CMCA Financial Reporting and Controls 2

Question 1

Which financial statement shows the association's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet (statement of financial position) presents assets, liabilities, and equity as of a specific date.

Question 2

What does a positive budget variance on an expense line item indicate?

Accepted Answer

The association spent less than budgeted

Answer

A positive (favorable) expense variance means actual spending came in below the budgeted amount.

Question 3

An HOA's accounts receivable aging report shows a homeowner 120+ days past due. What is the most appropriate next step?

Accepted Answer

Refer the account to the association's attorney for collection

Answer

Accounts delinquent beyond 120 days typically warrant escalation to legal counsel per the association's collection policy.

Question 4

Which internal control best prevents a single employee from both approving invoices and issuing payment?

Accepted Answer

Segregation of duties

Answer

Segregation of duties separates authorization, custody, and recordkeeping functions among different individuals to reduce fraud risk.

Question 5

What is the primary purpose of a reserve study for a community association?

Accepted Answer

To project future major repair and replacement costs and funding needs

Answer

A reserve study evaluates the condition and remaining useful life of common elements to project future costs and required funding levels.

CMCA - Certified Manager of Community Associations Practice Test