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Wiley CPA Examination Review Outlines And Study Guides Volume 1 - 2012-2013 39th Edition Patrick R. Delaney, O. Ray Whittington - Solutions
A CPA who is not independent may perform which of the following services for a nonissuer company?Compilation Reviewa. Yes Yesb. Yes Noc. No Yesd. No No
If information is for management’s use only, which of the following forms of CPA association with financial information is most likely to result in no report being issued?a. An agreed-upon procedures engagement.b. An audit.c. A compilation.d. A review.
Which of the following is not typically performed when accountants are performing a review of the financial statements of a nonissuer?a. Analytical procedures applied to financial data.b. Inquiries about significant subsequent events.c. Inquiries of the client’s attorney about legal matters.d.
Which of the following is always present in an attestation engagement?a. Assertion about the subject matter.b. Generally accepted assurance principles.c. Subject matter.d. An examination report.
Confirmations of accounts receivable address which assertion most directly?a. Completeness.b. Existence.c. Valuation.d. Classification.
Which is least likely to be a response when an auditor has obtained evidence indicating a risk of material misstatement in the area of inventory?a. Discuss questions of inventory valuation with any other auditors involved with the audit.b. Make oral inquiries of major suppliers in addition to
Accounting control procedures within computer processing may leave no visible evidence indicating that the procedures were performed. In such instances, the auditor should test these controls bya. Making corroborative inquiries.b. Observing the separation of duties of personnel.c. Reviewing
Which of the following is not a covered member for purposes of application of the independence requirements of the AICPA Code of Professional Conduct?a. A staff person on the attest team.b. A staff person that performs tax services for the attest client.c. The partner in charge of the firm office
When an auditor reissues in 20X7 the auditor’s report on the 20X5 financial statements at the request of the client without revising the 20X5 wording, the auditor shoulda. Use the date of the original report.b. Use the date of the client’s request.c. Use the date of the current period report.d.
A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor’s report on the financial statements of the year of the change should includea. No reference to consistency.b. A reference to a prior
A note to the financial statements of the First Security Bank indicates that all of the records relating to the bank’s business operations are stored on magnetic disks, and that there are no emergency back-up systems or duplicate disks stored since the First Security Bank and their auditors
Burrow & Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years.Mare has been unable to pay Burrow in full for services Burrow rendered nineteen months ago. Burrow is ready to begin fieldwork for the current year’s audit. Under the ethical standards of
Which of the following statements concerning evidential matter is correct?a. Appropriate evidence supporting management’s assertions should be convincing rather than merely persuasive.b. Effective internal control contributes little to the reliability of the evidence created within the entity.c.
An auditor who uses the work of a specialist may refer to and identify the specialist in the auditor’s report if thea. Specialist is also considered to be a related party.b. Auditor indicates a division of responsibility related to the work of the specialist.c. Specialist’s work provides the
When auditing merchandise inventory at year-end, the auditor performs a purchase cutoff test to obtain evidence thata. All goods purchased before year-end are received before the physical inventory count.b. No goods held on consignment for customers are included in the inventory balance.c. No goods
An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use ofa. Tests of transactions and balances.b. A preliminary review of internal control.c.
Which of the following matters is an auditor required to communicate to an entity’s audit committee?Significant audit adjustments Changes in significant accounting policiesa. Yes Yesb. Yes Noc. No Yesd. No No
Which is least likely to be a question asked of client personnel during a walk-through in an audit of the internal control of an issuer (public) company?a. What do you do when you find an error?b. Who is most likely to commit fraud among your coworkers?c. What kind of errors have you found?d. Have
Which of the following statements best describes the ethical standard of the profession pertaining to advertising and solicitation?a. All forms of advertising and solicitation are prohibited.b. There are no prohibitions regarding the manner in which CPAs may solicit new business.c. A CPA may
Further audit procedures consist of which of the following?Risk assessment procedures Substantive procedures Test of controlsa. Yes No Nob. Yes Yes Noc. No Yes Nod. No Yes Yes
In obtaining an understanding of a manufacturing entity’s internal control over inventory balances, an auditor most likely woulda. Review the entity’s descriptions of inventory policies and procedures.b. Perform test counts of inventory during the entity’s physical count.c. Analyze inventory
The independent auditor selects several transactions in each functional area and traces them through the entire system, paying special attention to evidence about whether or not the controls are in operation. This is an example of a(n)a. Application test.b. Test of a controls.c. Substantive test.d.
