AICPA Released Questions 2022

Business Environment & Concepts
(BEC)
AICPA
Released Questions -
2022
Material from Uniform CPA Examination Selected Questions
and Unofficial Answers, 2022, copyright ©️ by American Institute
of Certified Public Accountants, Inc., is reprinted and/or
adapted with permission
Note: Any knowing solicitation or disclosure of any questions or

answers included on any CPA examination is prohibited
Multiple Choice Question #1:
Lightning E-Retailing maintains a virtual inventory. When a customer orders an item, the system
contacts the firm's suppliers, who then deliver the goods required to Lightning the next day.
This practice is facilitated most by which of the following technologies?
A. Electronic funds transfer.
B. Electronic data interchange.

C. Client-server.
D. Wide area network.
Correct Answer: B
1
Freemont, Inc. plans to offer a bond issue but first wants to estimate the cost of debt capital.
The corporation plans to issue 2,000 bonds at 7% with $1,000 face value. Freemont's
investment bankers estimate the market rate to be 7% when the corporation issues its bonds.
Freemont's effective tax rate is 37%. What percentage is the estimated cost of debt capital of
Freemont's planned issuance?
A. 2.59%
B. 4.41%
C. 7.00%
D. 8.82%
Correct Answer: B
2
Which of the following statements about an organization's value chain is correct?
A. The value chain considers only the internal processes of a company.

B. The value chain consists of the major value-added functions for an organization.
C. The value chain is not concerned with postproduction functions.
D. The value chain is not concerned with preproduction functions.
Correct Answer: B
3
A company's financial reporting system has a process management feature to provide workflow
control. This feature allows the division accounting staff to input and review data and send the
data to the company's corporate office for final review and approval. What security access, if
any, should be granted to the division accounting staff once the data has been sent to the
corporate office for approval?
A. Read but not write.

B. Write but not read.
C. Both read and write.
D. No access.
Correct Answer: A
4
Company management completes event identification and analyzes the associated risks. The
company wishes to assess its risk in the absence of any actions management might take to alter
either the risk's likelihood or impact. According to COSO, which of the following types of risk
does this situation represent?
A. Inherent risk.
B. Residual risk.
C. Event risk.
D. Economic risk.
Correct Answer: A
5
According to COSO, which of the following organizational structures best promotes internal
control?
A. Divisional internal audit staff with indirect reporting to the corporate director of internal
audit, who in turn reports to the audit committee.
B. Divisional internal audit staff with indirect reporting to the corporate director of internal
audit, who in turn reports to the CFO.
C. Corporate internal audit staff with direct reporting to the corporate director of internal
audit, who in turn reports to the CFO.
D. Corporate internal audit staff with direct reporting to the corporate director of internal
audit, who in turn reports to the audit committee.
Correct Answer: D
6
Each of the following statements is correct regarding the impact of exchange rates on
operations, except:
A. A real depreciation of the domestic currency results in higher prices for imported goods.
B. A real depreciation of the domestic currency lowers the price for domestic goods
relative to foreign goods.
C. A real appreciation of domestic currency raises the price of domestic goods relative to
foreign goods.
D. A real appreciation of domestic currency hurts domestic importers and consumers
because imported goods cost more.
Correct Answer: D
7
Which of the following assumptions applies to the basic theory underlying the capital asset
pricing model?
A. A single risk-free rate exists.
B. The variability of returns is unrelated to stock prices.

C. The required return for a particular stock cannot be measured.
D. The total variability can be divided into three separate components.
Correct Answer: A
8
Which of the following strategies involving systems design is most likely to provide the best
result from the standpoint of ensuring effective control procedures?
A. Integrating general and application control procedures into the components as part of
the basic design.
B. Adding general and application control procedures to the design after the basic
development has been completed.
C. Adding general and application control procedures during system conversion.

