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NEW QUESTION # 156
An internal auditor considers the financial statement of an organization as part of a financial assurance engagement. The auditor expresses the organization's electricity and depreciation expenses as a percentage of revenue to be 10% and 7% respectively. Which of the following techniques was used by the internal auditor In this calculation?
- A. Horizontal analysis
- B. Vertical analysis
- C. Trend analysis
- D. Ratio analysis
Answer: B
NEW QUESTION # 157
Which of the following biometric access controls uses the most unique human recognition characteristic?
- A. Retinal print comparison.
- B. Facial comparison using photo identification.
- C. Voice comparison.
- D. Signature comparison.
Answer: A
NEW QUESTION # 158
A clothing company sells shirts for $8 per shirt. In order to break even, the company must sell 25.000 shirts. Actual sales total S300.000. What is margin of safety sales for the company?
- A. $100.000
- B. $500,000
- C. $200,000
- D. $275,000
Answer: A
NEW QUESTION # 159
What are the objectives of governance as defined by the Standards?
- A. Organize, assign, authorize, and implement.
- B. Add value, improve, assure, and conform.
- C. Inform, direct, manage, and monitor.
- D. Identify, assess, manage, and control.
Answer: C
NEW QUESTION # 160
Companies that adapt just-in-time purchasing systems often experience
- A. Less need for linkage with a vendor's computerized order entry system.
- B. An increase in carrying costs.
- C. A reduction in the number of suppliers.
- D. A greater need for inspection of goods as the goods arrive.
Answer: C
Explanation:
The objective of JIT is to reduce carrying costs by eliminating inventories and increasing the deliveries made by suppliers. Ideally, shipments of raw materials are received just in time to be incorporated into the manufacturing process. The focus of quality control under JIT is the prevention of quality problems. Quality' control is shifted to the supplier. JIT companies typically do not inspect incoming goods; the assumption is that receipts are of perfect quality. Suppliers are limited to those who guarantee perfect quality and prompt delivery.
NEW QUESTION # 161
Which of the following statements is not true regarding ISO 9000 standards?
- A. The ISO 9000 standards are revised every 5 years to account for technical and market developments.
- B. Compliance with the standards is voluntary.
- C. The objective of ISO 9000 standards is to ensure high quality products and services.
- D. ISO 9000 is a set of generic standards for establishing and maintaining a quality system within an entity.
Answer: C
Explanation:
The objective of ISO 9000 standards is to ensure consistent quality even if the quality is poor. The market determines the quality of the result.
NEW QUESTION # 162
Price skimming involves:
- A. Setting different freight charges for customers in different zones.
- B. Using markups tied closely to the price paid for a product.
- C. Setting a low introductory price.
- D. Setting a high introductory price.
Answer: D
Explanation:
Price skimming is used when a new product is introduced at the highest price possible given the benefits of the product. For market skimming to work, the product must appear to be worth its price, the costs of producing a small volume cannot be so high that they eliminate the advantage of charging more, and competitors cannot enter the market and undercut the price.
NEW QUESTION # 163
Which of the following statements is the best description of reversing entries?
- A. Reversing entries are identical to the adjusting entries made in the previous period.
- B. Reversing entries are the exact opposite of the adjustments made in the previous period.
- C. Reversing entries are made at the end of the next accounting period, after recording
regular transactions of the period. - D. The recording of reversing entries is a mandatory step in the accounting cycle.
Answer: B
Explanation:
Reversing entries are made at the beginning of a period to reverse the effects of adjusting entries made at the end of the preceding period. They are optional entries made for the sake of convenience in recording the transactions of the period. In order for reversing entries to reverse the prior adjustments, they must be the exact opposite of the adjustments made in the previous period.
NEW QUESTION # 164
Which of the following is an economic rationale for government intervention in trade?
- A. Protecting infant industries.
- B. Preserving national identity.
- C. Dealing with friendly countries.
- D. Maintaining spheres of influence.
Answer: A
Explanation:
The infant-industry argument contends that protective tariffs are needed to allow new domestic industries to become established. Once such industries reach a maturity stage in their life cycles, the tariffs can supp: - dry be removed.
NEW QUESTION # 165
Which new issues, associated with rapidly advancing computer technology, create new risk exposures for organizations?
- A. Controls over library tape procedures.
- B. Changes in organizational behavior.
- C. Complexity of operating systems and controls over privacy of data.
- D. Changes in organizational reporting requirements and controls over computer abuse.
Answer: C
Explanation:
Advancing computer technology presents more complex audit environments. With the advent of systems that permit remote access, the risk that unauthorized parties may obtain or tamper with important information is increased.
