BEC Mnemonics 2020
● C - Value Creation DUNS - Categories of Risk
ORC - Three categories of objectives on COSO
Framework
● O - Operations Objectives
● R - Reporting Objectives
● C - Compliance Objectives
CRIME - Internal Control Components
● C - Control Environment
● R - Risk Assessment
● I - Information and Technology
● M - Monitoring Activities
● E - Existing Control Activities
EBOCA - Principles of Control Environment
● E - Commitment to Ethical Values and
Integrity
● B - Board independence and oversight
● O - Organizational structure
● C - Commitment to Competence
● A - Accountability
SAFR - Principles of Risk Assessment
● S - Specify objectives
● A - Identify and Assess changes
● F - Consider the potential for Fraud
● R - Identify and analyze Risks
OIE - Information and Communication Principles
● S - Establishes operating Structure
O - Obtain and use information
● I - Internally communicate information
● E - Communicate with External Parties
SO D - Monitoring Activities Principles
● SO - Separate and/or Ongoing
Evaluations
● D - Communications of Deficiencies
CA T P - Existing Control Environment Principles
● CA - Select and develop Control A
ctivities
● T - Select and develop Technology
controls
● P - Deploy through Policies and P
rocedures
ARTS - Help respond to risk
● A - Avoid (high frequency, high severity)
● R - Reduce (high frequency, low
severity)
● T - Transfer (low frequency, high
severity) {Share}
● S - Self-Insure (low frequency, low
severity) {Accept}
COPS - Steps to compile and document the
internal control assessment
● O - Overall Assessment - supported by
complement evaluations
● C - Component Evaluation - supported
by principal evaluations
● P - Principal Evaluation - The source for
isolating and defining internal control
deficiencies
● S - Summary of Internal Control
Deficiencies (if any) - Summarized and
impact the overall assessment
CPER - Develop value - make it CPER
● P - Value Preservation
● E - Value Erosion
● R - Value Realization
CCPIS - To Manage risk and create value
● C - Culture
● C - Capabilities (Competitive
Advantage)
● P - Practices
● IS - Integration With Strategy-Setting
and Performance
GOPRO - Components of Enterprise Risk
Management
● G - Governance and Culture
● O - Strategy and Objective Setting
● P - Performance
● R - Review and Revision
● O - Information, Communication, and
Reporting (Ongoing)
DOVES - Governance and Culture Principles
● D - Defines Desired culture
● O - Exercises board Oversight
● V - Demonstrates commitment to core
Value (tone at the top)
● E - Attracts, developes, and retains
capable individuals (Employees) ●
SOAR - Strategy and Objective Setting Principles
● S - Evaluates alternative Strategies
● O - Formulates business Objectives
● A - Analyze business context
● R - Defines Risk appetite
VAPIR - Performance Principles of COSO
enterprise risk management
● V - Develops portfolio View
● A - Assesses severity risk
● P - Prioritizes risk
● I - Identifies risk (events)
● R - Implements Risk Responses
SIR - Review and Revision Principles
● S - Assesses Substantial change
● I - Pursues Improvement in Enterprise
Risk Management
● R - Reviews risk and performance
TIP - Information, Communication and Reporting
(Ongoing) Principles
● T - Leverages information and
Technology
● I - Communicates risk Information
● P - Reports on risk, culture, and
performance
● D - Diversifiable
● U - Unsystematic (non market/firm
specific)
● N - Nondiversifiable
● S - Systematic (market)
OWNES - Must meet one of the following to
classify as finance lease (or operating)
● O - Ownership transfer at the end of
the lease
● W - Written purchase option that the
lessee is reasonably certain to exercise
● N - Net present value of all lease
payments and guaranteed residual
value is equal to or substantially
exceeds the underlying asset’s fair
value
● E - Economic life of the underlying asset
is primarily encompassed within the
term of the lease
● S - Specialized asset such that it will not
have an expected alternative use to the
lessor when the lease end
ESOC - The EOQ equation and equation
components
● E - Order Size (
√
EOQ)
● 2 SO
S - Annual Sales ¿
(in units) C
● O - Cost per
Purchase Order
● C - Annual Carrying cost per unit
CALM - Valuing Tangible Assets (stay “CALM”)
● C - Cost Method (original cost and
potentially adjustments for
depreciation)
● A - Appraisal Method (professional
appraiser)
● L - Liquidation Method (If the asset had
to be sold today)
● M - Market Value Method (Similar
assets in marketplace - replacement
cost and NRV)
MIC - Valuing Intangible Assets (Just ask “MIC”)
● M - Market Approach (preferred
approach - actual arms length
transaction)
● I - Income Approach (DCF)
● C - Cost Approach (Replacement cost
and reproduction cost are iterations of
this approach)
PIE - Most frequent objectives of cost accounting
systems
● P - Product costing (inventory and cost
of goods manufactured and sold)
● I - Income Determination (profitability)
● E - Efficiency measurements
(comparisons to standards)
CRPI - four financial measures of responsibility
units (SBUS)
● C - Cost SBU (managers held
responsible for controlling costs)
● R - Revenue SBU (managers held
responsible for generating revenues)
● P - Profit SBU (managers are held
responsible for producing target profit)
● I - Investment SBU (manager held
responsible for return on assets)
FICA- Critical success factors of a balanced
scorecard
● F - Financial
● I - Internal business processes
● C - Customer Satisfaction
● A - Advancement of innovation and
human resource development
APIE - Costs of Quality
● A - Appraisal Costs (conformance cost,
detect before)
WRITEN - Factors that shift demand curves
(factors other than price)
● W - Changes in Wealth
● R - Changes in the Price of Related
Goods (substitutes and complements)
● I - Changes in Consumer Income
● T - Changes in Consumer Tastes or
Preferences for a Product
● E - Changes in Consumer Expectations
● N - Changes in the Number of Buyers
Served by the Market
ECOST - Factors That Shift Supply Curves
● E - Changes in Price Expectations of
Supplying Firm
● C - Changes in Production Costs (Price
of Inputs)
● O - Changes in the Price or Demand for
Other Goods
● S - Changes in Subsidies or Taxes
● T - Changes in Production Technology
NOO - % change
DMAIC - Six Sigma: Existing Product and Business
Improvements
● D - Define the Problem
● M - Measure Key Aspects of the Current
Process
● A - Analyze Data
● I - Improve or Optimize Current
Processes
● C - Control
DMADV - Six Sigma: New Product or Business
Process Development
● D - Define Design Goals
● M - Measure CTQ (critical to Quality
Issues)
● A - Analyze Design Alternatives
● D - Design Optimization
● V - Verify the Design
BIG - Big Data
● B - Big

