Answer..MCQs on AIS + Transaction Cycles* – 2024 New Syllabus Sections E + D. Covers source/turnaround docs, revenue, procurement, payroll cycles

Section A...

15 CMA Part 1 MCQs on AIS + Transaction Cycles* – 2024 New Syllabus Sections E + D. Covers source/turnaround docs, revenue, procurement, payroll cycles 

*Topic: Source & Turnaround Documents + AIS Deliverables*

*Q1. Source Documents*  

Which document is the _source document_ for recording a credit sale in the AIS?  

A. Customer monthly statement  

B. Sales invoice  

C. Cash receipts journal  

D. Accounts receivable aging report  

*Answer: B. Sales invoice*  

*Explanation*: Source docs initiate a transaction. Sales invoice triggers AR + Revenue entry. Statement is a turnaround doc. Aging is a report/deliverable.

---

*Q2. Turnaround Documents*  

Which is a _turnaround document_ in the revenue cycle?  

A. Purchase order  

B. Remittance advice attached to customer statement  

C. Receiving report  

D. Vendor invoice  

*Answer: B. Remittance advice attached to customer statement*  

*Explanation*: Turnaround = computer output sent out, then returned with data added. Customer tears off remittance advice + sends with payment for cash app.

---

*Q3. AIS Deliverables*  

Which is an _AIS deliverable_ used by management, not a source document?  

A. Time card  

B. Budget vs actual variance report  

C. Shipping document  

D. Check request  

*Answer: B. Budget vs actual variance report*  

*Explanation*: Deliverables = outputs/reports. A, C, D are inputs/source docs. Variance report supports Section B Performance Management.

---

*Topic: Revenue Cycle – Stages, Docs, Responsibility, Controls*

*Q4. Revenue Cycle Sequence*  

The correct order of revenue cycle activities is:  

A. Billing → Shipping → Sales Order → Cash Collection  

B. Sales Order → Shipping → Billing → Cash Collection  

C. Cash Collection → Sales Order → Shipping → Billing  

D. Shipping → Sales Order → Cash Collection → Billing  

*Answer: B. Sales Order → Shipping → Billing → Cash Collection*  

*Explanation*: 1. Customer order entry, 2. Approve credit/release goods, 3. Ship, 4. Invoice, 5. Collect. Billing after shipping ensures goods sent before invoicing.

---

*Q5. Revenue Cycle Documents + Department*  

Which document is prepared by the _Shipping Department_ in the revenue cycle?  

A. Sales order  

B. Bill of lading / Packing slip  

C. Sales invoice  

D. Remittance advice  

*Answer: B. Bill of lading / Packing slip*  

*Explanation*: Shipping prepares BOL + packing slip. Sales Dept = sales order. Billing Dept = invoice. Customer = remittance advice.

---

*Q6. Internal Control Weakness – Revenue*  

The same person approves credit, ships goods, and records sales. This violates:  

A. COSO Monitoring  

B. Segregation of Duties  

C. IT General Controls  

D. Data Governance  

*Answer: B. Segregation of Duties*  

*Explanation*: Authorization, Custody, Recording must be separate. Risk = fictitious sales + theft. Compensating control = independent review.

---

*Topic: Expenditure/Procurement Cycle – Stages, Docs, Controls*

*Q7. Procurement Cycle Sequence*  

Correct sequence for the expenditure cycle:  

A. Invoice approval → Purchase requisition → PO → Receiving → Payment  

B. Purchase requisition → PO → Receiving → Invoice approval → Payment  

C. PO → Purchase requisition → Payment → Receiving → Invoice approval  

D. Receiving → PO → Purchase requisition → Payment → Invoice approval  

*Answer: B. Purchase requisition → PO → Receiving → Invoice approval → Payment*  

*Explanation*: 1. Request, 2. Order, 3. Receive goods, 4. Match docs + approve, 5. Pay. Prevents payment for goods not received.

---

*Q8. Procurement Documents + Responsibility*  

Which document is prepared by the _Receiving Department_?  

A. Purchase requisition  

B. Purchase order  

C. Receiving report  

D. Vendor invoice  

*Answer: C. Receiving report*  

*Explanation*: Receiving counts/inspects goods + creates receiving report. Purchasing = PO. User dept = requisition. Vendor = invoice.

---

*Q9. Internal Control Weakness – Procurement*  

If AP clerk can add new vendors AND process payments, the _primary_ risk is:  

A. Duplicate payments  

B. Fictitious vendor fraud  

C. Inventory obsolescence  

D. Understatement of liabilities  

*Answer: B. Fictitious vendor fraud*  

*Explanation*: SOD violation – Authorization + Recording. Clerk creates fake vendor + pays self. Preventive control = vendor master maintenance by separate person + approval.

---

*Q10. Three-Way Match*  

The “three-way match” in AP prevents which risk?  

A. Payroll fraud  

B. Payment for goods not ordered or not received  

C. Overstated depreciation  

D. Underapplied FOH  

*Answer: B. Payment for goods not ordered or not received*  

*Explanation*: Match PO + Receiving Report + Vendor Invoice. Detective + preventive control. Ensures quantity, price, goods received.

---

*Topic: Payroll Cycle – Stages, Docs, Controls*

*Q11. Payroll Cycle Documents*  

Which is the _source document_ for payroll processing?  

A. Payroll register  

B. Time card / Clock data  

C. Payroll tax return  

D. Labor distribution report  

*Answer: B. Time card / Clock data*  

*Explanation*: Time cards capture hours worked = input. Payroll register + labor distribution = outputs. Tax return = compliance output.

---

*Q12. Payroll Department Responsibility*  

Which department should _authorize_ overtime hours?  

A. Payroll Department  

B. HR Department  

C. Employee’s Supervisor/Dept Manager  

D. Treasury Department  

*Answer: C. Employee’s Supervisor/Dept Manager*  

*Explanation*: Authorization = operating dept. Payroll = recording. HR = custody of personnel files. Treasury = custody of cash. SOD required.

---

*Q13. Payroll Control Weakness*  

The Payroll clerk can add employees, change pay rates, and distribute checks. This creates risk of:  

A. Duplicate vendor payments  

B. Ghost employee fraud  

C. Inventory shrinkage  

D. Sales cutoff errors  

*Answer: B. Ghost employee fraud*  

*Explanation*: SOD violation – Authorization + Custody + Recording. Preventive = HR adds employees, Supervisor approves rates, Payroll processes, Treasury distributes.

---

*Topic: Mixed Cycles + AIS Concepts*

*Q14. AIS Input-Process-Output*  

In an AIS, the chart of accounts is part of:  

A. Input  

B. Process  

C. Storage  

D. Output  

*Answer: C. Storage*  

*Explanation*: Chart of Accounts = master file stored in AIS. Input = source docs. Process = posting rules. Output = financial statements.

---

*Q15. Control Activity for All Cycles*  

Which control activity applies to _revenue, procurement, and payroll_ cycles?  