NEW QUESTION # 166
Auditors often make use of computer programs that perform routine processing functions, such as sorting and merging. These programs are made available by computer companies and others and are specifically referred to:
- A. Compiler programs.
- B. Utility programs.
- C. User programs.
- D. Supervisory programs.
Answer: B
Explanation:
Utility programs are provided by manufacturers of equipment to perform routine processing tasks required by both clients and auditors, such as extracting data, sorting, merging, and copying. Utility programs are pretested, are independent of the client's own programming efforts, and furnish useful information without the trouble of writing special programs for the engagement.
NEW QUESTION # 167
An assembly plant accumulates its variable and fixed manufacturing overhead costs in a
single cost pool, which is then applied to work in process using a single application base.
The assembly plant management wants to estimate the magnitude of the total manufacturing overhead costs for different volume levels of the application activity base using a flexible budget formula. If there is an increase in the application activity base that is within the relevant range of activity for the assembly plant, which one of the following relationships regarding variable and is true?
- A. The variable cost per unit is constant, and the total fixed costs decrease.
- B. The variable cost per unit increases and the total fixed costs remain constant.
- C. The variable cost per unit and the total fixed costs remain constant.
- D. The variable cost per unit is constant, and the total fixed costs increase.
Answer: C
Explanation:
Total variable cost changes when changes in the activity occur within the relevant range. The cost per unit for a variable cost is constant for all activity levels within the relevant range. Thus, if the activity volume increases within the relevant range, total variable costs will increase. A fixed cost does not change when volume changes occur in the activity level within the relevant range. If the activity volume increases within the relevant range, total fixed costs will remain unchanged.
NEW QUESTION # 168
A bank has changed from a system in which lines are formed in front of each teller to a one-line, multiple-server system. When a teller is free, the person at the head of the line goes to that teller. Implementing the new system will:
- A. Increase accuracy in teller reconciliations at the end of the day because fewer customers are served by each teller.
- B. Decrease the bank's wage expenses because the new system uses fewer tellers.
- C. Decrease time customers spend in the line.
- D. Improve on-the-job training for tellers because each will perform different duties.
Answer: C
Explanation:
When all customers must wait in a single queue, a decrease in waiting time is possible given multiple servers. An added effect is to increase customer satisfaction.
NEW QUESTION # 169
All of the following are objectives of pricing except:
- A. Image-oriented objectives.
- B. Stabilization.
- C. Profit maximization.
- D. Production maximization.
Answer: D
Explanation:
Pricing objectives may include maximization of profit and market share, price stabilization, and image enhancement. However, production maximization is not a pricing objective. It is more likely to be directed toward achieving economies of scale and resulting unit-cost reductions.
NEW QUESTION # 170
A bank has two drive-in lanes to serve customers:
The technique used in analyzing the problem is best described as:
- A. Simulation theory.
- B. Differential calculus.
- C. Integrated autoregressive-moving average (ARIMA) modeling.
- D. Linear programming.
Answer: A
Explanation:
Answer (A) is correct. Simulation is a technique for experimenting with logical/mathematical models using a computer. Despite the power of mathematics, many problems cannot be solved by known analytical methods because of the behavior of the variables and the complexity of their interactions. However, the performance of a quantitative model under uncertainty may be investigated by randomly selecting values for each of the variables in the model (based on the probability distribution of each variable) and then calculating the value of the solution. If this process is performed a large number of times, the distribution of results from the model will be obtained.
NEW QUESTION # 171
Futures and option contracts are examples of what type of financial instruments?
- A. Non derivatives.
- B. Equity instruments.
- C. Derivatives.
- D. Underlying.
Answer: C
Explanation:
A derivative is a financial instrument whose value changes with the change in the underlying. It requires little or no investment and is settled in the future. Examples are futures. forward, swap, or option contracts. The underlying is a specified interest rate, security price. foreign currency exchange rate. price index, commodity price, etc.
NEW QUESTION # 172
An entity uses the following formula in determining its optimal level of cash.
This formula is a modification of the economic order quantity EOQ formula used for inventory management. Assume that the set of selling marketable securities is US $10 per transaction and the interest rate on marketable securities is 6% per year. The entity estimates that it will make cash payments of US $12.000 over a one-month period. What is the average cash balance rounded to the nearest dollar)?
- A. US $2,000
- B. US $6,928
- C. US $1,000
- D. US $3,464
Answer: D
Explanation:
The BOO for inventory is a function of ordering cost per order, inventory demand, and carrying cost. In the cash model, the fixed cost per sale of securities is equivalent to the ordering cost, the demand for cash is similar to the demand for inventory, and the interest rate is effectively the cost of carrying a dollar of cash for the period. Substituting in the formula yields an optimal cash balance of about US $6.928. Thus, the average cash balance is US $3,464 $6,928 - 2).