D. Integrating general and application control procedures after implementing the system.
Correct Answer: A
9
A company is considering two possible $100,000 loans at 5%. Loan X requires four equal
payments over four years, whereas Loan Y requires one lump-sum payment at the end of the
fourth year, with annual payments of interest expense. Which of the following statements is
correct regarding the effect of the two loans on the company's working capital?
A. At the end of year 1, Loan X would result in a lower ending working capital.
B. At the end of year 2, Loan X would result in a higher ending working capital.
C. At the end of year 3, both loans would have the same effect on working capital.
D. At the end of year 4, both loans would have used the same amount of working capital.
Correct Answer: A
10
Total costs for the production of 10,000 units were $100,000. Variable costs were $60,000. If
15,000 units were produced, what would be the total costs?
A. $130,000
B. $150,000
C. $160,000
D. $180,000
Correct Answer: A
11
Which of the following terms represents a valid in-process control measure that would
normally assess product quality before production is completed?
A. Random inspection.
B. Variance analysis.
C. Machinery bottleneck identification.
D. Scrap cost yield analysis.
Correct Answer: A
12
A transaction processing system would appropriately include each of the following activities for
an online bookseller, except
A. Shipping.
B. Processing payroll.
C. Receiving Internet orders.
D. Monitoring competitor price changes.
Correct Answer: D
13
What is the most effective way that the information technology people, processes, and systems
can facilitate an organization's overall strategic decision-making process?
A. By providing improved security of critical information assets.
B. By providing online real-time processing for all transactions.

C. By providing relevant and reliable data that reduce uncertainty.
D. By providing large amounts of unfiltered data to decision makers.
Correct Answer: C
14
A decrease in which economic indicator would most appropriately encourage a business owner
to move forward on a planned expansion?
A. Stock prices.
B. Building permits.
C. Commercial loans.
D. Initial claims for unemployment.
Correct Answer: D
15
If a company's output is increasing at 100% while its input is increasing at 80%, the cause is
most likely the company's
A. Diminishing returns.
B. Economies of scale.
C. Diseconomies of scale.
D. Comparative advantage.
Correct Answer: B
16
Which of the following external factors would increase the inherent risk of a highly leveraged
audit client that has closely monitored profit expectations and imports most of its resale
inventory from Europe?
A. An increase in the prime interest rate.

B. A change in the management of the marketing department.
C. A low rate of inflation.

D. A stronger dollar relative to the euro.
Correct Answer: A
17
The current ratio of a company is 1.5. Which of the following transactions will cause the current
ratio to increase?
A. Payment on accounts payable.
B. Cash received from an account receivable.

C. Purchase of inventory on account.
D. Purchase of equipment for cash.
Correct Answer: A
18
In the processing of sales orders, which of the following documents authorizes the warehouse
to send goods to the shipping department?
A. Packing slip.
B. Customer purchase order.

C. Picking ticket.
D. Sales order.
Correct Answer: C
19
A firm has a perfectly inelastic supply curve, and it faces a downward sloping demand curve.
Which of the following results best describes an increase in demand when the supply curve is
constant?
A. Price will rise, and quantity will increase.

B. Price will rise, and quantity will be constant.
C. Price will fall, and quantity will increase.

D. Price will fall, and quantity will be constant.
Correct Answer: B
20
A company is planning to market a new product. The original cost and profit calculations are as
follows:
Factory overhead (based on 40% direct labor) $120
Gross profit (25% of sales) 220

Direct materials 240
Direct labor 300
Total cost 660
Selling price 880
When reviewing the final calculations, the controller found that direct labor should be 10%
higher. Which of the following correctly calculates the selling price for the product?
A. 1.25 x (($420 x 1.1) + $240)

B. 1.25 x (($300 x 1.1) + $240 + $120)
C. 1.33 x (($420 x 1.1) + $240)
D. 1.33 x (($300 x 1.1) + $240 + $120)
Correct Answer: C
21
Citrus Corp. produces three products in its plant: Juice, Pulp, and Zest. Zest has the following
per-unit revenue and cost characteristics:
Price $20
Variable manufacturing cost 8

Fixed manufacturing cost 5
Variable selling cost 4
Fixed selling cost 3
Variable administrative cost 2
Fixed administrative cost 1
Which of the following decisions is best for Citrus?
A. Continue to produce Zest because it makes a $6 per-unit contribution to the overall

operation.
B. Continue to produce Zest because it makes an $11 per-unit contribution to the overall
operation.
C. Discontinue production of Zest because it incurs a loss of $3 per unit.