A. Requiring purchase requisitions for all orders  

B. Segregation of duties between authorization, custody, recording  

C. Matching shipping docs to invoices  

D. Approving overtime hours  

*Answer: B. Segregation of duties between authorization, custody, recording*  

*Explanation*: SOD is a universal COSO Control Activity. A, C, D are cycle-specific. IMA tests SOD in every cycle scenario.

---

*High-Yield Exam Notes for Cycles – 2024 Syllabus*

**Cycle** **Key Docs** **Key SOD Issue** **#1 Control**

**Revenue** Sales order, BOL, Invoice, Remittance Credit + Shipping + AR recording Sales order approval + credit check

**Procurement** Req, PO, Receiving Report, Invoice Vendor master + AP payment 3-way match + SOD

**Payroll** Time card, Payroll register Add employee + process + distribute pay HR/Payroll/Treasury SOD + supervisor approval

*IMA Trap*: Turnaround doc = computer output returned. Source doc = original input. Deliverable = report.  

*SOD Rule*: If 1 person does 2 of: Authorize, Custody, Record = violation.

*Exam Tips for AIS MCQs – 2024 Syllabus*

1. *SOD = Control Activities* – if 1 person can authorize + record, it’s always SOD.

2. *RPO/RTO = Business decision* – not IT’s call. RPO = data loss tolerance.

3. *Analytics order*: Descriptive → Diagnostic → Predictive → Prescriptive.

4. *ITGC vs App*: ITGC = data center/access/change. App = edit checks in 1 system.

5. *Reasonable assurance only* – never pick “eliminates all risk”.

*Section B

: AIS Mini-Test – 15 MCQs*

*Q1. Segregation of Duties*  

During an AIS review, the auditor finds the Treasury Manager can initiate wire transfers, approve wires, and reconcile the bank account. This violates which principle?  

A. Control Environment  

B. Risk Assessment  

C. Control Activities  

D. Information & Communication  

*Answer: C. Control Activities*  

*Explanation*: SOD = Control Activities per COSO. One person with Authorization + Custody + Recording creates fraud risk. This is a preventive control failure.

---

*Q2. ERP Benefit*  

The _primary_ benefit of an ERP system for financial reporting is:  

A. Eliminates the need for internal auditors  

B. Provides a single database to reduce reconciliations and improve timeliness  

C. Guarantees absolute assurance of no misstatements  

D. Removes all IT General Controls requirements  

*Answer: B. Provides a single database to reduce reconciliations and improve timeliness*  

*Explanation*: ERP integrates modules = single source of truth. C and D are wrong – COSO gives only _reasonable_ assurance and ERP _increases_ ITGC needs.

---

*Q3. RPA vs AI*  

Which task is _best_ suited for RPA rather than AI?  

A. Predicting customer churn using historical sales patterns  

B. Classifying customer emails by sentiment  

C. Downloading invoices from email and entering them into AP  

D. Recommending optimal selling price based on demand elasticity  

*Answer: C. Downloading invoices from email and entering them into AP*  

*Explanation*: RPA = high-volume, rule-based, repetitive tasks. A, B, D require learning/judgment = AI/ML.

---

*Q4. Data Governance*  

Who should _own_ the definition of RPO and RTO for the cloud-based AIS?  

A. IT Department  

B. Cloud vendor  

C. Finance/Controller  

D. External auditor  

*Answer: C. Finance/Controller*  

*Explanation*: Per Data Governance, business data owners define recovery objectives. IT implements. RPO = how much data loss is acceptable. RTO = how fast to recover.

---

*Q5. COSO Component ID*  

Employees report they don’t know who to notify about suspected fraud because no policy exists. Which COSO component is deficient?  

A. Control Environment  

B. Risk Assessment  

C. Control Activities  

D. Information & Communication  

*Answer: D. Information & Communication*  

*Explanation*: Quality info must flow down, up, and across. Missing fraud reporting channel = Information & Communication failure.

---

*Q6. ITGC vs Application Control*  

Which is an IT General Control?  

A. Three-way match of PO, GRN, invoice before payment  

B. Program change must be tested and approved before production  

C. System prevents posting if debit ≠ credit  

D. Duplicate vendor invoice number is rejected  

*Answer: B. Program change must be tested and approved before production*  

*Explanation*: Change management = ITGC, applies to all systems. A, C, D are application controls for AP/GL.

---

*Q7. Types of Analytics*  

FP&A runs regression to forecast next quarter sales based on ad spend. This is:  

A. Descriptive analytics  

B. Diagnostic analytics  

C. Predictive analytics  

D. Prescriptive analytics  

*Answer: C. Predictive analytics*  

*Explanation*: Predictive = “what will happen”. Regression with R² forecasts. Descriptive = what happened. Diagnostic = why it happened.

---

*Q8. Data Quality Dimensions*  

An AIS accepts customer records with blank “State” fields. Which data quality dimension is violated?  

A. Timeliness  

B. Completeness  

C. Accuracy  

D. Consistency  

*Answer: B. Completeness*  

*Explanation*: Completeness = all required fields populated. Accuracy = value is correct. Blank field = incomplete.

---

*Q9. Blockchain in AIS*  

The _main_ benefit of blockchain for audit trail purposes is:  

A. It eliminates the need for bank reconciliations  

B. It provides an immutable, time-stamped ledger  

C. It guarantees financial statements are free of error  

D. It reduces the cost of RPA licenses  

*Answer: B. It provides an immutable, time-stamped ledger*  

*Explanation*: Blockchain’s key feature = cannot be altered retroactively. Improves audit evidence. Does not eliminate recs or guarantee no errors.

---

*Q10. Preventive vs Detective*  

Which control is _detective_?  

A. Password complexity requirements  

B. Segregation of duties for cash handling  

C. Monthly bank reconciliation  

D. Approval required for purchases > $10,000  

*Answer: C. Monthly bank reconciliation*  

*Explanation*: Recs find errors _after_ they occur = detective. A, B, D stop errors before = preventive.

---

*Q11. Master Data Management MDM*  

MDM’s primary objective in an AIS is to:  

A. Speed up month-end close by automating JEs  

B. Create a single source of truth for vendors, customers, products  

C. Replace the need for COSO Internal Control  

D. Provide predictive analytics for sales  

*Answer: B. Create a single source of truth for vendors, customers, products*  

*Explanation*: MDM ensures master files are consistent across systems. Prevents duplicate vendors, wrong ship-to, etc.

---

*Q12. R² Interpretation*  

A cost regression shows R² = 0.92. This means:  

A. 92% of the costs are fixed  

B. 92% of cost variation is explained by the activity driver  

C. The regression is not reliable  

D. 8% of costs are variable  

*Answer: B. 92% of cost variation is explained by the activity driver*  

*Explanation*: R² = coefficient of determination. High R² = strong relationship. Used in cost estimation.