The auditors of a nonissuer (nonpublic) company must perform a test of the operating effectiveness of a significant controla. In all audits.b. When the control relates to a significant asset.c. When substantive procedures alone will not provide sufficient evidence about the related assertion.d.
One reason that an auditor only obtains reasonable, and not absolute, assurance that financial statements are free from material misstatement isa. Comprehensive basis reporting.b. Employee collusion.c. Material misstatements.d. Professional skepticism.
Which of the following is correct concerning allowing additions and deletions to audit documentation after the documentation completion date under requirements of the Public Company Accounting Oversight Board?Additions Deletionsa. Allowed Allowedb. Allowed Not allowedc. Not allowed Allowedd. Not
Which of the following should an auditor obtain from the predecessor auditor prior to accepting an audit engagement?a. Analysis of balance sheet accounts.b. Analysis of income statement accounts.c. All matters of continuing accounting significance.d. Facts that might bear on the integrity of
The accountant who is not independent may perform which of the following types of engagements?a. Audit.b. Agreed-upon procedures.c. Compilation.d. Review.
Which of the following statements best describes the primary purpose of Statements on Auditing Standards?a. They are guides intended to set forth auditing procedures that are applicable to a variety of situations.b. They are procedural outlines that are intended to narrow the areas of inconsistency
Which of the following is ordinarily considered to be a fraud risk factor?a. The company’s financial statements include a number of last minute material adjustments.b. Management regularly informs investors of forecast information.c. The company has experienced increasing earnings over the
Following are the operating results of the two segments of Parklin Corporation:Segment A Segment B Total Sales 10, 000 15,000 25, 000 Va ri ab le co st of go od ss ol d4, 000 8, 500 12, 500 Fi xe dc os to fg oo ds so ld 1, 500 2, 500 4, 000 Gr os sm ar gi n4, 500 4, 000 8, 500 Va ri ab le se ll in
Mili Co. plans to discontinue a division with a $20,000 contribution margin. Overhead allocated to the division is 50, 000, o fw hi ch 5,000 cannot be eliminated. The effect of this discontinuance on Mili’s pretax income would be an increase ofa. $ 5,000b. $20,000c. $25,000d. $30,000
For the year ended December 31, 2012, Abel Co. incurred direct costs of 500, 000 ba se do na pa rt ic ul ar co ur se of ac ti on du ri ng th ey ea r.I fa di ff er en tc ou rs eo fa ct io nh ad be en ta ke n, d ir ec tc os ts wo ul dh av eb ee n400,000. In addition, Abel’s 2012 fixed costs were
Clay Co. has considerable excess manufacturing capacity.A special job order’s cost sheet includes the following applied manufacturing overhead costs:Fixed costs 21, 000 Va ri ab le co st s33, 000 Th ef ix ed co st si nc lu de an or ma l3,700 allocation for inhouse design costs, although no
Which of the following statements regarding transfer pricing is false?a. When idle capacity exists, there is no opportunity cost to producing intermediate products for another division.b. Market-based transfer prices should be reduced by any costs avoided by selling internally rather than
Systematic evaluation of the trade-offs between product functionality and product cost while still satisfying customer needs is the definition ofa. Activity-based management.b. Theory of constraints.c. Total quality management.d. Value engineering.
