - ANSWER-committee of sponsoring organizations (COSO) - an independent private sector initiative, established in mid-1980s to study the factors that lead to fraudulent financial reporting includes: - American Accounting Association (AAA) -...

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  • June 28, 2023
  • 84
  • 2022/2023
  • Exam (elaborations)
  • Questions & answers

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  • bec cpa

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BEC – CPA Exam Questions & Answers
2023/2024
COSO - ANSWER-committee of sponsoring organizations (COSO) - an independent private sector
initiative, established in mid-1980s to study the factors that lead to fraudulent financial reporting



includes:

- American Accounting Association (AAA)

- American Institute of Certified Public Accountants (AICPA)

- Financial Executives Institute (FEI)

- Institute of Internal Auditors (IIA)

- Institute of Management Accountants (IMA)



internal control - integrated framework - ANSWER-- issued by COSO in 1992 to assist organizations in
developing comprehensive assessments of internal control effectiveness

- updated in 2013, which formalized the fundamental concepts that were part of the original 1992
framework

- made up of 17 principles

- widely regarded as 'an appropriate and comprehensive basis to document the assessment of internal
controls over financial reporting'



effective system of internal control - ANSWER-- requires more than adherence to policies and procedures
by management, the board of directors, and the internal auditors

- requires the use of judgment in determining the sufficiency of controls, in applying the proper controls,
and in assessing the effectiveness of the system of internal controls

- principal-based approach

- all 5 components and 17 principles must be present and functioning (i.e., designed and implemented;
operating as designed)

- all 5 components operate as an integrated system

- if not effective, then there is a *major deficiency*

,definition of internal control - ANSWER-a process that is designed and implemented by an organization's
management, board of directors, and other employees to provide reasonable assurance that the
organization will achieve its operating, reporting and compliance objectives



COSO cube - ANSWER-depicts the relationship between:

- an entity's objectives (operations, reporting, and compliance); shown as columns

- integrated internal control components (CRIME); shown as rows

- organizational structure (entity level, division, operating units, and function); shown as a third
dimension



framework objectives - ANSWER-ORC



1. operations - effectiveness and efficiency of an entity's operations; ensures assets are adequately
safeguarded against potential losses

2. reporting - reliability, timeliness, and transparency of an entity's external and internal financial and
nonfinancial reporting

3. compliance - ensure the entity is adhering to all applicable laws and regulations



components of internal control - ANSWER-CRIME



1. control environment

2. risk assessment

3. information and communication

4. monitoring

5. (existing) control activities



*applies to all 3 'ORC' objectives



control environment - ANSWER-EBOCA

,1. commitment to ethics and integrity

2. board independence and oversight

3. organizational structure

4. commitment to competence

5. accountability



risk assessment - ANSWER-SAFR



1. specify objectives

2. identify and analyse risks

3. consider potential fraud

4. identify and assess changes



information and communication - ANSWER-OIE



1. obtain and use information

2. internally communicate information

3. communicate with external parties



monitoring activities - ANSWER-SO D



1. ongoing and/or separate evaluations

2. communication of deficiencies



(existing) control activities - ANSWER-CATP



1. select and develop control activities

2. select and develop technology controls

3. deployment of policies and procedures

, internal control (framework) limitations - ANSWER-- breakdowns in internal control due to error or
human failure

- faulty or biased judgment used in decision making

- issues relating to suitability of the entity's objectives

- external events beyond the control of the entity

- circumvention of controls through collusion

- management override of internal controls



COSO framework document - ANSWER-COPS



1. component evaluation

2. overall assessment

3. principal evaluation

4. summary of internal control deficiencies



enterprise risk management - ANSWER-ERM



issued by COSO in 2004 to assist organizations in developing a comprehensive response to risk
management



defined as: the culture, capabilities, and practices, integrated with strategy-setting and performance,
that organizations rely on to manage risk in creating, preserving, and realizing value



risk definition - ANSWER-the possibility that events will occur and affect the achievement of strategy and
business objectives



value - ANSWER-- the underlying premise of ERM is that all entities face risk in the pursuit of value for
their stakeholders

- management's decisions will impact its creation, preservation, erosion, and realization (CPER)

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