D. Discontinue production of Zest because it makes a contribution of $11 but does not
cover the remaining $14 of variable cost.
Correct Answer: A
22
23
Projections indicate that the economy is entering a slowdown. What is the expected outcome
in the near future?
A. Inflationary pressures.
B. Increasing demand for credit.

C. Wage hikes.
D. A drop in interest rates.
Correct Answer: D
24
Which of the following assumptions applies to the basic theory underlying the Black-Scholes
option-pricing model?
A. The call option can be exercised at any time before its expiration date.
B. There are no transaction costs for buying or selling the stock or option.
C. The stock underlying the call option pays dividends during the life of the option.
D. Purchasers of the underlying securities cannot borrow any of the proceeds used to buy
the securities.
Correct Answer: B
25
An entity's recording and reporting processes are highly automated, and the information
system produces much of the information used for monitoring controls. Which of the following
statements is correct regarding the entity's monitoring of controls?
A. Because the processes are automated, management can be sure that controls are
processed in a correct manner.
B. Any errors in the information provided by the system could lead management to
incorrect conclusions regarding controls.
C. Management will likely be unable to monitor system controls effectively in such a highly
automated environment.
D. Effective monitoring of application controls over specific applications of the information
system can overcome deficiencies in the design of general controls.
Correct Answer: B
26
A company uses the gross profit method to determine cost of goods sold and inventory levels
on an interim basis. The company miscalculated its costs in one of its product lines and is using
an overstated gross profit rate for the year. What impact could this have on the company's
operation?
A. The company could believe that it has less inventory than it actually has and thus
purchase more than it needs.
B. The company could erroneously believe that it has to raise its selling price to make its
profit margin goal.
C. The company could mislead its bank, making it believe that the company has more
collateral for its loan than it actually has.
D. The company's CFO could erroneously believe that it was time to withdraw the product
line.
Correct Answer: C
27
Macro Corp. issues $3 million of $10,000 face amount debenture bonds with a coupon rate of
9% and an effective interest rate of 8%. With interest payable semiannually, what total amount
will be disbursed on each interest payment date?
A. $120,000
B. $135,000
C. $240,000
D. $270,000
Correct Answer: B
28
According to COSO, management should be concerned with the effectiveness of the monitoring
processes of an entity regarding internal controls over financial statement preparation for each
of the following reasons, except:
A. Effective monitoring provides incentive for employees to perform their duties properly
over time.
B. Effective monitoring enables those charged with governance to determine whether the
internal control processes continue to operate effectively over time.
C. Effective monitoring allows those charged with governance to identify and correct
deficiencies before they materially affect financial statements.
D. Effective monitoring assists those charged with governance to ensure that the entity
meets its operating and financial expectations.
Correct Answer: D
29
A distributed data processing (DDP) model involves reorganizing the IT function into small units
that are distributed to end users and placed under their control. Which of the following is not
an advantage of such a model?
A. It reduces costs by allowing data to be entered and edited locally.

B. It enables an organization to exert greater control over its IT environment.
C. It enhances user satisfaction by allowing users to control the resources that influence
their profitability.
D. It provides the ability to back up computing facilities to protect against potential hazards
such as fires and flood.
Correct Answer: B
30
A company's performance guidelines sets a lower limit of 3% unfavorable material usage

variance for its production facility. In applying the COSO Enterprise Risk Management
framework, which of the following principles most closely aligns with the establishment of this
performance guideline?
A. Identifying risk.
B. Assessing substantial change.
C. Formulating business objectives.

D. Demonstrating commitment to core values.
Correct Answer: C
31
Which of the following pairs of techniques best provides for roughly the same level of
assurance about the enforceability of a digitally signed transaction as an inked signature
provides for a paper-based transaction?
A. Hashing and symmetric encryption.

B. Hashing and asymmetric encryption.
C. Data masking and symmetric encryption.

D. Data masking and asymmetric encryption.
Correct Answer: B
32
During the process of transforming raw data into information that can be used in a relational
database, which of the following must be used to create a relationship between two tables?
A. A foreign key.
B. The primary key.

