Skills and Competencies Flashcards

A CNA accountant is preparing a cost-benefit analysis for a capital investment. Which discount rate is most appropriate for evaluating the project's net present value?

Answer: The company's weighted average cost of capital (WACC)

WACC reflects the blended cost of all financing sources and is the standard hurdle rate for NPV analysis.

When reconciling a bank statement, which item would INCREASE the balance per books?

Answer: A bank credit memo for interest earned

A bank credit memo represents income credited by the bank that has not yet been recorded in the books, so it increases the book balance.

Which internal control procedure is most effective at preventing fictitious vendor payments?

Answer: Segregating the duties of purchasing, receiving, and payment authorization

Segregation of duties ensures no single employee can initiate, approve, and record a payment, eliminating the primary fraud opportunity.

A company's accounts receivable turnover ratio decreased significantly year-over-year. What is the most likely implication?

Answer: The company extended more lenient credit terms or collection efficiency declined

A lower AR turnover means receivables are taking longer to convert to cash, suggesting looser credit policies or weaker collections.

Under ASC 842, how should a lessee classify a lease where the lease term is 90% of the asset's remaining economic life?

Answer: Finance lease

Under ASC 842, if the lease term is for the major part of the asset's remaining economic life (typically ≥75%), it is classified as a finance lease.

Which analytical skill is most critical when identifying errors in a trial balance?

Answer: Cross-referencing debits and credits to ensure the balance sheet equation holds

Verifying that total debits equal total credits and tracing discrepancies to source documents is the core skill for resolving trial balance errors.

A manager asks a CNA accountant to exclude a known liability from the balance sheet to improve the debt-to-equity ratio before a loan application. The accountant should:

Answer: Refuse and explain that omitting known liabilities violates GAAP and professional ethics

Deliberately omitting known liabilities violates GAAP and the professional integrity standards required of a CNA, regardless of who approves it.