---

*Q13. Cloud Risk*  

The _biggest_ risk when moving AIS to SaaS is:  

A. Slower financial reporting  

B. Vendor lock-in and data security/privacy  

C. Loss of ERP functionality  

D. Inability to use RPA  

*Answer: B. Vendor lock-in and data security/privacy*  

*Explanation*: SaaS = data outside company. Key risks: vendor failure, breach, GDPR/CCPA compliance. Usually improves speed.

---

*Q14. SOX 404 & AIS*  

Under SOX 404, management must:  

A. Guarantee financial statements are 100% accurate  

B. Assess and report on effectiveness of ICFR, including IT controls  

C. Outsource internal audit to external auditors  

D. Eliminate all detective controls  

*Answer: B. Assess and report on effectiveness of ICFR, including IT controls*  

*Explanation*: SOX 404 = Mgmt tests ICFR + auditor attests. ITGCs are part of ICFR. No guarantee of 100% accuracy.

---

*Q15. Business Continuity*  

RTO = 4 hours. RPO = 1 hour. After a server crash, what does this mean?  

A. Systems must be restored within 1 hour, data loss ≤ 4 hours  

B. Systems must be restored within 4 hours, data loss ≤ 1 hour  

C. Both systems and data must be restored in 1 hour  

D. RTO/RPO only apply to cloud systems  

*Answer: B. Systems must be restored within 4 hours, data loss ≤ 1 hour*  

*Explanation*: RTO = Recovery Time Objective = downtime tolerance. RPO = Recovery Point Objective = data loss tolerance.

MCQs on AIS + Transaction Cycles* – 2024 New Syllabus Sections E + D. Covers source/turnaround docs, revenue, procurement, payroll cycles + internal control weaknesses.

 MCQs on AIS + Transaction Cycles* – 2024 New Syllabus Sections E + D. Covers source/turnaround docs, revenue, procurement, payroll cycles + internal control weaknesses.

Section A...

*Topic: Source & Turnaround Documents + AIS Deliverables*

*Q1. Source Documents*  

Which document is the _source document_ for recording a credit sale in the AIS?  

A. Customer monthly statement  

B. Sales invoice  

C. Cash receipts journal  

D. Accounts receivable aging report  

*Answer: 

---

*Q2. Turnaround Documents*  

Which is a _turnaround document_ in the revenue cycle?  

A. Purchase order  

B. Remittance advice attached to customer statement  

C. Receiving report  

D. Vendor invoice  

*Answer:

---

*Q3. AIS Deliverables*  

Which is an _AIS deliverable_ used by management, not a source document?  

A. Time card  

B. Budget vs actual variance report  

C. Shipping document  

D. Check request  

*Answer

---

*Topic: Revenue Cycle – Stages, Docs, Responsibility, Controls*

*Q4. Revenue Cycle Sequence*  

The correct order of revenue cycle activities is:  

A. Billing → Shipping → Sales Order → Cash Collection  

B. Sales Order → Shipping → Billing → Cash Collection  

C. Cash Collection → Sales Order → Shipping → Billing  

D. Shipping → Sales Order → Cash Collection → Billing  

*Answer:

---

*Q5. Revenue Cycle Documents + Department*  

Which document is prepared by the _Shipping Department_ in the revenue cycle?  

A. Sales order  

B. Bill of lading / Packing slip  

C. Sales invoice  

D. Remittance advice  

*Answer

---

*Q6. Internal Control Weakness – Revenue*  

The same person approves credit, ships goods, and records sales. This violates:  

A. COSO Monitoring  

B. Segregation of Duties  

C. IT General Controls  

D. Data Governance  

*Answer:

---

*Topic: Expenditure/Procurement Cycle – Stages, Docs, Controls*

*Q7. Procurement Cycle Sequence*  

Correct sequence for the expenditure cycle:  

A. Invoice approval → Purchase requisition → PO → Receiving → Payment  

B. Purchase requisition → PO → Receiving → Invoice approval → Payment  

C. PO → Purchase requisition → Payment → Receiving → Invoice approval  

D. Receiving → PO → Purchase requisition → Payment → Invoice approval  

*Answer:

---

*Q8. Procurement Documents + Responsibility*  

Which document is prepared by the _Receiving Department_?  

A. Purchase requisition  

B. Purchase order  

C. Receiving report  

D. Vendor invoice  

*Answer: 

---

*Q9. Internal Control Weakness – Procurement*  

If AP clerk can add new vendors AND process payments, the _primary_ risk is:  

A. Duplicate payments  

B. Fictitious vendor fraud  

C. Inventory obsolescence  

D. Understatement of liabilities  

*Answer: 

---

*Q10. Three-Way Match*  

The “three-way match” in AP prevents which risk?  

A. Payroll fraud  

B. Payment for goods not ordered or not received  

C. Overstated depreciation  

D. Underapplied FOH  

*Answer:

---

*Topic: Payroll Cycle – Stages, Docs, Controls*

*Q11. Payroll Cycle Documents*  

Which is the _source document_ for payroll processing?  

A. Payroll register  

B. Time card / Clock data  

C. Payroll tax return  

D. Labor distribution report  

*Answer

---

*Q12. Payroll Department Responsibility*  

Which department should _authorize_ overtime hours?  

A. Payroll Department  

B. HR Department  

C. Employee’s Supervisor/Dept Manager  

D. Treasury Department  

*Answer:

---

*Q13. Payroll Control Weakness*  

The Payroll clerk can add employees, change pay rates, and distribute checks. This creates risk of:  

A. Duplicate vendor payments  

B. Ghost employee fraud  

C. Inventory shrinkage  

D. Sales cutoff errors  

*Answer: 

---

*Topic: Mixed Cycles + AIS Concepts*

*Q14. AIS Input-Process-Output*  

In an AIS, the chart of accounts is part of:  

A. Input  

B. Process  

C. Storage  

D. Output  

*Answer:

---

*Q15. Control Activity for All Cycles*  

Which control activity applies to _revenue, procurement, and payroll_ cycles?  

A. Requiring purchase requisitions for all orders  

B. Segregation of duties between authorization, custody, recording  

C. Matching shipping docs to invoices  

D. Approving overtime hours  

*Answer: 

---

*High-Yield Exam Notes for Cycles – 2024 Syllabus*

**Cycle** **Key Docs** **Key SOD Issue** **#1 Control**

**Revenue** Sales order, BOL, Invoice, Remittance Credit + Shipping + AR recording Sales order approval + credit check

**Procurement** Req, PO, Receiving Report, Invoice Vendor master + AP payment 3-way match + SOD

**Payroll** Time card, Payroll register Add employee + process + distribute pay HR/Payroll/Treasury SOD + supervisor approval

*IMA Trap*: Turnaround doc = computer output returned. Source doc = original input. Deliverable = report.  

*SOD Rule*: If 1 person does 2 of: Authorize, Custody, Record = violation.

Section B....