The management of James Corporation has decided to implement a transfer pricing system. James’ MIS department is currently negotiating a transfer price for its services with the four producing divisions of the company as well as the marketing department. Charges will be assessed based on number
Ajax Division of Carlyle Corporation produces electric motors, 20% of which are sold to Bradley Division of Carlyle and the remainder to outside customers. Carlyle treats its divisions as profit centers and allows division managers to choose their sources of sale and supply. Corporate policy
The budget for Klunker Auto Repair Shop for the year is as follows:Direct labor per hour $ 30 Total labor hours 10,000 Overhead costs:Materials handling and storage 10, 000 Ot he r(r en t, u ti li ti es, d ep re ci at io n, i ns ur an ce)120,000 Direct materials cost 500, 000 Kl un ke ra ll oc at
Vince, Inc. has developed and patented a new laser disc reading device that will be marketed internationally. Which of the following factors should Vince consider in pricing the device?I. Quality of the new device.II. Life of the new device.III. Customers’ relative preference for quality compared
Briar Co. signed a government construction contract providing for a formula price of actual cost plus 10%. In addition, Briar was to receive one-half of any savings resulting from the formula price being less than the target price of $2,200,000. Briar’s actual costs incurred were$1,920,000. How
Based on potential sales of 500 units per year, a new product has estimated traceable costs of $990,000. What is the target price to obtain a 15% profit margin on sales?a. $2,329b. $2,277c. $1,980d. $1,935
Cuff Caterers quotes a price of $60 per person for a dinner party. This price includes the 6% sales tax and the 15% service charge. Sales tax is computed on the food plus the service charge. The service charge is computed on the food only. At what amount does Cuff price the food?a. $56.40b.
A technique that is often used in project management to identify tasks where attention should be focused because they are the most critical is referred to asa. ABC Analysis.b. Milestone analysis.c. Work breakdown analysis.d. Tasking.K. Product and Service Pricing
When a project can be completed in a number of completely different ways that might involve branching after performing activities, the best schedule and control technique would bea. Program Evaluation and Review Technique.b. Gant chart.c. Critical Path Method.d. Graphical Evaluation and Review
Which of the following is used to describe the practice of adding resources to shorten selected activity time on the critical path of a project?a. Making adjustments.b. Project crashing.c. Slack time.d. Reengineering.
Which of the following is a detailed listing of the manhour, equipment, and materials requirements for a project?a. Statement of work.b. Work breakdown structure.c. Project specifications.d. Milestone schedule.
Which of the following involves comparing measures of actual progress of a project to planned progress?a. Project planning.b. Project scheduling.c. Project control.d. Project closure.
Lanta Restaurant compares monthly operating results with a static budget. When actual sales are less than budget, would Lanta usually report favorable variances on variable food costs and fixed supervisory salaries?Variable food costs Fixed supervisory salariesa. Yes Yesb. Yes Noc. No Yesd. No No
The budgeted total variable overhead cost for C machine hours isa. AB.b. BC.c. AC minus DO.d. BC minus DO.
Are the following overhead variances favorable or unfavorable?Volume (capacity)variance Efficiency variancea. Favorable Favorableb. Favorable Unfavorablec. Unfavorable Favorabled. Unfavorable Unfavorable
Which of the following variances would be useful in calling attention to a possible short-term problem in the control of overhead costs?Spending variance Volume variancea. No Nob. No Yesc. Yes Nod. Yes Yes
The following information pertains to Roe Co.’s 2012 manufacturing operations:Standard direct manufacturing labor hours per unit 2 Actual direct manufacturing labor hours 10,500 Number of units produced 5,000 Standard variable overhead per standard direct manufacturing labor hour 3A ct ua lv ar
During 2012, a department’s 3-variance overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity.If 100% of practical capacity had been selected instead, how would
Under the 2-variance method for analyzing overhead, which of the following variances consists of both variable and fixed overhead elements?Controllable (budget)variance Volume variancea. Yes Yesb. Yes Noc. No Nod. No Yes
Baby Frames, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of May:Actual Budgeted Number of frames manufactured 19,000 20,000 Variable overhead costs 4, 100 2 per direct labor hour Fixed overhead costs 22, 000 20,000
The following were among Gage Co.’s 2012 costs:Normal spoilage $ 5,000 Freight out 10,000 Excess of actual manufacturing costs over standard costs 20,000 Standard manufacturing costs 100,000 Actual prime manufacturing costs 80,000 Gage’s 2012 actual manufacturing overhead wasa. $ 40,000b. $
On the diagram below, the line OW represents the standard labor cost at any output volume expressed in direct labor hours. Point S indicates the actual output at standard cost, and Point A indicates the actual hours and actual cost required to produce S.Which of the following variances are
The following direct manufacturing labor information pertains to the manufacture of product Glu:Time required to make one unit 2 direct labor hours Number of direct workers 50 Number of productive hours per week, per worker 40 Weekly wages per worker $500 Workers’ benefits treated as direct
Yola Co. manufactures one product with a standard direct manufacturing labor cost of four hours at 12.00 pe rh ou r.D ur in gJ un e, 1, 000 un it sw er ep ro du ce du si ng 4, 100 ho ur sa t12.20 per hour. The unfavorable direct labor efficiency variance wasa. $1,220b. $1,200c. $ 820d. $ 400
Carr Co. had an unfavorable materials usage variance of$900. What amounts of this variance should be charged to each department?Purchasing Warehousing Manufacturing a.0 0 $900 b.0 900 $0 c.300 300 $300 d.900 0 $0
Dahl Co. uses a standard costing system in connection with the manufacture of a “one size fits all” article of clothing.Each unit of finished product contains two yards of direct material. However, a 20% direct material spoilage calculated on input quantities occurs during the manufacturing
The standard direct material cost to produce a unit of Lem is four meters of material at 2.50 pe rm et er.D ur in gM ay 2012, 4, 200 me te rs of ma te ri al co st in g10,080 were purchased and used to produce 1,000 units of Lem. What was the material price variance for May 2012?a. $400 favorable.b.
