CMCA - Certified Manager of Community Associations Financial Reporting and Controls Questions and Answers Flashcards

Which financial statement reports an association's assets, liabilities, and members' equity at a specific point in time?

Answer: Balance sheet

The balance sheet is a snapshot of financial position on a given date.

Under the cash flow method of funding reserves, contributions are set so that the reserve balance:

Answer: Stays positive in every year of the projection period

The cash flow method calculates the lowest contributions that keep the projected balance above zero throughout the period.

Requiring two board signatures on checks above a set dollar amount is primarily an example of which internal control?

Answer: Authorization and dual control over disbursements

Dual signatures add a second authorization before large funds leave the association.

Under accrual accounting, assessment revenue is generally recognized when:

Answer: The assessment is levied for the period, regardless of when cash is received

Accrual accounting records revenue when earned or assessed, not when cash arrives.

Who should ideally prepare the monthly bank reconciliation?

Answer: A person who does not handle cash receipts or disbursements

Segregating reconciliation from cash handling prevents one person from concealing theft.

An unqualified (clean) audit opinion means the auditor concluded that the financial statements:

Answer: Present fairly, in all material respects, the financial position and results

An unqualified opinion states fair presentation in all material respects, not a guarantee of accuracy or absence of fraud.

How is a prepaid insurance premium shown on the association's balance sheet?

Answer: As an asset

Prepaid expenses represent future benefits and are recorded as current assets.