MCQ 1: ERP & Segregation of Duties*

Apex Mfg is implementing SAP. During UAT, internal audit notes that users with “AP clerk” access can also post journal entries to the GL. The IT manager says segregation of duties will be fixed after go-live.

Which COSO internal control component is _most_ deficient?

A. Risk Assessment

B. Control Environment

C. Control Activities

D. Monitoring

*Answer

---

*MCQ 2: RPA & Data Quality*

Beta Corp uses RPA bots to auto-post bank fees from downloaded statements. Last month, duplicate rows in the bank file caused $50,000 duplicate fees to post. No exception report was reviewed.

Which 2 data quality dimensions were _most likely_ violated?

A. Accuracy and Validity

B. Timeliness and Completeness

C. Consistency and Accessibility

D. Uniqueness and Integrity

*Answer:

---

*MCQ 3: Cloud AIS & Data Governance*

Gamma Retail’s SaaS AIS had no defined RPO/RTO. After a ransomware attack, recovery took 5 days and 2 days of sales data was lost. The Controller stated “IT owns the cloud.”

This scenario _best_ illustrates a failure in:

A. IT General Controls – Change Management

B. Data Governance – Ownership and Data Life Cycle

C. Application Controls – Input Validation

D. COSO Monitoring – Separate Evaluations

*Answer

---

*MCQ 4: BI Dashboard & Analytics Type*

Delta Co’s Power BI dashboard shows “actual vs budget” sales. FP&A discovers actuals use cash-basis while budget is accrual-basis, causing misleading FOH variances.

The dashboard provides which type of analytics, and what is missing?

A. Predictive; missing regression analysis

B. Descriptive; missing diagnostic analysis

C. Diagnostic; missing prescriptive analysis

D. Prescriptive; missing descriptive analysis

*Answer

---

*MCQ 5: ITGC vs Application Control*

Which of the following is an example of an _IT General Control_ rather than an application control?

A. System rejects invoice if amount is negative

B. Quarterly review of user access rights to the GL module

C. Batch total of payroll hours must match detail records

D. Field format check for valid date in sales entry screen

*Answer: 

---

*MCQ 6: RPA vs AI*

Which statement _correctly_ differentiates RPA from AI in an AIS context?

A. RPA uses machine learning to improve decision making over time

B. AI is best for high-volume, rule-based, repetitive tasks

C. RPA follows programmed rules and does not learn from data

D. AI cannot be used for financial statement preparation

*Answer:

---

*Exam Tips for AIS MCQs – 2024 Syllabus*

1. *SOD = Control Activities* – if 1 person can authorize + record, it’s always SOD.

2. *RPO/RTO = Business decision* – not IT’s call. RPO = data loss tolerance.

3. *Analytics order*: Descriptive → Diagnostic → Predictive → Prescriptive.

4. *ITGC vs App*: ITGC = data center/access/change. App = edit checks in 1 system.

5. *Reasonable assurance only* – never pick “eliminates all risk”.

---

*Section E: AIS Mini-Test – 15 MCQs*

*Q1. Segregation of Duties*  

During an AIS review, the auditor finds the Treasury Manager can initiate wire transfers, approve wires, and reconcile the bank account. This violates which principle?  

A. Control Environment  

B. Risk Assessment  

C. Control Activities  

D. Information & Communication  

*Answer:

---

*Q2. ERP Benefit*  

The _primary_ benefit of an ERP system for financial reporting is:  

A. Eliminates the need for internal auditors  

B. Provides a single database to reduce reconciliations and improve timeliness  

C. Guarantees absolute assurance of no misstatements  

D. Removes all IT General Controls requirements  

*Answe

---

*Q3. RPA vs AI*  

Which task is _best_ suited for RPA rather than AI?  

A. Predicting customer churn using historical sales patterns  

B. Classifying customer emails by sentiment  

C. Downloading invoices from email and entering them into AP  

D. Recommending optimal selling price based on demand elasticity  

*Answer:

---

*Q4. Data Governance*  

Who should _own_ the definition of RPO and RTO for the cloud-based AIS?  

A. IT Department  

B. Cloud vendor  

C. Finance/Controller  

D. External auditor  

*Answer:

---

*Q5. COSO Component ID*  

Employees report they don’t know who to notify about suspected fraud because no policy exists. Which COSO component is deficient?  

A. Control Environment  

B. Risk Assessment  

C. Control Activities  

D. Information & Communication  

*Answer

---

*Q6. ITGC vs Application Control*  

Which is an IT General Control?  

A. Three-way match of PO, GRN, invoice before payment  

B. Program change must be tested and approved before production  

C. System prevents posting if debit ≠ credit  

D. Duplicate vendor invoice number is rejected  

*Answer:

---

*Q7. Types of Analytics*  

FP&A runs regression to forecast next quarter sales based on ad spend. This is:  

A. Descriptive analytics  

B. Diagnostic analytics  

C. Predictive analytics  

D. Prescriptive analytics  

*Answer: 

---

*Q8. Data Quality Dimensions*  

An AIS accepts customer records with blank “State” fields. Which data quality dimension is violated?  

A. Timeliness  

B. Completeness  

C. Accuracy  

D. Consistency  

*Answer:

---

*Q9. Blockchain in AIS*  

The _main_ benefit of blockchain for audit trail purposes is:  

A. It eliminates the need for bank reconciliations  

B. It provides an immutable, time-stamped ledger  

C. It guarantees financial statements are free of error  

D. It reduces the cost of RPA licenses  

*Answer:

---

*Q10. Preventive vs Detective*  

Which control is _detective_?  

A. Password complexity requirements  

B. Segregation of duties for cash handling  

C. Monthly bank reconciliation  

D. Approval required for purchases > $10,000  

*Answer:

---

*Q11. Master Data Management MDM*  

MDM’s primary objective in an AIS is to:  

A. Speed up month-end close by automating JEs  

B. Create a single source of truth for vendors, customers, products  

C. Replace the need for COSO Internal Control  

D. Provide predictive analytics for sales  

*Answer:

---

*Q12. R² Interpretation*  

A cost regression shows R² = 0.92. This means:  

A. 92% of the costs are fixed  

B. 92% of cost variation is explained by the activity driver  

C. The regression is not reliable  

D. 8% of costs are variable  

*Answer

---

*Q13. Cloud Risk*  

The _biggest_ risk when moving AIS to SaaS is:  

A. Slower financial reporting  

B. Vendor lock-in and data security/privacy  

C. Loss of ERP functionality  

D. Inability to use RPA  

*Answer: 

---

*Q14. SOX 404 & AIS*  

Under SOX 404, management must:  

A. Guarantee financial statements are 100% accurate  

B. Assess and report on effectiveness of ICFR, including IT controls  

C. Outsource internal audit to external auditors  

D. Eliminate all detective controls  

*Answer

---

*Q15. Business Continuity*  

RTO = 4 hours. RPO = 1 hour. After a server crash, what does this mean?  