● P - Prevention Costs (conformance cost, ● New minus Old divided by Old ● I - Information
prevent) ● G - Generates Opportunities
BRIC - Emerging Economies
● I - Internal failure (nonconformance
costs, cure a defect before customer
● B - Brazil
receives) ● R - Russia
● E - External failure (nonconformance ● I - India IRAC - Written Communication
costs, cure a defect after customer ● C - China ● I - Intro (what’s the problem)
receives) ● R - Rules
IT TA DO - Factors that drive globalization ● A - Analysis
TWICE Government - factors that shift aggregate
demand
● IT - Improvements in Transportation ● C - Conclusion
● T - Taxes
● TA - Technological Advancement

● W - Wealth
● I - Interest Rates
● C - Consumer Confidence
● E - Exchange rates
● G - Government spending
GICE - GDP calculated under expenditure approach
● G - Government purchases of goods
and services +
● I - Gross private domestic Investment +
● C - Personal Consumption expenditures
+
● E - Net Exports (exports minus imports)
● D - Deregulation of International
Financial Markets
● O - Organizational/Operational Options
for International Business
FIL JVS
● F - Franchising
● I - International Trade
● L - Licensing
● JV - Joint Ventures
● S - Global Sourcing
● (& Direct Foreign Investment (DFI) )
PEE - Risk of International Business