NEW QUESTION # 173
What coefficient of correlation results from the following data?
- A. Cannot be determined from the data given
- B. 0
- C. 1
- D. +1
Answer: B
Explanation:
The coefficient of correlation (in standard notation, r) measures the strength of the linear relationship. The magnitude of r is independent of the scales of measurement of x and y. Its range is -1 to +1. A value of -1 indicates a perfectly inverse linear relationship between x and y A value of zero indicates no linear relationship between x and y. A value of 1 indicates a perfectly direct relationship between x and y. As x increases by 1, y consistently decreases by 2. Hence, a perfectly inverse relationship exists, and r must be equal to-1.
Topic 8, Volume H
NEW QUESTION # 174
KW Ltd. leased equipment under a 4-year non cancelable lease properly classified as a finance learn. The lease does not transfer ownership or contain a bargain purchase option. The equipment had an estimated economic life of 5 years and an estimated residual value of US $20.000. Terms of the lease included a guarantees residual value of US $50,000. KW initially recorded the leased equipment at US $240,000 and its depreciation polity for owned assets is to use the straight-line method. Thus, the amount of depreciation that should be charged each year is:
- A. US $38,000
- B. US $55,000
- C. US $47,500
- D. US $44,000
Answer: C
Explanation:
Depreciation should be consistent with the accounting policy for owned assets. Absent a reasonable certainty that the lessee will own the asset at the end of the lease term, it should be fully depreciated over the shorter of the useful life or the lease term. The lease does not transfer ownership or contain a bargain purchase option. Accordingly, the period of amortization should be the lease term. In accordance with the straight-line method used by KW for owned assets, the depreciable base for this finance lease is equal to the US $240,000 initially recorded minus the US $50,000 guaranteed residual value allocated equally over the 4-year lease term. Consequently, annual depreciation expense is US $47,500 [($24,00,000 - $50,000) - 4 years]. On January 1 Plantation Partners is planning to enter as the lessee into the two lease agreements described in the opposite column. Each lease is noncancelable, and Plantation does not receive title to either leased property during or at the end of the lease term. All payments required under these agreements are due on January 1 each year.
NEW QUESTION # 175
In a process-costing system, the cost of abnormal spoilage should be:
- A. Ignored.
- B. Prorated between units transferred out and ending inventory
- C. Included in the cost of units transferred out.
- D. Treated as a loss in the period incurred.
Answer: D
Explanation:
Abnormal spoilage is spoilage that is not expected to occur under normal, efficient operating conditions. Because of its unusual nature, abnormal spoilage is typically treated as a loss in the period in which it is incurred. Believing that its traditional cost system may be providing misleading information, an organization is considering an activity-based costing ABC) approach. It now employs a full cost system and has been applying its manufacturing overhead on the basis of machine hours. The organization plans on using
50.000 direct labor hours and 30.000 machine hours in the coming year. The following data show the manufacturing overhead that is budgeted.
Cost, sales, and production data for one of the organization' s products for the coming year are as follows:
NEW QUESTION # 176
Which of the following is true regarding the COSO enterprise risk management framework?
- A. The framework categorizes an organization's objectives to distinct, non overlapping objectives.
- B. Control environment is one of the framework's eight components.
- C. The framework integrates with, but is not dependent upon, the corresponding internal control framework.
- D. The framework facilitates effective risk management, even if objectives have not been established.
Answer: C
NEW QUESTION # 177
Only two companies manufacture Product A. The finished product is identical regardless of which company manufactures it. The cost to manufacture Product A is US$1, and the selling price is US $2. One company considers reducing the price to achieve 100% market share but fears the other company will respond by further reducing the price. Such a scenario would involve a:
- A. Dual-win strategy.
- B. No-win strategy.
- C. One win-one lose strategy.
- D. Neutral strategy.
Answer: B
Explanation:
If both firms reduce the selling price of Product A, neither will gain sales and the resultant price war will cause both firms to earn lower profits. This outcome is inevitable when reduced profit margins do not result in a significant increase in sales. This is classified as a no-win strategy.
NEW QUESTION # 178
Which of the following best describes an objective for an audit of an environmental management system?
- A. To evaluate executive management oversight.
- B. To assess whether an annual control review is necessary.
- C. To determine conformance with requirements and agreements.
- D. To promote environmental awareness.
Answer: C
NEW QUESTION # 179
Which of the following application controls verifies the accuracy of transaction results in a system?
- A. Input controls
- B. Integrity controls
- C. Processing controls
- D. Output controls
Answer: A
NEW QUESTION # 180
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