A. Systems must be restored within 1 hour, data loss ≤ 4 hours  

B. Systems must be restored within 4 hours, data loss ≤ 1 hour  

C. Both systems and data must be restored in 1 hour  

D. RTO/RPO only apply to cloud systems  

*Answer:.

---

Why students struggle with CASEBASED QUESTION ⁉️ Discussion with suggestions/Prof Mahaley, Gmsisuccess

 

Why students struggle with CASEBASED QUESTION ⁉️ Discussion with suggestions/Prof Mahaley, Gmsisuccess

Why students show excellent performance in MCQ question mocktest,but lack of confidence & score less marks in casebased questions like topics subtopic From US CMA Part 1 like variance analysis performance measurement allocation of overheads cashflow statement budgetory control etc

Critical Analysis:

Students often excel at MCQs because those test recognition and isolated facts, but they underperform and feel insecure on case-based questions (CBQs) because CBQs require integrated application, interpretation of exhibits, structured problem-solving, and clear written/calculation answers under time pressure. This gap is primarily a skill-transfer and exam‑strategy issue, not always a knowledge gap 

Why this happens (critical analysis)

- Different cognitive demand: MCQs mainly test recall, pattern recognition, and narrow calculations; CBQs test analysis, synthesis, and judgement across multiple topic areas (variance analysis, overhead allocation, budgets, cash flows). Students trained for MCQs can recognise cues but struggle to *apply* concepts to novel facts  

- Fragmented study habits: Many candidates learn topics in isolation (e.g., variance formulas, overhead allocation methods) and practise single-step problems; CBQs require chaining those steps (interpret variance reason → trace to cost-driver → recommend corrective action), which students haven’t practiced enough  

- Weak exam‑reading and exhibit skills: Case questions present exhibits and require extracting salient numbers and assumptions quickly; weaker students either miss relevant info or over‑use irrelevant data, causing errors or lower confidence   

- Calculation + narrative integration: CBQs mix calculations (e.g., flexible-budget variances, cash‑flow adjustments) with explanation and recommendation; many students can compute but cannot succinctly explain drivers or managerial implications, which reduces scores and confidence .  

- Time management and format unfamiliarity: MCQ practice often uses many small, timed questions; CBQs are longer and require planning (outline → compute → explain). Lack of simulated CBQ practice creates time pressure and anxiety on exam day 

- Over-reliance on templates or rote steps: Some students memorize solution templates that fail when a case twists facts (e.g., mixed cost behaviour, nonstandard overhead pools), so they freeze when faced with variant detail 

- Assessment weighting misperception: Historically MCQs carried large weight (75%) and essays/CBQs smaller; this makes some learners underinvest in case practice believing MCQs are “enough,” which backfires when CBQs require passing performance to earn full marks or in newer CBQ formats that are integral 

Targeted suggestions to fix it (practical, exam-focused)

1. Train with integrated case practice (daily/weekly).  

   - Replace a portion of MCQ time with CBQ practice: 2 full CBQs/week rising to timed mocks. Use cases that combine variance analysis, overhead allocation, budgeting, and cash flows 

2. Use a structured solve template for each CBQ type.  

   - Example template: 1) Read overview (30–60s); 2) Identify objectives & required outputs (30s); 3) Scan exhibits to list relevant figures; 4) Outline steps (computations, tables, explanations); 5) Compute; 6) Answer succinctly (result + 1-line implication + 1 action). Practise until step 2–4 become automatic .  

3. Practice exhibit reading and data triage.  

   - Do timed drills where you extract only figures needed for a specific calculation (e.g., flexible‑budget variances, cash collections schedule) to speed information retrieval .  

4. Bridge calculation → interpretation.  

   - For every variance or allocation calculation, force a two-line commentary: (a) what the number means (favourable/unfavourable and why), (b) managerial implication or corrective action. Habitually writing this builds explanation skills required in CBQs 

5. Build adaptable technical blocks (not rote templates).  

   - Learn core patterns: flexible vs. static budgets; normal vs. standard costing variances; plantwide vs. departmental vs. activity‑based overhead allocation; direct vs. indirect cash-flow adjustments. For each, have 3 alternate fact patterns practised so you can adapt when case facts change 

6. Simulate exam conditions and feedback loops.  

   - Take full timed mocks with MCQ + CBQ sections; review mistakes in a log, categorize (calculation, interpretation, data‑reading, time). Focus subsequent practice on top two error categories. Use graders or peers to get feedback on clarity of explanations 

7. Improve time and anxiety management.  

   - Use short warm-up CBQs pre-study to build confidence. On exam day, allocate time blocks per sub‑question and stick to the solve template; leave small buffer for review  

8. Learn presentation brevity — write crisp answers.  

   - CBQs reward clarity. Practice writing 1–2 sentence conclusions and 1–2 bullet corrective actions; use tables for numeric summaries to save words and examiner time 

9. Use case-study groups and peer teaching.  

   - Explain your case answers to peers; teaching forces you to structure logic and exposes gaps—especially useful for corporate governance and performance-measurement recommendations  

10. Focused topic drills with integrated scenarios.  

    - For variance analysis: do drills that start with a flexible-budget then trace variances through price/efficiency, then link to operational drivers. For overhead allocation: practice reallocating overhead under different bases and show P&L impact. For cashflow: forecast-to-actual drills and explanation of timing differences 

Short study-plan example (4-week cycle)

- Week 1: 3 CBQ exposures (untimed) focusing on reading and outlining; daily 30 MCQs.  

- Week 2: 3 timed CBQs (90–120 mins) with post-review and error log; daily 30 MCQs.  

- Week 3: Mixed full mock (MCQ + 2 CBQs) under exam timing; targeted drills for top 2 error types.  

- Week 4: Final timed mocks, practice crisp write-ups, peer reviews and mental rehearsal.

One illustration (how to answer a variance CBQ sub-question)

- Compute: Flexible-budget sales variance = (Actual units × Standard price) − (Budgeted units × Standard price).  

- Interpret: Result is X unfavourable, mainly due to lower volume and higher material price.  

- Action: Investigate supplier pricing and production bottlenecks; consider renegotiation or substitute inputs. Practise writing that in one short paragraph after the calculation 

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100 US GAAP MCQs for *CMA Part 1: Financial Accounting* new syllabus, with Answers

100 US GAAP MCQs for *CMA Part 1: Financial Accounting* new syllabusGrouped by topic. Exam style + 1-line why for each.

 

*Note:* CMA Part 1 uses US GAAP for F/S reporting Qs, but main focus = managerial accounting. Still, these concepts show up in Section C “Financial Statement Analysis” + ethics/corporate finance.

 

*Batch 1: Concepts, Conventions, Principles, Stakeholders 1-15*

 

*Q1.* Which principle requires expenses matched with revenues of same period? 

A. Revenue recognition  B. Matching  C. Conservatism  D. Consistency 

*Ans: B* | Matching principle = US GAAP core.

