CAA CAA Financial Management & Ethics 2

Question 1

Under the Sarbanes-Oxley Act (SOX) Section 404, management must:

Accepted Answer

Assess and report on the effectiveness of internal controls over financial reporting

Answer

SOX Section 404 requires management to assess the effectiveness of internal controls over financial reporting and have auditors attest to that assessment.

Question 2

The concept of 'independence in appearance' for an accountant means:

Accepted Answer

Third parties must perceive the accountant as unbiased and objective

Answer

Independence in appearance requires that a reasonable, informed observer would conclude that the accountant is free from any bias or conflict of interest.

Question 3

Which working capital management strategy typically reduces cash conversion cycle the most?

Accepted Answer

All of the above combined

Answer

The cash conversion cycle = Days in inventory + Days receivable outstanding − Days payable outstanding; reducing all three components has the greatest combined impact.

Question 4

A company has a debt-to-equity ratio of 2:1. This means:

Accepted Answer

The company has $2 of debt for every $1 of equity

Answer

A debt-to-equity ratio of 2:1 means the company has two dollars of debt for every one dollar of equity in its capital structure.

Question 5

Which ethical framework focuses on maximizing overall welfare or 'the greatest good for the greatest number'?

Accepted Answer

Utilitarian ethics

Answer

Utilitarian ethics judges actions by their outcomes, seeking to maximize total well-being across all affected parties.

(CAA) Certified Accounting Analyst Practice Test

(CAA) Certified Accounting Analyst Practice Test

CAA CAA Financial Management & Ethics 2