Mixed Deck — All CA Topics Flashcards

In an ERP system, a 'three-way match' refers to matching:

Answer: Invoice, purchase order, and receiving report

A three-way match compares the vendor invoice, purchase order, and receiving report to ensure agreement before payment is authorized.

Which professional attribute is most valued in cost accounting within the CA field?

Answer: Accountability and commitment to standards

Accountability and commitment to professional standards build trust and ensure consistent, high-quality practice.

Which of the following is an example of a committed fixed cost?

Answer: Depreciation on factory equipment

Committed fixed costs arise from long-term investment decisions and cannot be easily changed in the short run; depreciation on factory equipment is a classic example.

What is the best practice for maintaining information systems performance over time?

Answer: Implement scheduled preventive maintenance

Scheduled preventive maintenance catches potential issues before they cause failures, maintaining reliability and extending equipment life.

What does tax avoidance refer to?

Answer: Legal tax planning

Tax avoidance refers to legal tax planning, where individuals and businesses use legitimate strategies within the tax code to minimize their tax liability. This involves taking advantage of deductions, credits, and provisions allowed by law. It is distinct from tax evasion, which is the illegal act of deliberately misrepresenting financial information to avoid paying taxes.

Which act combats corporate fraud and enforces compliance?

Answer: Sarbanes-Oxley Act

The Sarbanes-Oxley Act (SOX) of 2002 was enacted to combat corporate fraud and enforce compliance in publicly traded companies. It introduced stringent requirements for corporate governance, internal controls, and financial reporting to protect investors from accounting scandals. SOX significantly strengthened auditor independence and increased accountability for corporate executives.

A firm with net income of $200,000, depreciation of $50,000, an increase in accounts receivable of $30,000, and an increase in accounts payable of $10,000 would report operating cash flow of:

Answer: $230,000

OCF = Net income + Depreciation − ΔAR + ΔAP = $200,000 + $50,000 − $30,000 + $10,000 = $230,000.

Which of the following best describes the 'business judgment rule' in corporate law?

Answer: Courts will not second-guess good-faith business decisions by directors

The business judgment rule protects directors from liability for honest mistakes in good-faith decisions made on an informed basis.

Which foundational principle is MOST important for success in the Certified Accountant profession?

Answer: Commitment to continuous learning, ethical practice, and quality outcomes

Success in any professional field requires a commitment to continuous learning to stay current, ethical practice to maintain trust and integrity, and a focus on quality outcomes that serve stakeholders and the public interest.

Which of the following best describes 'detection risk' in the audit risk model?

Answer: The risk that the auditor's procedures fail to detect a misstatement that exists

Detection risk is the risk that the auditor's substantive procedures will not detect a material misstatement that exists in an account balance or transaction class.

Which risk management approach is MOST effective for CA professionals when evaluating potential workplace hazards?

Answer: Proactive hazard identification and assessment

Proactive hazard identification and assessment allows professionals to identify and mitigate risks before incidents occur, which is far more effective than reactive approaches that only address problems after they happen.

When using the high-low method to estimate a cost function, which data points are used?

Answer: The observations with the highest and lowest activity levels

The high-low method uses only the highest and lowest activity-level data points to calculate variable cost per unit and total fixed costs.

Which procedure provides the highest level of assurance about the existence of accounts receivable?

Answer: Sending positive confirmations to customers

Positive confirmations require the recipient to respond regardless of agreement, providing strong third-party evidence of existence.

In capital budgeting, what does the profitability index measure?

Answer: The ratio of the present value of future cash flows to the initial investment

The profitability index (PI) = PV of future cash inflows ÷ Initial investment; a PI greater than 1.0 indicates an acceptable project.

Which defense to contract enforcement is based on a mutual mistake by both parties about a material fact at the time of contracting?

Answer: Bilateral (mutual) mistake

A bilateral or mutual mistake occurs when both parties share a false belief about a material fact, which may allow rescission of the contract.

Which segment of the statement of cash flows would reflect proceeds from selling long-term investments in marketable equity securities?

Answer: Investing activities

Buying and selling long-term investments are investing activities because they involve the acquisition and disposal of long-term assets.

Which statement BEST describes the relationship between Certified Accountant certification requirements and industry evolution?

Answer: Requirements evolve periodically to reflect advances in knowledge, technology, and practice standards

Certification requirements evolve to keep pace with advances in professional knowledge, technological developments, and changes in practice standards. This ensures that certified professionals remain current and competent in a changing professional landscape.

A company issues $1,000,000 of 8% bonds when the market rate is 10%. The bonds will be issued at:

Answer: A discount

When the stated interest rate (8%) is lower than the market rate (10%), bonds are issued at a discount because investors demand a higher yield than the bond offers.

Which corporate restructuring technique involves one company splitting into two or more independent companies by distributing shares of the new entities to existing shareholders?

Answer: Spin-off

A spin-off distributes shares of a subsidiary to the parent's shareholders, creating a separate public company.

Which type of negotiable instrument is an unconditional written order by one party directing another to pay a fixed sum to a third party?

Answer: Draft (bill of exchange)

A draft is a written order (three-party instrument) where the drawer directs the drawee to pay the payee, making it the classic bill of exchange.