 

*Q2.* “Record asset at historical cost, not market value” is which convention? 

A. Conservatism  B. Materiality  C. Historical cost  D. Going concern 

*Ans: C* | Cost principle under GAAP.

 

*Q3.* Assumption that business will continue indefinitely is? 

A. Entity  B. Periodicity  C. Going concern  D. Monetary unit 

*Ans: C* | Going concern basis.

 

*Q4.* Stakeholder with primary interest in dividends + share price? 

A. Creditor  B. Employee  C. Shareholder  D. Govt 

*Ans: C* | Shareholder = residual claim.

 

*Q5.* Bank lending money is concerned mainly with? 

A. Profitability  B. Liquidity + solvency  C. Growth  D. Market share 

*Ans: B* | Creditor interest = repayment ability.

 

*Q6.* Conflict of interest for manager: 

A. Maximize shareholder wealth by legal means 

B. Approve project giving personal bonus but negative NPV for company 

C. Follow GAAP 

D. Reduce cost 

*Ans: B* | Personal gain vs company goal = agency problem.

 

*Q7.* Goal congruence means: 

A. All depts have same budget 

B. Individual goals align with org goals 

C. CEO decides all goals 

D. No conflict ever 

*Ans: B* | Key CMA concept.

 

*Q8.* Conservatism convention: 

A. Overstate assets, understate liabilities 

B. Anticipate losses, not gains 

C. Record all gains immediately 

D. Ignore uncertainty 

*Ans: B* | “Anticipate no profit, provide for all losses”.

 

*Q9.* Materiality depends on: 

A. Size only  B. Nature + size + context 

C. Auditor’s opinion only  D. Tax law 

*Ans: B* | GAAP: item material if it affects decision.

 

*Q10.* Consistency principle violated if: 

A. Company uses FIFO both years 

B. Company switches FIFO to LIFO without disclosure 

C. Company depreciates SLM both years 

D. Company follows GAAP 

*Ans: B* | Consistency = same method period to period.

 

*Q11.* Entity concept means: 

A. Owner + business finances mixed 

B. Business separate from owner 

C. Only corporation is entity 

D. No relevance 

*Ans: B* | Separate legal entity.

 

*Q12.* Primary users of general purpose financial statements per FASB? 

A. Mgmt only  B. Investors + creditors 

C. Govt only  D. Employees only 

*Ans: B* | FASB CF: primary users.

 

*Q13.* Dual aspect concept means: 

A. 2 accountants check each entry 

B. Every transaction has debit + credit 

C. 2 financial statements 

D. 2 methods for depreciation 

*Ans: B* | Debit = Credit.

 

*Q14.* Realization principle for revenue: 

A. Cash received  B. Earned + realizable 

C. Order received  D. Budget made 

*Ans: B* | GAAP revenue recognition 5-step.

 

*Q15.* Which is NOT qualitative characteristic of useful info? 

A. Relevance  B. Reliability  C. Comparability  D. Conservatism 

*Ans: D* | Conservatism = convention, not QC per FASB CF.

 

*Batch 2: Depreciation, Impairment 16-30*

 

*Q16.* Machine cost $100k, salvage $10k, life 9 yrs. SLM annual dep? 

A. $10k  B. $11,111  C. $9,000  D. $12,000 

*Ans: A* | ($100k-$10k)/9 = $10k.

 

*Q17.* Under SLM, dep expense each year is: 

A. Increasing  B. Decreasing  C. Constant  D. Zero 

*Ans: C* | Straight line = constant.

 

*Q18.* Asset carrying value $80k, fair value $60k, undiscounted CF $70k. Impairment loss? 

A. $0  B. $10k  C. $20k  D. $80k 

*Ans: A* | US GAAP 2-step: If undisc CF $70k > CV $80k? No, $70k < $80k → test fails. Loss = CV - FV = $80k-$60k = $20k. Wait: 2-step: Step1: CV vs undisc CF. $80k > $70k → impaired. Step2: Loss = CV - FV = $20k. 

*Ans: C. $20k*

 

*Q19.* Impairment loss under GAAP recognized in: 

A. OCI  B. P&L  C. Equity  D. Not recognized 

*Ans: B* | Expense in income statement.

 

*Q20.* After impairment, new dep base = ? 

A. Old cost  B. New carrying value / remaining life 

C. Fair value  D. Original cost 

*Ans: B* | Dep on revised book value.

 

*Q21.* Units-of-production dep depends on: 

A. Time  B. Output/units produced 

C. SLM rate  D. Market value 

*Ans: B* | Activity-based.

 

*Q22.* Dep is process of: 

A. Valuation  B. Allocation of cost 

C. Cash outflow  D. Funding replacement 

*Ans: B* | Cost allocation, not valuation.

 

*Q23.* Land is not depreciated because: 

A. No cost  B. Indefinite useful life 

C. GAAP prohibits  D. Tax rule 

*Ans: B* | Land life indefinite.

 

*Q24.* If salvage value increases, SLM dep: 

A. Increases  B. Decreases  C. No change  D. Becomes zero 

*Ans: B* | Dep = (Cost - Salvage)/Life.

 

*Q25.* Impairment test under GAAP done when: 

A. Every year  B. Triggering event/indicator exists 

C. Only at sale  D. Never 

*Ans: B* | When events suggest CV not recoverable.

 

*Q26.* Gain on sale of PPE recorded if: 

A. Proceeds > CV  B. Proceeds < CV 

C. Always  D. Never 

*Ans: A* | Proceeds - CV = gain.

 

*Q27.* Accumulated depreciation is: 

A. Asset  B. Liability  C. Contra-asset 

D. Equity 

*Ans: C* | Reduces gross PPE.

 

*Q28.* Change in dep method is: 

A. Error  B. Change in estimate – prospective 

C. Change in policy – retrospective 

D. Fraud 

*Ans: B* | Estimate change = prospective GAAP.

 

*Q29.* Capital expenditure increases: 

A. Expense  B. Asset value 

C. Liability  D. Revenue 

*Ans: B* | Adds to asset.

 

*Q30.* Revenue expenditure is: 

A. Capitalized  B. Expensed in period 

C. Added to asset  D. Deferred 

*Ans: B* | Repairs, maintenance.

 

*Batch 3: Inventory FIFO LIFO 31-45*

 

*Q31.* During inflation, FIFO vs LIFO: COGS? 

A. FIFO > LIFO  B. FIFO < LIFO 

C. Same  D. Can’t say 

*Ans: B* | FIFO uses old cheap cost → lower COGS.

 

*Q32.* During inflation, ending inventory value highest under? 

A. FIFO  B. LIFO  C. Weighted avg  D. Same 

*Ans: A* | FIFO ending inv = latest higher cost.

 

*Q33.* US GAAP allows which inventory method? 

A. FIFO  B. LIFO  C. Both FIFO + LIFO  D. Only weighted avg 

*Ans: C* | GAAP allows FIFO, LIFO, avg. IFRS bans LIFO.

