CPA Business Environment & Concepts Flashcards

Which IT general control is designed to ensure that only authorized personnel can access financial data systems?

Answer: Access controls

Access controls restrict system entry to authorized users through passwords, biometrics, and role-based permissions to protect data integrity.

A company's current ratio is 2.5 and its quick ratio is 1.2. What does this comparison suggest?

Answer: The company holds significant inventory

A large gap between the current ratio and quick ratio indicates that a significant portion of current assets consists of inventory, which is excluded from the quick ratio.

Which supply chain strategy minimizes inventory by receiving goods only as they are needed in production?

Answer: Just-in-time (JIT)

Just-in-time (JIT) inventory management reduces holding costs by synchronizing material deliveries with production schedules.

The balanced scorecard framework evaluates organizational performance across four perspectives. Which is NOT one of them?

Answer: Employee satisfaction

The four perspectives in Kaplan and Norton's balanced scorecard are Financial, Customer, Internal Business Processes, and Learning & Growth — not Employee Satisfaction.

In the context of corporate governance, the board's audit committee is primarily responsible for:

Answer: Overseeing financial reporting and external auditors

The audit committee oversees the integrity of financial statements, coordinates with external auditors, and monitors internal controls.

Which business valuation method estimates value based on expected future cash flows discounted to present value?

Answer: Discounted cash flow (DCF) method

The DCF method values a business by projecting future free cash flows and discounting them at an appropriate rate reflecting risk.