I PIRATED- GDP calculated under the income

● P - Political
approach ● E - Exchange Rate (Currency Risk)
● I - Income of proprietors ● E - Economic
● P - Profits of corporations
PDCA - Process Management
● I - Interest (net)
● P - Plan: design the planned process
● R - Rental income improvement
● A - Adjustments for net foreign income ● D - Do: Implement the process
and misc. items improvement
● T - Taxes (indirect business taxes) ● C - Check: Monitor the process
● E - Employee compensation (wages) improvement
● D - Depreciation (also known as capital ● A - Act: Continuously commit to the
consumption allowance) process and reassess the degree of
improvement
BEC Formulas
 Beta = % Δ stock price
% Δ market price
 CAPM = RFR + Beta*(Mark R – RFR)
 DCF = (Curr Div*(1+g)/Curr stock
price) + g AKA… (D1/P0) + g
 BRRP = pretax cost of LT debt +
market risk premium
 Market risk = RFR + inflat prem
 Net cost of debt = effective rate *
(1 – TR)
 (when computing WACC
remember that debt needs to
be made reduced by tax rate)
 Cost of PS = div paid (par * % div)
net proceeds (SP – iss costs)
 Times interest earned = EBIT a
Interest Exp
 Turnover Ratios are IS/Av BS
 Inventory Turnover = CGS a
Avg Inventory
 AR Turnover = Sales (net) a
Avg AR (net)
 AP Turnover= CGS a  ECONOMICS
Avg AP
 Days Ratios are end BS/(IS/365)
 Days Inventory = End Inventory
CGS/365
 Days AR = End AR a
Sales (net) /365
 Days AP= End AP a
CGS/365
 CCC = days Inv + days AR – days AP
 Effective rate = [(1 + (i/p))^p] - 1
 Cost of investing in AR = Sales * VC
Ratio * Req rate of return * (Avg
coll/360)
 Pretax cost of carrying additional
investment in AR
o 1) Avg AR = Annual sales a
(360/Avg coll period)
o 2) Answer 1 * VC ratio
o 3) Answer 2 * req rate of ret
 Constant grow mod (Pt) = Dt (1+G)
(R – G)1 (yrs)
o R = use CAPM model to get
 Zero growth model P = D / R
 PEG Ratio = (P0 / E1) / G
 Free cash flow = NI + noncash exp –
increase WC – capital expenditures
 Issue price = (face * stated rate) a
(1 + market price) 1…2…3
 Investment TO = Sales / Avg Invest
 ROI = NI / Avg invested capital
ROA = NI / Avg total assets
Or… NPM * Asset TO
 ROE = NI / Avg total equity
Or… ROA * DFL
 DOL = Q*(S-VC) a
(Q* (S-VC) – FC)
 DFL = EBIT a  Gross Margin = Revenue - CGS
(EBIT – I – (P / (1-TR)))
 Reorder point = safety stock + (lead
time * sales during lead time)
 EOQ = ESOC = sqrt ( (2*S*O) / C )
S = units annual sales
O = order cost per purch order
C = carrying cost per unit
 # times to purch =units to be purch
EOQ
 Discounts = 360 * discount %
pay per – disc per 100%-disc %
 PI = PV CFs / PV initial investment
(PI is used for capital rationing)
 Depreciation tax shield = Dep * TR
(added to after tax CF)
 Payback period = Net initial invest
Inc in net after tax CFs
 Factor of IRR = Net increme invest
Net annual CFs
 Weighted average (ignore beg WIP)
units comp&transf out (100%)
ending WIP (%)
RM beg + curr = total/EU = per unit
 FIFO
beg WIP (% to complete)
complet&transf – beg WIP (100%)
end WIP (% complete)
only this period/EU = per unit
 CGM = CGS + End FG – Beg FG
 CGS = DM + DL + OH applied
 Economic Value Added (EVA) =
EBIT*(1-TR)*Cost of capital =
NOPAT*WACC
 Asset TO = Sales/Assets
 ROI = Income / Invested Capital
or… Profit Marg * Investment TO
or… Inc/Sales * Sales/Invest Capital
 RI = Income – (Invest * hurdle rate)
 ROE = NI/Equity
or… NPM * Asset TO * Fin Leverage
or… NI/Sales * S/Assets * A/Equity
 EVA = NOPAT – required return
(req ret=cost of equity+cost of debt)
(weight % * cap * % return)
 ROS = NI / Sales
 ROA = NI / Average Assets
 ROA = PM * Asset TO
or… NI/Sales * S/Assets
 BEP units = FC / UCM
 BEP $ = FC / CMR
 Marg of safety = Total sales – BEP $
 CMR = (SP-VC)/SP
 Total debt ratio = Liabilities / Assets
 Operating Margin = Op Inc / Rev
 Pretax Margin = EBIT / Rev
 Net Profit Margin = Net Inc / Rev
 VARIANCES (PURE DADS) (d = difference)
 DM price var = (A price-S price) * A quant
 DM usage var = (A quant-S quant) * S price
 DL rate var = (A rate-S rate) * A hours
 DL effic var = (A hours-S hours) * S rate
 OH VARIANCES
 VOH rate var = (A rate – Std rate) * A hrs