 

*Q34.* LIFO liquidation occurs when: 

A. Inventory units increase  B. Inventory units decrease below base 

C. Price increases  D. Price decreases 

*Ans: B* | Old layer liquidated, boosts profit.

 

*Q35.* LCM rule under GAAP: inventory valued at? 

A. Cost  B. Market  C. Lower of cost or net realizable value 

D. Higher of cost or market 

*Ans: C* | Conservatism.

 

*Q36.* Purchase 100@10, 100@12, sold 120. FIFO COGS? 

A. $1,240  B. $1,200  C. $1,320  D. $1,100 

*Ans: A* | 100×10 + 20×12 = $1,240.

 

*Q37.* Same data, LIFO COGS? 

A. $1,240  B. $1,200  C. $1,320  D. $1,100 

*Ans: C* | 100×12 + 20×10 = $1,320.

 

*Q38.* During deflation, FIFO profit vs LIFO? 

A. FIFO profit < LIFO 

B. FIFO profit > LIFO 

C. Same 

D. Zero 

*Ans: B* | FIFO COGS higher, profit lower? Wait deflation: old cost high. FIFO uses high old cost → higher COGS → lower profit. LIFO uses new low cost → lower COGS → higher profit. 

*Ans: A. FIFO profit < LIFO*

 

*Q39.* Inventory shrinkage recorded as: 

A. Increase asset  B. Expense loss 

C. Liability  D. Revenue 

*Ans: B* | Debit COGS/loss.

 

*Q40.* Periodic vs perpetual: diff in timing of? 

A. Purchase entry  B. COGS recognition 

C. Sales entry  D. Cash entry 

*Ans: B* | COGS updated continuously in perpetual.

 

*Q41.* Weighted avg cost per unit = ? 

A. Total cost / total units 

B. Latest cost 

C. Oldest cost 

D. Market price 

*Ans: A* | Avg method.

 

*Q42.* LIFO conformity rule requires: 

A. Use LIFO for tax if used for financial 

B. Use FIFO for tax 

C. No rule 

D. Use avg for tax 

*Ans: A* | If LIFO for financial, must use for tax.

 

*Q43.* Inventory turnover = ? 

A. COGS / Avg inventory 

B. Sales / Inventory 

C. Profit / Inventory 

D. Assets / Inventory 

*Ans: A* | Efficiency ratio.

 

*Q44.* Net realizable value = ? 

A. Selling price 

B. Selling price - completion + disposal cost 

C. Cost 

D. Market price 

*Ans: B* | NRV for LCM.

 

*Q45.* Write-down of inventory under GAAP: 

A. Reversed if value recovers 

B. Not reversed 

C. Added to asset 

D. Goes to equity 

*Ans: B* | GAAP prohibits reversal of inventory write-down.

 

*Batch 4: Receivables, Allowance, Cash Flow 46-60*

 

*Q46.* Allowance for doubtful accounts is: 

A. Asset  B. Contra-asset 

C. Liability  D. Expense 

*Ans: B* | Reduces AR.

 

*Q47.* Bad debt expense under allowance method recorded when? 

A. Customer defaults 

B. At time of sale, based on estimate 

C. Cash received 

D. Year end only 

*Ans: B* | Matching principle.

 

*Q48.* Write-off of AR: Debit? 

A. Bad debt expense 

B. Allowance for doubtful accounts 

C. Cash 

D. Sales 

*Ans: B* | Write-off uses allowance, not expense again.

 

*Q49.* Recovery of written-off AR: Credit? 

A. Cash  B. Allowance  C. Bad debt expense  D. Sales 

*Ans: B* | Reinstate AR + allowance first.

 

*Q50.* Age-wise analysis used for: 

A. Dep method 

B. Estimating allowance for doubtful accounts 

C. Inventory valuation 

D. Tax 

*Ans: B* | Aging schedule → % uncollectible.

 

*Q51.* CFO under indirect method starts with: 

A. Cash  B. Net income 

C. Sales  D. Assets 

*Ans: B* | Indirect method starts NI.

 

*Q52.* Increase in AR during year: 

A. Added to NI for CFO  B. Deducted from NI 

C. No effect  D. Added to CFI 

*Ans: B* | Cash not collected yet.

 

*Q53.* Depreciation expense in CFO: 

A. Deducted  B. Added back to NI 

C. Ignored  D. Part of CFI 

*Ans: B* | Non-cash expense.

 

*Q54.* Purchase of equipment is: 

A. CFO  B. CFI  C. CFF  D. Not CF 

*Ans: B* | Capital expenditure = investing.

 

*Q55.* Issue of bonds is: 

A. CFO  B. CFI  C. CFF  D. Not CF 

*Ans: C* | Financing activity.

 

*Q56.* Loss on sale of asset in CFO: 

A. Deducted  B. Added back to NI 

C. Ignored  D. Part of CFI 

*Ans: B* | Non-cash loss.

 

*Q57.* Cash basis vs accrual: accrual records? 

A. Only cash  B. Revenue when earned, expense when incurred 

C. Only expenses  D. Only revenue 

*Ans: B* | Accrual basis.

 

*Q58.* Prepaid insurance $12k for 1 yr, 3 months passed. Expense? 

A. $12k  B. $3k  C. $9k  D. $0 

*Ans: B* | $12k×3/12 = $3k.

 

*Q59.* Unearned revenue is: 

A. Asset  B. Liability  C. Equity  D. Revenue 

*Ans: B* | Obligation to deliver service.

 

*Q60.* Accrued expense means: 

A. Paid in advance 

B. Incurred but not yet paid 

C. Paid and incurred 

D. Not incurred 

*Ans: B* | Wages payable, etc.

 

*Batch 5: Tax, Deferred Tax, Capital Theories 61-80*

 

*Q61.* Current tax expense based on: 

A. Accounting profit  B. Taxable profit 

C. Revenue  D. Cash profit 

*Ans: B* | Tax law profit.

 

*Q62.* Deferred tax arises due to: 

A. Permanent difference 

B. Temporary difference 

C. Both 

D. Neither 

*Ans: B* | Timing diff reverses.

 

*Q63.* Permanent difference example: 

A. Depreciation diff 

B. Fine/penalty not deductible 

C. Warranty provision 

D. Unearned revenue 

*Ans: B* | Fine never deductible.

 

*Q64.* Temp difference: tax dep > book dep creates? 

A. Deferred tax asset 

B. Deferred tax liability 

C. Current tax asset 

D. No effect 

*Ans: B* | Pay less tax now, more later.

 

*Q65.* DTL shown in: 

A. Asset side  B. Liability side 

C. Equity  D. Not shown 

*Ans: B* | Deferred tax liability.

 

*Q66.* Prior period excess tax provision $5k rectified. Entry? 

A. Dr Tax exp Cr Cash 

B. Dr Tax payable Cr Retained earnings 

C. Dr Retained earnings Cr Tax payable 

D. Dr Cash Cr Revenue 

*Ans: B* | Prior period adjustment to opening RE.

