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model based testing for embedded systems
Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012 38th Edition O. Ray Whittington, Patrick R. Delaney - Solutions
5. Under the ethical standards of the profession, which of the following situations involving independent members of an auditor’s family is most likely to impair the auditor’s independence?a. A parent’s immaterial investment in a client.b. A first cousin’s loan from a client.c. A spouse’s
4. On the audit of a nonissuer (nonpublic) company, the purpose of performing risk assessment procedures is toa. Obtain an understanding of the entity and its environment.b. Reduce detection risk.c. Evaluate management ability.d. Determine the operating effectiveness of controls.
3. A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be disassociated from the resolution of
2. When one auditor succeeds another, the successor auditor should request thea. Client to instruct its attorney to send a letter of audit inquiry concerning the status of the prior year’s litigation, claims, and assessments.b. Predecessor auditor to submit a list of internal control weaknesses
1. Which of the following is least likely to be a test of a control?a. Inquiries of appropriate personnel.b. Inspection of management’s engagement letter.c. Observation of the application of a policy.d. Reperformance of the application of a policy.
30. When performing a review of an issuer company, which is least likely to be included in the CPA’s inquires of management members with responsibility for financial and accounting matters?a. Subsequent events.b. Significant journal entries and other adjustments.c. Communications with related
29. 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
28. 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.
27. 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
26. 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.
25. Confirmations of accounts receivable address which assertion most directly?a. Completeness.b. Existence.c. Valuation.d. Classification.
24. 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
23. 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
22. 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
21. 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
20. 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
19. 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
18. 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
17. 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
16. 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
15. 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
14. 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.
13. Which of the following matters is an auditor required to communicate to an entity’s audit committee?1208 APPENDIX A: AUDITING AND ATTESTATION SAMPLE EXAMINATION Significant audit adjustments Changes in significant accounting policiesa. Yes Yesb. Yes Noc. No Yesd. No No
12. 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.
11. 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
10. 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
9. 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
8. 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
7. 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.
6. 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.
5. 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
4. 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
3. 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.
2. 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
1. 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
87. Mili Co. plans to discontinue a division with a$20,000 contribution margin. Overhead allocated to the division is $50,000, of which $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 88.
86. For the year ended December 31, 2009, Abel Co.incurred direct costs of $500,000 based on a particular course of action during the year. If a different course of action had been taken, direct costs would have been$400,000. In addition, Abel’s 2009 fixed costs were$90,000. The incremental cost
85. 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 Variable costs 33,000 The fixed costs include a normal $3,700 allocation for inhouse design costs, although no in-house
84. 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
83. 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.
82. 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
81. 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
80. 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 Other (rent, utilities, depreciation, insurance) $120,000 Direct materials cost $500,000** CMA adapted Klunker allocates
79. 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
78. 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.
77. 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
76. 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.
75. 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.
74. 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
73. 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.
72. 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.
71. 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.
70. 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?Fixed supervisory Variable food costs salariesa. Yes Yesb. Yes Noc. No Yesd. No
69. The budgeted total variable overhead cost for C machine hours isa. AB.b. BC.c. AC minus DO.d. BC minus DO.
68. Are the following overhead variances favorable or unfavorable?Volume Efficiency(capacity) variance variancea. Favorable Favorableb. Favorable Unfavorablec. Unfavorable Favorabled. Unfavorable Unfavorable
67. 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
66. The following information pertains to Roe Co.’s 2009 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 $3 Actual
65. During 2009, 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
64. Under the 2-variance method for analyzing overhead, which of the following variances consists of both variable and fixed overhead elements?Controllable (budget) Volume variance variancea. Yes Yesb. Yes Noc. No Nod. No Yes
63. 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
62. The following were among Gage Co.’s 2009 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 2009 actual manufacturing overhead wasa. $ 40,000b. $
61. 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
60. 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
59. Yola Co. manufactures one product with a standard direct manufacturing labor cost of four hours at $12.00 per hour. During June, 1,000 units were produced using 4,100 hours at $12.20 per hour. The unfavorable direct labor efficiency variance wasa. $1,220b. $1,200c. $ 820d. $ 400
58. Carr Co. had an unfavorable materials usage variance of$900. What amounts of this variance should be charged to each department?Purchasing Warehousing Manufacturinga. $0 $0 $900b. $0 $900 $0c. $300 $300 $300d. $900 $0 $0
57. 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
56. The standard direct material cost to produce a unit of Lem is four meters of material at $2.50 per meter. During May 2009, 4,200 meters of material costing $10,080 were purchased and used to produce 1,000 units of Lem. What was the material price variance for May 2009?a. $400 favorable.b. $420
55. 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.
54. 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
53. Companies in what type of industry may use a standard cost system for cost control?Mass production Service industry industrya. Yes Yesb. Yes Noc. No Nod. No Yes
52. Wages earned by machine operators in producing the firm’s product should be categorized as Controllable by the Direct machine operators’labor foremana. Yes Yesb. Yes Noc. No Yesd. No No
51. The following is a summarized income statement of Carr Co.’s profit center No. 43 for March 2009:Contribution margin $70,000 Period expenses:Manager’s salary $20,000 Facility depreciation 8,000 Corporate expense allocation 5,000 33,000 Profit center income $37,000 Which of the following
50. Controllable revenue would be included in a performance report for a Profit center Cost centera. No Nob. No Yesc. Yes Nod. Yes Yes
49. 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 Variable costs per unit per unita. Decrease Decreaseb. No change No changec. No change Decreased.
48. A flexible budget is appropriate for a Marketing Direct material budget usage budgeta. No Nob. No Yesc. Yes Yesd. Yes No
47. 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
46. 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
45. 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.
44. 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.
43. 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.
42. 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.
41. 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.
40. 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 12. Calculate the predicted amount of revenue for the next week.a. $10,902b. $11,362 1190 MODULE 47 PLANNING, CONTROL, AND ANALYSISc. $16,032d. $20,547
39. 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.
38. 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
37. 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.
36. 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.
35. 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.
34. 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,
33. 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
32. Cook Co.’s total costs of operating five sales offices last year were $500,000, of which $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
31. Trumbull Company budgeted sales on account of$120,000 for July, $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
30. A 2009 cash budget is being prepared for the purchase of Toyi, a merchandise item. Budgeted data are Cost of goods sold for 2009 $300,000 Accounts payable 1/1/09 20,000 Inventory—1/1/09 30,000 12/31/09 42,000 Purchases will be made in twelve equal monthly amounts and paid for in the following
29. 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
28. 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.
27. Which of the following budgeting systems focuses on improving operations?a. Responsibility budgeting.b. Activity-based budgeting.c. Operational budgeting.d. Kaizen budgeting.
26. 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
25. 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* CIA adapted** CMA adapted
24. The budgeted cost of the company’s purchases for the month of August would bea. $302,500b. $305,000c. $307,500d. $318,750
23. 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.
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