Q1. Which statement is not an advantage of robotic process automation (RPA)?
✅Bots are more creative than humans
Mad:Bots do no need to take time off
Mad:Bots improve efficiency
Mad:Bots can eliminate human errors

Q2. What effect does a contra asset account have on a balance sheet?
Mad:A contra asset is not an accounting term
✅A contra asset has a credit balance and therefore a negative effect on total assets
Mad:A contra asset with a positive balance will increase overall liabilities
Mad:A contra asset has a debit balance and therefore a positive effect on total assets

Q3. Internal controls may be preventative, detective, corrective, or directive. Which is a detective control?
Mad:data backups
✅physical inventory check
Mad:employee background checks
Mad:physical locks on inventory warehouse

Q4. On March 15, a business receives an invoice from the power company for utilities used in February. The retailer pays the invoice on April 1. The business uses accrual-based accounting. Which month should the business recognize the expense?
Mad:April
Mad:March
Mad:no record required
✅February

Q5. Which choice is a general guideline for adequate separation of duties to prevent both fraud and error?
Mad:A person who has control over an asset should not safeguard that asset.
Mad:A person who has temporary or permanent custody of an asset should not account for that asset.
✅A person who has record-keeping responsibility should not make journal entries.
Mad:A person who has operational responsibility should not authorize transactions for the area.

Q6. What does the cost of a unit of product under absorption costing method consist of?
Mad:direct materials, direct and indirect labor, and fixed overhead
Mad:direct materials, indirect labor, and variable and fixed overhead
✅direct materials, direct labor, and both variable and fixed overhead
Mad:direct materials, direct and indirect labor, and variable overhead

Q7. Which answer best describes accruals and deferrals?
Mad:Accruals are past cash receipts and payments, while deferrals are expected future cash receipts and payments.
Mad:Both accruals and deferrals are both expected future cash receipts and payments.
✅Accruals are expected future cash receipts and payments, while deferrals are past cash receipts and payments.
Mad:Both accruals and deferrals are not expected past cash receipts and payments.

Q8. What do you call a situation where more than one person collaborates to circumvent existing internal controls?
Mad:assigned responsibility
Mad:segregation of duties
Mad:fraud prevention
✅collusion

Q9. Which is not an example of an internal control activity?
✅review of manufacturing plan
Mad:segregation of duties
Mad:bank reconciliations
Mad:approval process

Q10. Which budgeting approach request justification of all expenditures?
✅zero-based budgeting
Mad:master budgeting
Mad:rolling budgets
Mad:bottom-up budgeting

Q11. What does the discontinued operations section of the income statement refer to?
✅disposal of a major product line or major geographical area of operations
Mad:sale of unused or obsolete equipment and discontinued inventory
Mad:plant shutdown or decommissioning of a facility
Mad:net income or loss for products completed and sold

Q12. How are the three financial statements (income statement, balance sheet, and cash flow statement) linked?
Mad:Only the assets are reflected in the cash flow statement, and the net income expenses correlate with the liabilities.
Mad:The net income goes to retained earnings, but the cash flow remains independent.
Mad:The gross profit goes to retained earning, and the shareholder equity total is added to the cash flow statement
✅The net income goes to the retained earning and to the cash flow statement

Q13. Which is not one of the four perspectives of the balanced scorecard?
Mad:internal business
Mad:learning and growth
✅quantitative
Mad:customer

Q14. What would be deducted from the balance per books when doing a bank reconciliation?
Mad:deposits in transit
Mad:bank service fees
✅outstating checks
Mad:electronic fund transfers/payments

Q15. What situation could be the results of the three retails store employees sharing the same cash register?
Mad:a thorough internal control activity
✅a violation of assignment of responsibility
Mad:a violation of segregation of duties
Mad:a support process to avoid fraud

Q16. A firm has $1,000 in debt and $3,000 in assets. What is the firm's debt-to-equity ratio?
Mad:3
Mad:2
Mad:0.5
✅0.33