C. A data dictionary.
D. A conceptual-level schema.
Correct Answer: A
33
Simulation
Item: 2458 #1:
Murray Co., which has one location, utilizes a just-in-time inventory system that greatly reduces the
number of personnel in the inventory process. The board of directors has not considered the just-in-
time system as a factor in its disaster recovery and business continuity plans.
Write a memo advising Murray's board of directors of the implications of a just-in-time system on
the disaster recovery and business continuity plans.
Type your communication in the response area below.
REMINDER: Your response will be graded for technical content and writing skills. Technical content
will be evaluated for information that is helpful to the intended audience and clearly relevant to the
issue. Writing skills will be evaluated for development, organization, and the appropriate expression
of ideas in professional correspondence. Use an appropriate business format with a clear
introduction, body, and conclusion. Do not convey information in the form of a table, bullet-point
list, or other abbreviated presentation.
Memorandum
To: Board of directors

Re: Just-in-time system and disaster recovery
END OF CONTENT - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
34
Exhibits Information
There are no exhibits for this item.
35
Blueprint Information
CSO: 004.003.003
Skill: Written Communication
Representative task: Understand the importance of business resiliency for an entity and the key
strategies, resources, business functions, employees and steps involved in planning for it.
36
Simulation
Item: 80815 #2:
Your company's fixed-asset accountant uses a spreadsheet to keep detailed subsidiary records
supporting the general ledger accounts for fixed assets, accumulated depreciation, and current-year
depreciation. The spreadsheet is used to calculate depreciation for book and tax purposes. The
company's accounting manager asked you to evaluate whether the company should eliminate the use
of spreadsheets for this purpose and consider the implementation of a software package to track the
asset information.
Write a memo to the company's accounting manager detailing the reasons for supporting the switch
to a software package to track the company's fixed-asset information.
Type your communication in the response area below.
REMINDER: Your response will be graded for technical content and writing skills. Technical content
will be evaluated for information that is helpful to the intended audience and clearly relevant to the
issue. Writing skills will be evaluated for development, organization, and the appropriate expression
of ideas in professional correspondence. Use an appropriate business format with a clear
introduction, body, and conclusion. Do not convey information in the form of a table, bullet-point
list, or other abbreviated presentation.
Memorandum
To: Accounting Manager

Re: Advantages of packaged software for fixed-asset reporting
END OF CONTENT - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
37
38
CSO: 001.003.000
Skill: Written Communication
Representative task: Identify the appropriate techniques, methods, systems or other tools that could
improve the performance of a process.
39
Simulation
Item: 500232 #3:
Scroll down to complete all parts of these tasks.
Task 1:
The product designers for Maple Corp. sent you an email outlining options for new products during
year 2. Only one product can be added to production in year 2 due to the configuration of the
company's factory floor.
Using the information from the email and the minutes from the Board of Directors meeting, located in
the exhibits above, answer the questions in the table below. For each question in column A, click in
the associated cell in column B and select the appropriate answer.
-- Option List Details –
B2 List
• Product A
• Product B
• Product C
• Product D
• Maple should not produce any of the products.
B3 List
• Direct costing
• Job costing
• Process costing
• Target costing
• Throughput costing
• Transfer pricing
40
Task 2:
Management asked for your assistance with the action items related to transfer pricing discussed at
the Board of Directors meeting held in June, year 2. Using the minutes from the Board of Directors
meeting in the exhibits above, answer the questions in the table below.
For each question in column A, click in the associated cell in column B and select the appropriate
answer. For any question in column A that asks for a calculated amount, enter your response in
column B rounded to two decimal places.
Each question below presents an independent set of facts and assumptions that should not be
carried over to the other questions. If a response is zero, enter a zero (0).
B2 List
• Full cost method
• Market price method
• Negotiated price method
• Variable cost method
Task 3:
You received an email from the controller, located in the exhibits above, with some questions
regarding a proposed stock repurchase.
Using the financial information located in the exhibits above, answer the questions below posed by
the controller. Use the Analytics Definitions exhibit for the ratio definitions. For each question in
column A, click in the associated cell in column B and select the appropriate answer.
41
B2 List
• Increased capital
• Increased earnings
• Increased return on equity
• Increased shareholders' equity
B3 List
• Current ratio
• Debt-to-equity ratio
• Total debt ratio
END OF CONTENT - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
42
Exhibits included 1. Balance sheet of Maple Corp. as of December 31, year 2

