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BEC CPA Exam Notes Questions & Answers 2023/2024
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BEC CPA Exam Notes Questions & Answers 2023/2024 SU 1 (18% of test) - ANSWER-Corporate Governance Basic Corporate Documents - ANSWER-Articles of Incorporation: Corp's name, # Share authorized, Address of Registered Office, Name of Registered Agent, Name and Address of each incorporator Filed...

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  • June 28, 2023
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  • 2022/2023
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BEC CPA Exam Notes Questions &
Answers 2023/2024
SU 1 (18% of test) - ANSWER-Corporate Governance



Basic Corporate Documents - ANSWER-Articles of Incorporation: Corp's name, # Share authorized,
Address of Registered Office, Name of Registered Agent, Name and Address of each incorporator

Filed with secretary of state

Articles of Incorporation are general.

Bylaws: contain information about managing affairs of corporation. Bylaws are detailed.



Common and Preferred Shareholders - ANSWER-Common have contributed basic capital for the
corporation to carry on business. Preferred have a contractual right to dividends and liquidation rights
before common shareholders.



Board of Directors - ANSWER-Board acts on behalf of S/H. Major decisions made by board. Board selects
officers. Board declares dividends. Directors owe a fiduciary duty to corporation.



Business Judgment Rule - ANSWER-Protects and officer or director from honest mistakes of judgment.



Corporate Opportunity - ANSWER-Director must give corporation first right of refusal.



SOX Reporting - ANSWER-Targets officers, BOD, and Public Auditors

It is applicable to issuers. Each member of audit committee must be an independent member of BOD
(cannot receive compensation from corp.) One must be a financial expert.

Audit Committee reports to BOD not management. PCAOB regulates accounting profession.



Sec 302 of SOX - ANSWER-CEO and CFO certify financial statements free from material misstatements,
responsible for system of internal controls, and informed audit committee of any deficiencies. Also
report any fraud whether or not material.

,Sec 404 of SOX - ANSWER-Name internal control model must be named and management has taken
responsibility for establishing system of internal controls.



Sec 802, 906, 1103, 1107 - ANSWER-802: Criminal Penalties for destroying documents

906: Fines and Jail Time for certifying noncomplying filings

1107: Jail time for retaliation against informants



COSO Model of Internal Control - ANSWER-Widely recognized as standard for internal control system.



3 Objectives of Control - ANSWER-Operations, Reporting, Compliance (ORC)

Operations include the safeguarding of an entity's assets. Reporting relates to information needed by
users to make sounds financial decisions. Compliance deals with rules and regulations that should be
complied with.

Internal Control does not provide absolute assurance.

Breakdowns: employee carelessness, management overwrite, collusion



Components of Internal Control - ANSWER-CRIME

Control Environment, Risk Assessment, Control Activities, Information and Communication, Monitoring



Control Environment - ANSWER-5 Principles: 1.) Integrity and Ethical Values (Tone at the Top) 2.)
Oversight by Board 3.) Reporting lines and structure 4.) Retain competent individuals 5.) Hold individuals
accountable



Risk Assessment - ANSWER-Specifies objective with clarity to enable the identification and assessment of
risks.

Identifies and analyzes risks.

Considers potential for fraud.

Identifies changes that could affect internal control.

Management's responsibility to assess risk.

, Control Activities - ANSWER-Helps ensure that management directives are carried out. These are
preventive or detective.



Information and Communication - ANSWER-Enable organization to maintain accountability and measure
and review performance. The organization internally communicates information .



Monitoring - ANSWER-Must continuously evaluate the controls.



Entity's Organizational Structure as part of Internal Control - ANSWER-Entity Level, Division Level,
Operating Unit, Function --> Top Down approach.



Coso's Framework for Managing Risk - ERM Coso Model - ANSWER-Framework created to help entities
manage risks that adversely affect the achievement of entity objectives.



SU 2, 3 and 4 (18%) - ANSWER-Economics



SU 2 - ANSWER-Microeconomics



Movement along demand and supply curve - ANSWER-Demand: Increase in price is a decrease in the
quantity demanded. Decrease in price is an increase in the quantity demanded. Any factor other than
price changes demand curve (shifting curve to left or right).



Supply: Increase in price is an increase in the quantity supplied. Decrease in price is a decrease in the
quantity supplied. Any other factor is a shift in the supply curve.



Inferior versus Normal Goods - ANSWER-Normal goods are positively related to income. Demand shifts
to the right as income rises. Inferior goods are negatively related to income (as income rises demand
decreases).



Substitutes versus Compliment Goods - ANSWER-Substitute Goods: If a price increase in one product
results in an increase in the demand for another product it is a substitute.

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