Q17. An external auditor is required to be independent when performing
✅all attestation services
Mad:all professional services (wrong ans, includes consulting)
Mad:all tax services
Mad:all consulting engagements (wrong ans)

Q18. Proper segregation of functional responsibilities calls for separation of
Mad:custody, payment, and recording
Mad:authorization, custody, and execution
✅authorization, custody, and recording
Mad:custody, execution, and payment

Q19. What does the degree of operating leverage represent?
Mad:how much the value of capital assets will change in response to a change in sales
✅how much the operating income of a company will change in response to a change in sales
Mad:the valuation of assets to determine how much additional debt the company can borrow
Mad:how much the sales of a company will change in response to a change in operating income

Q20. Which characteristic would concern an auditor about the risk of material misstatements arising from fraudulent financial reporting?
Mad:limited employee turnover within the accounting and finance department
✅management's disregard of regulations and regulatory authorities
Mad:regularly reported bank reconciliations, including deposits in transit
Mad:capital assets sold at a loss before being depreciated fully

Q21. An employee who makes a sale, ships the goods, and bills the customer violates which control activity?
Mad:assignment of responsibility
Mad:audit verification
✅segregation of duties
Mad:review and reconciliation

Q22. What trait distinguishes auditors from accountants?
Mad:The auditor can interpret accounting principles applicable to the country in which the client operates.
Mad:The auditor has extensive education beyond what is required for an accountant
Mad:The auditor can adapt to a rapidly changing profession.
✅The auditor has expertise in the gathering and interpretation of audit evidence.

Q23. What is the purpose of an operational audit?
✅assessing the company's compliance with environmental laws and regulations
Mad:evaluating whether the organization is meeting the metrics set by management in order to achieve the goals and objectives set forth by the board of directors
Mad:assessing the organization's control mechanisms for overall efficiency and reliability
Mad:evaluating compliance with applicable laws, regulations, policies, and procedures

Q24. Which statement is false?
Mad:The balanced scorecard aligns an organization's operational activities with its mission.
Mad:The balanced scorecard focuses on four primary areas: financial, customer, internal process, and learning and growth. (def true)
Mad:The balanced scorecard measures, tracks, and reports on a balance of qualitative and financial data and metrics. (def true)
✅The balanced scorecard ensures the organization's profitability aligns with director compensation and dividend expectations.

Q25. Which choice is not a component of internal control?
Mad:information and communication
✅risk mitigation
Mad:monitoring
Mad:control environment

Q26. What is the difference between the cost of an asset and the accumulated depreciation for that asset?
Mad:depreciation value
Mad:prepaid asset
Mad:depreciation expense
✅book value

Q27. A company budgeted 1,200 washers, but only 1,000 are produced. It costs $10 to produce a widget. What is the materials variance?
✅200
Mad:2000
Mad:350
Mad:20

Q28. Who does an audit committee report to?
✅external auditors
Mad:senior management
Mad:board of directors
Mad:union of employee representatives

Q29. A business purchased office equipment by issuing a one-year note payable. The entire amount of the note is due at the end of one year. How do you record this transaction?
Mad:Debt asset, credit equity
Mad:Debt liablity, credit asset.
✅Debit asset, credit liability
Mad:Debit equity, credit asset.

Q30. Which section of a financial annual report describes the corporation's accounting methods?
✅Notes to the financial statements
Mad:An auditor's report
Mad:Listing of the stockholders
Mad:Management discussion and analysis

Q31. What does "independence" mean in auditing?
Mad:being an advocate for all clients
Mad:not being dependent on a client's fee
Mad:having only indirect financial interests in the auditee
✅taking an unbiased viewpoint

Q32. What would cause a bank to increase a depositor's account?
Mad:collecting a note receivable
✅paying a note payable
Mad:NSF checks ("non sufficient funds")
Mad:service changes