in this item 2. Income statement excerpt for year 2
3. Email from product design manager
4. Minutes from the Board of Directors meeting
5. Email from controller
6. Analytics Definitions
43
Exhibit for Item: 500232
Exhibit 1: Balance sheet of Maple Corp. as of December 31, year 2
Balance sheet of Maple Corp. as of December 31, year 2
Line item Year 2, amount DR/(CR)
Cash $5,500,000
Accounts receivable $1,150,000
Inventory $775,000
Noncurrent assets $50,000
Total assets $7,475,000
Accounts payable ($650,000)
Other current liabilities ($500,000)
Current portion of long-term debt ($125,000)
Long-term debt ($1,500,000)
Other long-term liabilities ($950,000)
Total liabilities ($3,725,000)
Total shareholders’ equity ($3,750,000)
Total liabilities and shareholders’equity ($7,475,000)
44
Exhibit 2: Income statement excerpt for year 2
Income statement excerpt for year 2
Revenues ($9,250,000)
Total expenses $7,500,000
45
Exhibit 3: Email from product design manager
From: productdesigner@maplecorp.com
To: costaccountant@maplecorp.com
Date: June 12, year 2 10:45 am
Subject: Product Design
Dear Cost Accountant:
We have been reviewing designs for new products, but we can put only one of them into production in
year 2 and would like to know which one, if any, meets Maple’s financial criteria for launching a new
product.
Maple’s policy states that the company can launch a new product if it expects to achieve annual
sales of at least $500,000 and a 40% share of the total annual local market revenue. Here is a
summary of the information provided by our marketing department:
Product Estimated selling Forecast annual Total local annual

price per unit sales (units) market revenue
Product A $50.00 10,000 $1,000,000
Product B $60.00 6,750 $900,000
Product C $49.00 10,000 $1,200,000
Product D $60.00 9,000 $1,500,000
Regards,
Product Design Manager
46
Exhibit 4: Minutes from the Board of Directors meeting
Meeting Minutes, Board of Directors
Maple Corp.
Meeting Date & Time: 6/13/year 2 2:00 pm
Attendees:
Ahmad Yasin, Chairman of the Board and CEO

Amit Kunal, Secretary
Camilla Hansen, Treasurer
Everett Baker, CFO
Faiza Hamza, Director of Engineering
Grace Kim, Director of Marketing
Jamie Reynolds, Chief Risk Officer
Jennifer Sullivan, Director of Sales
Jiang Hulin, Chief Operations Officer
Agenda:
• Transfer pricing
• New product pricing/costing
Meeting Notes:
Transfer Pricing: Maple recently purchased one of its raw materials suppliers, Birch Co. Prior to
acquiring Birch, Maple was purchasing raw materials for $10.00 per unit from Birch. Total annual fixed
costs for Birch are $50,000, and variable costs are $3.00 per unit, based on a volume of 10,000 units
annually.
New product pricing/costing: Management will undertake the following steps to achieve the budgeted
profit margin once a new product is decided on:
• Determine a market price that customers are willing to pay.

• Determine the desired profit.
• Calculate the necessary cost, given the market price and desired profit.
• Use value engineering, kaizen costing, and operational control to identify ways to reduce product
cost, as necessary.
47
Exhibit 5: Email from controller
From: controller@maplecorp.com
To: costaccountant@maplecorp.com
Date: June 15, year 2 11:30 am
Subject: Stock repurchase
Dear Cost Accountant:
We are considering repurchasing 100,000 of our outstanding shares on the open market at the
current market price of $15 per share, using available cash. The current balance of cash on hand
exceeds operating requirements, and management has no other variable investment opportunities at
this time.
There are concerns about the impact of the stock repurchase on ratios in our debt covenants. Listed
below are the key ratios from those covenants:
• Current ratio should be at least 3.5 to 1.0