Which of the following standard costing variances would be least controllable by a production supervisor?a. Overhead volume.b. Overhead efficiency.c. Labor efficiency.d. Material usage.
In connection with a standard cost system being developed by Flint Co., the following information is being considered with regard to standard hours allowed for output of one unit of product:Hours Average historical performance for the past three years 1.85 Production level to satisfy average
Companies in what type of industry may use a standard cost system for cost control?Mass production industry Service industrya. Yes Yesb. Yes Noc. No Nod. No Yes
Wages earned by machine operators in producing the firm’s product should be categorized as Direct labor Controllable by the machine operators’ foremana. Yes Yesb. Yes Noc. No Yesd. No No I. Standards and Variances
The following is a summarized income statement of Carr Co.’s profit center No. 43 for March 2012:Contribution margin $70,000 Period expenses:Manager’s salary 20, 000 Fa ci li ty de pr ec ia ti on 8, 000 Co rp or at ee xp en se al lo ca ti on 5, 000 33, 000 Pr of it ce nt er in co me 37,000
Controllable revenue would be included in a performance report for a Profit center Cost centera. No Nob. No Yesc. Yes Nod. Yes Yes
When production levels are expected to increase within a relevant range, and a flexible budget is used, what effect would be anticipated with respect to each of the following costs?Fixed costs per unit Variable costs per unita. Decrease Decreaseb. No change No changec. No change Decreased. Decrease
A flexible budget is appropriate for a Marketing budget Direct material usage budgeta. No Nob. No Yesc. Yes Yesd. Yes No
The basic difference between a master budget and a flexible budget is that a master budget isa. Only used before and during the budget period and a flexible budget is only used after the budget period.b. For an entire production facility and a flexible budget is applicable to single departments
Using regression analysis, Fairfield Co. graphed the following relationship of its cheapest product line’s sales with its customers’ income levels:If there is a strong statistical relationship between the sales and customers’ income levels, which of the following numbers best represents the
A forecasting technique that is a combination of the last forecast and the last observed value is calleda. Delphi.b. Least squares.c. Regression.d. Exponential smoothing.
Which of the following is a quantitative approach to developing a sales forecast?a. Delphi technique.b. Customer surveys.c. Moving average.d. Executive opinions.
Which of the following is a quantitative approach used to develop sales forecasts based on analysis of consumer behavior?a. Markov techniques.b. Regression analysis.c. Econometric models.d. Exponential smoothing.
Assume that Lackland’s model predicts revenue for a week to be $13,400. Calculate the 95% confidence interval for the amount of revenue for the week. (The 95% confidence interval corresponds to the area representing 2.3436 deviations from the mean.)a. $13,400 ± 6,279b. $13,400 ± 4,404c. $13,400
Which of the following represents an accurate interpretation of the results of Lackland’s regression analysis?a. 6.279% of the variation in revenue is explained by the predicted number of days above 10 degrees and the number of inches of snow.b. The relationships are not significant.c. Predicted
Calculate the predicted amount of revenue for the next week.a. $10,902b. $11,362c. $16,032d. $20,547
Assume that management predicts the number of days above 10 degrees for the next week to be 6 and the number of inches of snow to be
Which variables(s) in this function is (are) the dependent variable(s)?a. Predicted number of days above 10 degrees.b. Predicted number of inches of snow.c. Revenue.d. Predicted number of days above 10 degrees and predicted number of inches of snow.