 

*Q67.* Capital maintenance: proprietary theory views equity as? 

A. Residual interest of owner 

B. Creditor claim 

C. Govt claim 

D. Employee claim 

*Ans: A* | Equity = assets - liabilities.

 

*Q68.* Entity theory treats business as separate from? 

A. Creditors  B. Owner 

C. Employees  D. Govt 

*Ans: B* | Entity separate from owner.

 

*Q69.* Residual theory: income belongs to? 

A. Creditors  B. Govt 

C. Residual claimant = common shareholders 

D. Employees 

*Ans: C* | After all claims paid.

 

*Q70.* Financial capital maintenance means? 

A. Physical capacity maintained 

B. Money amount of equity maintained 

C. Asset value maintained 

D. No depreciation 

*Ans: B* | Money measure of capital.

 

*Q71.* Physical capital maintenance means? 

A. Money capital maintained 

B. Operating capacity maintained 

C. Profit maintained 

D. Sales maintained 

*Ans: B* | Current cost accounting concept.

 

*Q72.* Deferred tax asset arises when: 

A. Taxable profit > accounting profit 

B. Taxable profit < accounting profit 

C. No difference 

D. Always 

*Ans: B* | Pay more tax now, less later.

 

*Q73.* Valuation allowance on DTA if: 

A. DTA will be realized 

B. “More likely than not” DTA not realized 

C. Always required 

D. Never required 

*Ans: B* | GAAP conservatism.

 

*Q74.* Timing difference = synonym for? 

A. Permanent difference 

B. Temporary difference 

C. Current tax 

D. Tax rate 

*Ans: B* | Reverses over time.

 

*Q75.* Tax rate change affects: 

A. Current tax only 

B. DTA/DTL balance 

C. Cash only 

D. No effect 

*Ans: B* | Remeasure DTA/DTL.

 

*Q76.* Risk contingency in accounting: 

A. Record liability if probable + estimable 

B. Always record 

C. Never record 

D. Disclose only if remote 

*Ans: A* | Contingency rules ASC 450.

 

*Q77.* Remote contingency: 

A. Accrue  B. Disclose  C. Ignore 

D. Record as asset 

*Ans: C* | No action.

 

*Q78.* Reasonably possible contingency: 

A. Accrue  B. Disclose in notes 

C. Ignore  D. Record as asset 

*Ans: B* | Disclosure only.

 

*Q79.* Gross profit = ? 

A. Sales - COGS 

B. Sales - all expenses 

C. Operating income 

D. Net income 

*Ans: A* | Before operating expenses.

 

*Q80.* Operating profit = ? 

A. Gross profit - operating expenses 

B. Sales - COGS 

C. Net income + tax 

D. EBITDA 

*Ans: A* | EBIT.

 

*Batch 6: Reporting, Ratios, Other 81-100*

 

*Q81.* Annual report includes: 

A. Only B/S 

B. B/S, IS, CF, Notes, MD&A 

C. Only IS 

D. Only auditor report 

*Ans: B* | Complete package.

 

*Q82.* MD&A section explains: 

A. Only numbers 

B. Mgmt view on results + future risks 

C. Auditor opinion 

D. Tax details 

*Ans: B* | Management Discussion & Analysis.

 

*Q83.* Notes to accounts provide: 

A. Summary only 

B. Detail + accounting policies 

C. Cash only 

D. Not required 

*Ans: B* | Required disclosures.

 

*Q84.* Auditor’s report gives: 

A. Mgmt opinion 

B. Independent opinion on F/S fairness 

C. Tax opinion 

D. Budget 

*Ans: B* | Unqualified/qualified/adverse.

 

*Q85.* Current ratio = ? 

A. Current assets / Current liabilities 

B. Quick assets / CL 

C. Cash / CL 

D. Total assets / TL 

*Ans: A* | Liquidity ratio.

 

*Q86.* Quick ratio excludes: 

A. Cash  B. Inventory 

C. AR  D. Marketable securities 

*Ans: B* | (Cash+MS+AR)/CL.

 

*Q87.* Debt-to-equity ratio measures: 

A. Profitability  B. Leverage/solvency 

C. Efficiency  D. Liquidity 

*Ans: B* | Capital structure.

 

*Q88.* ROE = ? 

A. NI / Sales  B. NI / Avg equity 

C. Sales / Assets  D. EBIT / Assets 

*Ans: B* | Return on equity.

 

*Q89.* ROA = ? 

A. NI / Avg assets 

B. Sales / Assets 

C. Gross profit / Assets 

D. EBIT / Equity 

*Ans: A* | Return on assets.

 

*Q90.* Days sales outstanding = ? 

A. 365 / AR turnover 

B. 365 / Inventory turnover 

C. AR / Sales 

D. Sales / AR 

*Ans: A* | Collection period.

 

*Q91.* Inventory days = ? 

A. 365 / Inventory turnover 

B. COGS / Inventory 

C. Sales / Inventory 

D. 365 / AR turnover 

*Ans: A* | Days inventory held.

 

*Q92.* Prior period error correction under GAAP: 

A. Current year income 

B. Restate prior year + adjust opening RE 

C. Ignore 

D. Add to expense 

*Ans: B* | Retrospective restatement.

 

*Q93.* Change in accounting principle under GAAP: 

A. Prospective  B. Retrospective with cumulative adjustment 

C. Ignore  D. Current year only 

*Ans: B* | Restate prior periods.

 

*Q94.* Segment reporting required when? 

A. Always  B. Public company with reportable segments 

C. Never  D. Only for tax 

*Ans: B* | ASC 280.

 

*Q95.* EPS = ? 

A. NI / Shares outstanding 

B. Sales / Shares 

C. Assets / Shares 

D. Debt / Shares 

*Ans: A* | Earnings per share.

 

*Q96.* Comprehensive income includes: 

A. NI only 

B. NI + OCI items 

C. Cash flow only 

D. Revenue only 

*Ans: B* | NI + unrealized gains/losses.

 

*Q97.* OCI example: 

A. Sales revenue 

B. Unrealized gain on AFS securities 

C. Wages expense 

D. Interest expense 

*Ans: B* | Bypass P&L.

 

*Q98.* Related party transaction must be: 

A. Ignored  B. Disclosed in notes 

C. Recorded at market always 

D. Not allowed 

*Ans: B* | Disclosure required.

 

*Q99.* Going concern uncertainty: auditor? 

A. Unqualified always 

B. Add emphasis paragraph if doubt 

C. Ignore 

D. Adverse opinion 

*Ans: B* | If substantial doubt.

 

*Q100.* Subsequent event after year-end but before issue date: 

A. Always adjust F/S 

B. Adjust if provides evidence of condition at B/S date 

C. Ignore always 

D. Add to next year 

*Ans: B* | Adjusting vs non-adjusting event.

 

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