• Debt-to-equity ratio should not exceed 1.5
• Total debt ratio should not exceed 0.75
Regards,
Controller
48
Exhibit 6: Analytics Definitions
Analytics Definitions
Analytic Formula
Accounts receivable turnover Sales (net) ÷ Average accounts receivable (net)
Asset turnover Sales (net) ÷ Average total assets
Income available to common shareholders ÷ Weighted-average
Basic earnings per share common shares outstanding
Days sales in accounts receivable + Days in inventory − Days of payables
Cash conversion cycle outstanding
Current ratio Current assets ÷ Current liabilities
Days in inventory Ending inventory ÷ (Cost of goods sold ÷ 365)
Days of payable outstanding Ending accounts payable ÷ (Cost of goods sold ÷ 365)
Days sales in accounts
receivable Ending accounts receivable (net) ÷ (Sales (net) ÷ 365)
Debt to equity Total liabilities ÷ Total equity
Dividend payout Cash dividends ÷ Net income
Equity multiplier Total assets ÷ Total equity
Gross margin
(Gross profit margin) (Sales (net) − Cost of goods sold) ÷ Sales (net)
Inventory turnover Cost of goods sold ÷ Average inventory
Operating cash flow ratio Cash flow from operations ÷ Ending current liabilities
Price earnings ratio Price per share ÷ Basic earnings per share
Profit margin Net income ÷ Sales (net)
(Cash and cash equivalents + Short-term marketable securities
Quick ratio + Receivables (net)) ÷ Current liabilities
Return on assets Net income ÷ Average total assets
Return on equity Net income ÷ Average total equity
Return on sales Income before interest income, interest expense, and taxes ÷ Sales (net)
Income before interest expense and taxes ÷ Interest expense
Times interest earned or
Earnings before interest and taxes ÷ Interest expense
Total debt ratio Total liabilities ÷ Total assets
49
CSO: 002.002.000
Skill: Analysis
Representative task: Determine the business reasons for, and explain the underlying economic
substance of, significant transactions (e.g., business combinations and divestitures, product line
diversification, production sourcing and public and private offerings of securities).
50
Simulation #4:
Item: 500425
Scroll down to complete all parts of this task.
Brown and Green, Inc., an issuer, is going through a restructuring initiative in order to improve its
corporate governance structure. The company's management sees the initiative as an opportunity to
take a fresh look at the effectiveness and quality of existing internal control activities and processes.
The scope of the project will encompass the review of existing corporate policies, processes, and
control activities that are part of Brown and Green's corporate governance structure through the
application of the principles of the COSO Internal Control Integrated Framework and other industry
leading practices.
The company hired an independent consulting firm to assist with the restructuring initiative. As an
accountant for the consulting firm, you are tasked with assisting the company's management with
this review and suggesting improvements. For each of the current processes/control activities
reviewed, complete the following in the table below:
• Click in the cells in column B and select from the option list the best proposed internal
control activity/process, if needed, when compared to the current internal control
activity/process identified in the associated cell in column A.
• If no changes are required to the current process/control activity identified in the associated
cell in column A, select "No changes necessary."
51
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52
B2 List
• The company’s director of internal audit reports administratively to the audit committee and
functionally to the CFO.
• The company’s director of internal audit reports functionally and administratively to the CEO.
• The company’s director of internal audit reports functionally and administratively to the chief risk
officer (CRO).
• The company’s director of internal audit reports functionally to the chair of the board of directors
and administratively to the CFO.
• No changes necessary.
B3 List
• The company established an anonymous, independently monitored whistleblower hotline to
report instances of fraud and ethical violations.
• The company has an anonymous whistleblower chat room with a log of ethics violations that
is managed by its information technology group.
• The company has an anonymous whistleblower hotline that is managed by its in-house general
counsel to report instances of fraud and ethical violations.
• The company has an anonymous whistleblower hotline that provides the reports of ethics
violations to division leaders.
B4 List
• On a quarterly basis, the company's officers receive an email that reminds them of their
obligations to conduct themselves in accordance with the company's code of conduct.
• On an annual basis, the company encourages its officers to review an online update of its code of
conduct.
• On the date of hire, each officer of the company is required to sign a statement of compliance
with the company's code of conduct.
• The company includes a statement in published financial statements indicating that all of its
officers have received proper training in the company's code of conduct.
53
B5 List
• On an annual basis, a compensation steering committee that reports to the board of directors
reviews the company's incentive compensation plans to ensure alignment with corporate
objectives.
• On an annual basis, division leaders review and adjust incentive compensation plans based on
divisional goals.
• The audit committee is responsible for establishing and approving the company's incentive
compensation plans.
• The company's CFO is responsible for establishing and approving incentive compensation
plans.
B6 List
• On a quarterly basis, department heads review their employees' access roles to assess
compliance with company policy.
• The IT department maintains user-access rights to the accounting system, and on a quarterly
basis, internal audit reviews the appropriateness of user-access rights.
• User access is not defined within the accounting system, but on a quarterly basis compliance
with segregation of duties is assessed through internal audit reviews.
• User access to the accounting system is assigned to individual employees rather than to
defined accounting roles.
B7 List
• External auditors have the responsibility to enforce compliance with internal control policies.
• Internal audit exercises oversight of the development and performance of internal control.
• The company's board of directors exercises oversight of the development and performance
of internal control.
• The Public Company Accounting Oversight Board (PCAOB) has oversight authority to make
certain internal controls mandatory for the company.
54
55
CSO: 001.002.002
Skill: Application
Representative task: Apply the COSO internal control framework to identify controls to meet an
entity’s compliance, operations and reporting (internal and external, financial and non-financial)
objectives at the entity and sub-unit level.
56