 VOH effic var = (A hours-S hours) * S rate
 FOH budget var = (A FOH – Budget FOH)
 FOH vol var = Budg FOH – (A prod*S rate)
 Multiplier = 1 / (1 – MPC)
 Δ in real GDP = multiplier*Δ in
spending
 Disposab Inc = personal inc * (1-TR)
 Velocity of money = nominal GDP
money supply
 Elasticity of demand = %Δ D / %Δ P
Reddit “must know formulas”:
-WACC
-NPV
-CCC
-CAPM
-CPI
-Inventory TO
-AR TO
-AP TO
-Ratios
-TO Ratios (IS/Avg BS)
-Days Ratios (End BS/(IS/365))
Reddit “frequently tested topics” :
-Variances
-COSO/ERM
-IT
-ECON
-Cost accounting
IT NOTES
IT 5 focus areas = value delivery, strategic
alignment, resource management, risk
management, performance measurement
Steering committee = oversee system
development and acquisition after an assessment
of data processing needs
Primary goal of IT governance = balance risk
versus return over IT and its processes
Electronic Data Interchange = exchange of
business transactions documents from one
computer to another, faster than paper exchange,
inventory can be reordered faster (inventory
stockout = less of risk (stockout = customer orders
> inventory on hand))
Monetary value of risk = if happens $ * prob % + if
not $ * prob not % = answer
EFT = reduce frequency of data entry errors
ERP = integrate data from all aspects of
organization’s activity
CRM system = provide sales force automation and
manage customer contracts, manage sales people,
forecast sales and sales targets/goals, manage
sales leads and potential sales leads, provide and
manage online quotes and product specifications
and pricing, and analyzes sales data
AIS type of MIS type of BIS
Business Information System = BIS = collect,
store, transform and distribute data
BIS = hardware, software, network, people, data
Transaction Processing System = TPS = routine,
payroll, data input, data storage, data processing.
and information output, large numbers of
common business events that are processed in
predefined highly structured way
Decision Support System = DSS = interactive
Executive Information System = EIS = for senior
managers, immediate and easy access to internal
and external information, assist in making non
routine decisions (involving analysis of cyclical
data, acquisitions, and competitor behavior)
Accounting Information System = AIS = solve
problems with uncertainty and ill-derived report
req
Cold site = no actual equipment
Warm site = compromise b/w cold&hot
Hot site = fully equipped to take over data
processing
Incremental = only changed since last backup
Differential – ALL changes since last FULL backup
PKI = system and process issue and manage
asymmetric keys and digital certificates
Asymmetric encryption = public key used to
encrypt message, private key used to decrypt
message at other end
User = enter data, use information processed by
system
Software developer = design/write
system/program to: collect, process, store,
transfer, distribute data
Data librarian = maintain custody of data
Network admin = manage remote access so
multiple computers can share the same data and
information
Edit check = application control that validates data
before data successfully input
Database admin = responsible for design,
maintain, security of database, control data and
structure
Systems analyst = design system, prepare
specifications for program, serve as intermediary
between user and programmers
Hardware technician = sets up and configures
computers
Data security controls = ensure storage media,
subject to auth prior to
Application programmer =
access/change/destruction, code approved
changes to a payroll program
System programmer = work with operating
systems and compliers
Data mining process = looking at large database
and data sets to derive new information, find
previously unknown info
Disaster recovery planning = ensuring able to
restore and continue its operations in the event
that its computing systems are shut down or
destroyed
Program modification controls = controls over the
modification of programs being used in production
applications, include both controls that attempt to
prevent changes by unauthorized personnel and