Based upon the data derived from the regression analysis, 420 maintenance hours in a month would mean the maintenance costs (rounded to the nearest dollar) would be budgeted ata. $3,780b. $3,600c. $3,790d. $3,746
The letter x in the standard regression equation is best described as a(n)a. Independent variable.b. Dependent variable.c. Constant coefficient.d. Coefficient of determination.
In the standard regression equation y = a + bx, the letter b is best described as a(n)a. Independent variable.b. Dependent variable.c. Constant coefficient.d. Variable coefficient.
All of the following are useful for forecasting the needed level of inventory except:a. Knowledge of the behavior of business cycles.b. Internal accounting allocations of costs to different segments of the company.c. Information about seasonal variations in demand.d. Econometric modeling.
The internal auditor of a bank has developed a multiple regression model which has been used for a number of years to estimate the amount of interest income from commercial loans. During the current year, the auditor applies the model and discovers that the r2 value has decreased dramatically, but
In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variables?a. 1.03b. –.02c. –.89d. .75
Cook Co.’s total costs of operating five sales offices last year were 500, 000, o fw hi ch 70,000 represented fixed costs. Cook has determined that total costs are significantly influenced by the number of sales offices operated. Last year’s costs and number of sales offices can be used as the
Trumbull Company budgeted sales on account of 120, 000 fo rJ ul y, 211,000 for August, and $198,000 for September. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% the second month, and 4% will be uncollectible. The cash from accounts
A 2012 cash budget is being prepared for the purchase of Toyi, a merchandise item. Budgeted data are Cost of goods sold for 2012 $300,000 Accounts payable 1/1/12 20,000 Inventory—1/1/12 30,000 12/31/12 42,000 Purchases will be made in twelve equal monthly amounts and paid for in the following
Rolling Wheels purchases bicycle components in the month prior to assembling them into bicycles. Assembly is scheduled one month prior to budgeted sales. Rolling pays 75% of component costs in the month of purchase and 25%of the costs in the following month. Component cost included in budgeted cost
Which of the following is included in a firm’s financial budget?a. Budgeted income statement.b. Capital budget.c. Production schedule.d. Cost of goods sold budget.
Which of the following budgeting systems focuses on improving operations?a. Responsibility budgeting.b. Activity-based budgeting.c. Operational budgeting.d. Kaizen budgeting.
Which of the following best describes tactical profit plans?a. Detailed, short-term, broad responsibilities, qualitative.b. Broad, short-term, responsibilities at all levels, quantitative.c. Detailed, short-term, responsibilities at all levels, quantitative.d. Broad, long-term, broad
The company’s total cash receipts from sales and collections on account that would be budgeted for the month of September would bea. $757,500b. $771,000c. $793,800d. $856,500
The budgeted cost of the company’s purchases for the month of August would bea. $302,500b. $305,000c. $307,500d. $318,750
The master budgeta. Shows forecasted and actual results.b. Reflects controllable costs only.c. Can be used to determine manufacturing cost variances.d. Contains the operating budget.
Mien Co. is budgeting sales of 53,000 units of product Nous for October 2012. The manufacture of one unit of Nous requires four kilos of chemical Loire. During October 2012, Mien plans to reduce the inventory of Loire by 50,000 kilos and increase the finished goods inventory of Nous by 6,000 units.
Which of the following is an output of a financial planning model?a. Strategic plan.b. Actual financial results.c. Projected financial statements.d. Variance analysis.D. Budgeting
A single-product company prepares income statements using both absorption and variable costing methods. Manufacturing overhead cost applied per unit produced in 2012 was the same as in 2011. The 2012 variable costing statement reported a profit whereas the 2012 absorption costing statement reported
A manufacturing company prepares income statements using both absorption and variable costing methods. At the end of a period actual sales revenues, total gross profit, and total contribution margin approximated budgeted figures, whereas net income was substantially greater than the budgeted
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