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

A bank reconciliation is performed to:

Answer: Verify that the association's accounting records match the bank statement balance adjusted for outstanding items

Bank reconciliation reconciles the balance per the association's books with the balance per the bank statement, accounting for outstanding checks, deposits in transit, and bank errors or fees.

Which financial statement shows the results of an association's operations over a specific period?

Answer: Income statement or statement of revenues and expenses

The income statement shows all revenues and expenses over a period, typically a month, quarter, or year, revealing whether the association operated at a surplus or deficit.

An accounts receivable aging report helps a community manager:

Answer: Identify how long homeowner assessment balances have been outstanding

An accounts receivable aging report categorizes delinquent assessment balances by how long they have been outstanding such as 30, 60, or 90 or more days, enabling managers to prioritize collection efforts.

Accrual basis accounting recognizes revenues and expenses when:

Answer: They are earned or incurred regardless of when cash changes hands

Accrual accounting records revenue when it is earned such as when assessments are due, and expenses when they are incurred such as when a service is performed, regardless of actual cash flow timing.

An internal control requiring two authorized signatures on checks above a certain dollar amount is an example of:

Answer: Dual approval and separation of duties

Requiring two signatures on large checks is a separation-of-duties control that prevents a single individual from authorizing large expenditures unilaterally, reducing the risk of fraud or error.

When an association's financial audit reveals a material weakness in internal controls, this means:

Answer: There is a significant deficiency in internal controls that could allow material misstatement of financial statements to go undetected

A material weakness is a serious gap in internal controls, one significant enough that there is a reasonable possibility that a material misstatement in the financial statements would not be prevented or detected in a timely manner.