CMCA CMCA - Certified Manager of Community Associations Financial Reporting and Controls Questions and Answers 3

Question 1

A compilation financial report differs from an audit primarily in that a compilation:

Accepted Answer

Involves the CPA presenting management-provided data without verifying its accuracy or providing any assurance

Answer

Is more thorough and provides greater assurance

Answer

Is required by all state HOA statutes

Answer

Cannot be performed by a CPA

Question 2

Which of the following is the best indicator that an association's operating budget is healthy?

Accepted Answer

Actual year-to-date expenses are tracking close to budgeted amounts with no major variances

Answer

The reserve fund balance exceeds one million dollars

Answer

All homeowners paid their assessments on time

Answer

The management fee has not increased in five years

Question 3

The statement of cash flows is useful to a community association board because it shows:

Accepted Answer

How cash was generated and used during the period including operating, investing, and financing activities

Answer

Total assets and liabilities at year end

Answer

Whether the reserve fund is adequately funded

Answer

The market value of the association's property

Question 4

A manager notices that the same employee who processes vendor invoices also signs checks to pay those vendors. This is a problem because:

Accepted Answer

It eliminates the separation of duties control that would catch unauthorized or fraudulent payments

Answer

It violates GAAP only if the amounts exceed ten thousand dollars

Answer

It is permitted as long as the board reviews invoices monthly

Answer

It violates the Fair Debt Collection Practices Act

Question 5

Funds held in an association's reserve account should be:

Accepted Answer

Kept in a separate, clearly designated account to prevent accidental spending on operating expenses

Answer

Commingled with operating funds in a single account for efficiency

Answer

Invested entirely in speculative stocks to maximize return

Answer

Spent on operating expenses if the operating account runs low

Question 6

An association's chart of accounts serves as:

Accepted Answer

The standardized numbering and classification system for all financial transactions

Answer

A list of all homeowners and their contact information

Answer

The budget document approved at the annual meeting

Answer

A record of all vendor contracts