also that track program changes so that there is an
exact record of what versions of what programs
were running in production at any specific point in
time, normally includes a software change
management tool and change request tracking
tool
Biometric control = fingerprint, eye scanner, facial
recognition
Digital signature = ensure that the sender of a
message is authentic
Real time processing = current status of inventory
can be properly replenished and so that quick
price reductions can be made for inventory that is
not selling (new retail location)
Batch processing = upload transaction data from
individual stores to retailer’s centralized
processors
Batch processing system = data input controls
include report showing exceptions and a control
total for all invoices processed in each batch
Firewall = system of user identification and
authentication that prevents unauthorized users
from gaining access to network resources,
protective devise allows private intranet users to
access internet without allowing internet users to
access private intranet information
Offsite mirrored web server = take over almost
immediately in the event of a disaster,
uninterrupted service
Primary key = unique attribute that identifies a
specific record in a table
Foreign key = column found in a relational
database table that links data between two tables
Secondary key = non-identifying column used to
find a row in a table Decision Support Systems
(DSS) = interactive
Cloud computing = virtual servers over the
internet rather than housing data-on-site, critical
aspects of data security evaluation include third
party suppliers, architecture to support users,
cloud of cloud agreements
Electronic data interchange (EDI) = computer to
computer exchange of business transaction
documents in formats that allow direct processing
of data by the receiving system, having computer
activity logs that show where transactions have
failed is a key component to evaluating the
effectiveness of EDI
Vertical scalability = adding more memory,
computing power, and resources to the cloud, but
does not relate to data security
FARHART IT NOTES:
General controls apply to all aspects of IT function
BEFORE transactions are processed
General controls – 6 catergories
1) admin of the IT function
2) separation of IT duties
3) system development
4) physical and online security
5) backup and contingency planning
6) hardware controls
Input controls = designed so that the information entered
is authorized, accurate, and complete
Typical input controls:
1) management authorization
2) adequate preparation of input source docs
3) competent personnel
Typical input controls in IT
1) input screens with preformatted prompts for
transaction info
2) online based input controls for e-commerce where
suppliers/customers perform initial part of trans input
3) check digit = verify info on the barcode has been
entered correctly
4) validity check = computer performed validation test of
input accuracy, verify customer number against customer
master file
5) edit checks = automated controls programmed to
prevent invalid or unreasonable (# or text field only)
6) limit test = SS 9 digits, date fields, $ limit over is void
7) pull down menu
8) immediate error correction procedures
9) accumulation of errors follow up by data input person

Processing controls = prevent and detect errors while

transaction data is processed

Processing controls examples:

1) validation test = type appropriate
2) sequence test = submit in correct order
3) arithmetic accuracy test = sum equal gross pay
4) data reasonableness test = over limits?
5) completeness test = every field entered

Output controls = after processing is completed, review

data for reasonableness by someone knowledgeable
about the output

Output controls examples:

1) reconcile computer produced output to manual control
total
2) compare number of units processed to number of units
submitted for processing
3) compare a sample of transaction output to input
source documents
4) verify dates and times of processing to identify any out
of sequence processing