AICPA Released Questions 2022

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AICPA Released Questions 2022

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Business Environment & Concepts

Note: Any knowing solicitation or disclosure of any questions or

A. Electronic funds transfer.

B. Electronic data interchange.

Which of the following statements about an organization's value chain is correct?

A. The value chain considers only the internal processes of a company.

A. Read but not write.

A. A single risk-free rate exists.

B. The variability of returns is unrelated to stock prices.

C. Adding general and application control procedures during system conversion.

A. By providing improved security of critical information assets.

B. By providing online real-time processing for all transactions.

A. An increase in the prime interest rate.

C. A low rate of inflation.

A. Payment on accounts payable.

B. Cash received from an account receivable.

B. Customer purchase order.

A. Price will rise, and quantity will increase.

C. Price will fall, and quantity will increase.

Factory overhead (based on 40% direct labor) $120

Gross profit (25% of sales) 220

A. 1.25 x (($420 x 1.1) + $240)

D. 1.33 x (($300 x 1.1) + $240 + $120)

Variable manufacturing cost 8

Fixed administrative cost 1

Which of the following decisions is best for Citrus?

A. Continue to produce Zest because it makes a $6 per-unit contribution to the overall

C. Discontinue production of Zest because it incurs a loss of $3 per unit.

B. Increasing demand for credit.

A. It reduces costs by allowing data to be entered and edited locally.

A company's performance guidelines sets a lower limit of 3% unfavorable material usage

C. Formulating business objectives.

A. Hashing and symmetric encryption.

C. Data masking and symmetric encryption.

B. The primary key.

Type your communication in the response area below.

To: Board of directors

Type your communication in the response area below.

To: Accounting Manager

-- Option List Details –

-- Option List Details –

Exhibits included 1. Balance sheet of Maple Corp. as of December 31, year 2

Balance sheet of Maple Corp. as of December 31, year 2

Line item Year 2, amount DR/(CR)

Accounts receivable $1,150,000

Noncurrent assets $50,000

Total assets $7,475,000

Accounts payable ($650,000)

Other current liabilities ($500,000)

Current portion of long-term debt ($125,000)

Long-term debt ($1,500,000)

Other long-term liabilities ($950,000)

Total liabilities ($3,725,000)

Total shareholders’ equity ($3,750,000)

Total liabilities and shareholders’equity ($7,475,000)

Income statement excerpt for year 2

Total expenses $7,500,000

Dear Cost Accountant:

Product Estimated selling Forecast annual Total local annual

Product Design Manager

Meeting Date & Time: 6/13/year 2 2:00 pm

Ahmad Yasin, Chairman of the Board and CEO

• Determine a market price that customers are willing to pay.

Dear Cost Accountant: