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CPA Exam Review Business Environment and Concepts (BEC) (1).
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- CISA: Domain #2, Part A: IT Governance
CPA Exam Review Business Environment and Concepts (BEC) (1).
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CPA Exam Review Business Environment andConcepts (BEC)
What is the backup facility that can be up and running at a short notice called?
A. VAN.
B. Remote site.
C. Cold site.
D. Hot site. - ANS-D.
A hot site is a backup facility that can be up and running at a short notice. A cold site is a
backup facility that can be up and running at a considerable effort. VAN stands for Value Added
Network and is not a backup facility. Remote site is not specific about the speed of availability.
The application processing phase where the master file is updated is called:
A. audit trail.
B. edit routine.
C. data capture.
D. master file maintenance. - ANS-D.
Master file maintenance involves updating the master file with new transaction(s). Data capture
is the phase where data is recorded. Edit routine is validation of (previously) input data. Audit
trail is an authentication control to verify integrity of transactions.
Which of the following factors would cause the demand curve for a given product to increase
(shift to the right)?
A. Changes in the price of the given product.
B. Decrease in consumer income.
C. Increase in the price of a substitute product.
D. Increase in the price of a complimentary product. - ANS-C.
An increase in the price of a substitute product would cause the demand curve for a given
product to increase (shift to the right).
The purpose of a flexible budget is to:
A. reduce the total time in preparing the annual budget.
B. compare actual and budgeted results at virtually any level of production.
, C. eliminate cyclical fluctuations in production reports by ignoring variable costs.
D. allow management some latitude in meeting goals. - ANS-B.
This is the definition of a flexible budget. Compared to a static budget, which shows only one
level of production, the flexible budget shows budgeted costs and revenues for any level of
production. As levels of production change, the costs and revenues will change as well. The
flexible budget provides that information. Variance analysis is made more meaningful with
flexible budgets.
Spoilage occurring during a manufacturing process can be considered normal or abnormal. The
proper accounting for each of these costs is:
Normal Abnormal
A. Product Period
B. Product Product
C. Period Product
D. Period Period - ANS-A.
Normal spoilage is product deterioration expected to occur, especially in manufacturing, even
under the best of conditions. Abnormal spoilage is spoilage beyond the normal spoilage rate.
Normal spoilage is a product cost while abnormal spoilage is a period cost. The cost of normal
spoilage is "absorbed" by the surviving units while the abnormal spoilage loss is recognized
immediately; that is, in the current period.
The Public Company Accounting Oversight Board (PCAOB) was created by which of the
following?
A. Securities and Exchange Commission.
B. Sarbanes-Oxley Act of 2002.
C. Financial Accounting Standards Board.
D. Institute of Certified Public Accountants. - ANS-B.
The Sarbanes-Oxley Act of 2002 created the PCAOB.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) internal
control framework consists of five interrelated components including control activities. Which of
the following is NOT an example of a control activity?
A. Risk assessment.
B. Segregation of duties.
C. Security of assets.
D. Performance reviews - ANS-A.
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