CPA Client Advisory Services 3 — Questions and Answers
Question 1: A CPA using a predictive analytics tool for a CAS client identifies that the client is likely to face a cash shortfall in 60 days. This represents which type of advisory value?
- Compliance value
- Diagnostic value
- Predictive/forward-looking value (Correct answer)
- Historical reporting value
Correct answer: Predictive/forward-looking value
Predictive analytics delivers forward-looking insights that enable proactive management decisions, a hallmark of high-value CAS engagements.
Question 2: Which metric would be MOST relevant when advising a SaaS company client on business health in a CAS engagement?
- Gross margin percentage
- Monthly Recurring Revenue (MRR) and churn rate (Correct answer)
- Inventory turnover ratio
- Days payable outstanding
Correct answer: Monthly Recurring Revenue (MRR) and churn rate
MRR and churn rate are the foundational KPIs for SaaS business models, reflecting recurring revenue stability and customer retention.
Question 3: A CPA in a CAS role helps a client evaluate whether to lease or purchase equipment. This type of service is classified as:
- Tax advisory
- Strategic advisory/management consulting within CAS (Correct answer)
- Attest service
- Compilation engagement
Correct answer: Strategic advisory/management consulting within CAS
Lease-versus-buy analysis is a management consulting/strategic advisory service within the CAS umbrella, governed by SSCS No. 1.
Question 4: Under the AICPA's CAS framework, 'Controller Services' typically includes all of the following EXCEPT:
- Financial close process management
- Budget preparation and variance analysis
- Conducting an independent audit of financial statements (Correct answer)
- Cash management oversight
Correct answer: Conducting an independent audit of financial statements
Independent auditing is an attest function that cannot be performed by the same firm providing controller services due to independence requirements.
Question 5: A CPA advises a client on improving their accounts receivable process. Which of the following recommendations would MOST directly reduce Days Sales Outstanding (DSO)?
- Increase advertising spend
- Implement automated invoice reminders and offer early payment discounts (Correct answer)
- Switch from cash to accrual accounting
- Delay vendor payments to preserve cash
Correct answer: Implement automated invoice reminders and offer early payment discounts
Automated reminders and early-pay incentives accelerate collections, directly reducing the average number of days receivables remain outstanding.
Question 6: A CPA providing CAS must maintain client confidentiality. Under ET Section 1.700.001, a CPA may disclose confidential client information WITHOUT client consent in which situation?
- To respond to a subpoena or court order (Correct answer)
- To share with a prospective new client as a reference
- To discuss with a colleague at a networking event
- To include in a public blog post as an anonymous case study
Correct answer: To respond to a subpoena or court order
ET Section 1.700.001 permits disclosure without consent when required by a valid legal process such as a subpoena or court order.
Question 7: When scoping a CAS engagement, a CPA should document the nature of services in an engagement letter primarily to:
- Satisfy IRS requirements
- Clearly define responsibilities and manage client expectations to reduce misunderstandings (Correct answer)
- Meet PCAOB standards
- Comply with SSARS No. 21 compilation requirements
Correct answer: Clearly define responsibilities and manage client expectations to reduce misunderstandings
Engagement letters establish the scope, responsibilities, and limitations of CAS work, protecting both the CPA and client from scope creep and disputes.
CPA Client Advisory Services 3
A CPA using a predictive analytics tool for a CAS client identifies that the client is likely to face a cash shortfall in 60 days.
This represents which type of advisory value?