CEP Cheat Sheet 2026

The 30 highest-yield CEP facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. What is an internal control in CEP financial management? → A process providing assurance about financial reporting reliability
2. What is the primary purpose of financial analysis in equity compensation? → To evaluate plan impact
3. Which of the following award structures is MOST likely to trigger liability (mark-to-market) accounting under ASC 718? → Cash-settled SARs where the company has an obligation to pay cash upon exercise
4. What differentiates fixed from variable costs in CEP? → Fixed costs stay constant; variable costs change with volume
5. Which financial statement disclosure is required by ASC 718 regarding the weighted-average grant-date fair value of options granted during the period? → It must be disclosed in the notes to financial statements
6. What is financial forecasting in CEP practice? → Predicting future conditions based on historical data and trends
7. Which of the following is a valid basis for setting the purchase price under a Section 423 ESPP? → 85% of the lower of FMV on the offering date or the purchase date
8. What is a 'sell-to-cover' RSU release transaction? → Selling a portion of the vested RSU shares to cover the tax withholding obligation
9. Which of the following represents a 'clawback' risk for a CEP professional managing an executive equity plan? → The risk that previously paid compensation must be recouped due to a financial restatement
10. Which accounting standard governs the financial reporting of share-based payment transactions under IFRS? → IFRS 2
11. What is budget variance analysis in CEP financial management? → Comparing actual spending against budgeted amounts to explain differences
12. Which forfeiture accounting policy did ASU 2016-09 permit companies to elect instead of estimating a forfeiture rate at grant date? → Recognize forfeitures as they occur rather than estimating upfront
13. What is the role of a stock plan administrator? → Managing plan administration
14. What is the purpose of the Sarbanes-Oxley Act in relation to equity compensation? → To ensure reporting accuracy
15. In a diluted EPS calculation under the treasury stock method, which of the following correctly describes the denominator adjustment for in-the-money options? → Add net new shares: options exercisable minus shares repurchased at average market price
16. What is the primary goal of regulatory compliance in CEP practice? → Ensuring adherence to laws and standards governing professional practice
17. Under a Section 423 ESPP, the same rights and privileges must be granted to: → All participating employees equally
18. What does residual risk mean in CEP practice? → Risk remaining after all controls are implemented
19. When assessing forfeiture risk for an equity plan, which data source is MOST reliable for estimating future forfeitures? → The company's own historical forfeiture experience by employee group
20. What does ROI measure in CEP financial analysis? → Gain or loss relative to the investment amount
21. The 'expected term' input for Black-Scholes reflects anticipated employee behavior. Which scenario would most likely LENGTHEN the expected term used in a model? → A large portion of option holders are nearing retirement
22. What is financial forecasting in CEP practice? → Predicting future conditions based on historical data and trends
23. What does the term 'vesting' refer to in equity compensation? → The period before a stock option can be exercised
24. What is the primary goal of regulatory compliance in CEP practice? → Ensuring adherence to laws and standards governing professional practice
25. What does a company disclose as 'unrecognized compensation cost' in its equity award footnote? → The remaining stock-based compensation expense for unvested awards not yet recognized
26. A company grants restricted stock (not RSUs) to an executive. To make an 83(b) election, the executive must file with the IRS within: → 30 days of the grant date
27. Under ASC 718, for awards subject to a performance condition, how should the number of awards expected to vest be estimated? → Estimate the probable outcome and recognize expense based on awards expected to vest
28. What is a risk matrix used for in CEP practice? → Evaluating risks by plotting likelihood against impact severity
29. How should equity compensation plan changes be communicated to employees? → Through email and formal notices
30. Which financial metric is most directly impacted when a company shifts from settling RSUs in cash rather than shares? → Classification of compensation expense from equity to liability accounting