We have provided for you sample questions from each of our Review Systems. We've only provided a few questions from each Review System, to show you examples of the questions. Each Review System has over hundreds of questions!
CPA Review System
Auditing & Attestation:
Q: What are some factors which affect the nature, timing and extent of an audit? >>Answer
Q: Define hash totals. Give some examples of other methods used as input controls. >> Answer
Q: What are the different levels of assurance as they relate to an audit, review and compilation? >> Answer
Financial Accounting & Reporting
Q: How should depreciation be reported in the financial statements of a private not-for-profit? >> Answer
Q: What are the two methods of reporting minority interest on the balance sheet? >> Answer
Q: Define two types of pension plans. >> Answer
Regulation
Q: Define constructive receipt: >> Answer
Q: What are the steps to elect S corporation status? >> Answer
Q: What is the tax treatment for gambling winnings and losses? >> Answer
Business Environment & Concepts
Q: What are some of the different types of trusts? >> Answer
Q: What partnership actions require unanimous approval of all partners? >> Answer
Q: Define a flexible budget. >> Answer
CMA Exam Review
Business Analysis
Q: What type of opinion should an auditor issue if financial statements are not presented in conformity with GAAP or when there is inadequate disclosure? >> Answer
Q: What types of controls should be included in an effective system of internal control? >> Answer
Q: What are the two approaches used in measuring gross domestic product? >> Answer
Management Accounting & Reporting
Q: Appraisal costs are one of the four categories of product quality costs. Give some examples of appraisal costs. >> Answer
Q: What are some of the advantages and disadvantages of electronic data interchange? >> Answer
Q: Distinguish between process costing and job-order costing .>> Answer
Strategic Management
Q: What elements determine the net cost of the investment? >> Answer
Q: What are the two types of probabilities? >> Answer
Q: What are the components of a target marketing plan? >> Answer
Business Applications
Q: What are the basic relationships that exist within an organizational structure? >> Answer
Q: Why may line managers conflict with staff managers? >> Answer
Q: Define communication. Distinguish between formal and informal communication. >> Answer
EA (Enrolled Agent)
Q: What is the relationship between the standard deduction and itemized deductions? >>Answer
Q: Distinguish between a gift of present interest and a gift of future interest. >> Answer
Q: What is a short sale? >> Answer
Q: When may a corporation claim a deduction for life insurance premiums? >> Answer
CFP Exam Review System
Fundamental Principles
Q:What is the liquidity preference function? >> Answer
Q: Define the following national income measurements:
Disposable Income | Gross Income | Net Investment >> Answer
Q: At what point are assets and liabilities recorded on the balance sheet? >> Answer
Investment Planning
Q: Define Perpetuity >> Answer
Q: Distinguish between bull markets and bear markets >> Answer
Q: What is the uptick rule? >> Answer
Estate Planning
Q: What is a power of attorney? >> Answer
Q: What are three types of trusts? >> Answer
Q: What are the requirements for a charitable gift? >> Answer
Income Tax Planning
Q: Distinguish between a gift or present interest and gift of future interest. >> Answer
Q: How does a corporation distribute money and/or property to its shareholders? >> Answer
Q: Describe the corporate tax filing process: >> Answer
Insurance Planning
Q: What are the primary insurance company rating agencies? >> Answer
Q: What is the impact of continued employment on Social Security old age benefits? >> Answer
Q: What are the most common exclusions in a homeowner's policy? >> Answer
Retirement Planning
Q: Describe the ratio percentage test: >> Answer
Q: What are the vesting guidelines for a 403(b) plan? >> Answer
Q: What is section 457 plan? >> Answer
NASD Series 7: General Securities Representative
Q: What is a yield curve? >> Answer
Q: What is the standard deviation? >> Answer
Q: Distinguish between a long position and a short position in a futures contract? >> Answer
Q: Discuss the Black-Scholes option valuation model. >> Answer
CPA Review System Answer Section:
Auditing & Attestation:
Q: What are some factors which affect the nature, timing and extent of an audit?
Nature, timing and extent of an audit are based upon:
1. Auditor's familiarity with client and its business.
2. Size and complexity of the company.
3. Past experience with the industry.
Q: Define hash totals. Give some examples of other methods used as input controls.
Hash totals are the sums of certain figures (i.e., account numbers) which have no accounting or financial significance but are used for data input control purposes.
Examples of other methods of input control include: verification, logic tests, control tests, check digit, echo checks, stored data tests, file labels and validity checks.
Q: What are the different levels of assurance as they relate to an audit, review and compilation?
1. Audit: assurance sufficient to base an opinion on a company's financial statements.
2. Review: limited assurance.
3. Compilation: no assurance.
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Financial Accounting & Reporting:
Q: How should depreciation be reported in the financial statements of a private not-for-profit?
Depreciation should be recorded for all long-lived tangible assets but not shown separately as it is not a function. Depreciation is not required on certain works of art and historical treasures with extraordinarily long lives.
Q: What are the two methods of reporting minority interest on the balance sheet?
The two methods of reporting minority interest on the balance sheet are as follows:
1. Proprietary theory - included before stockholders' equity but after long-term debt.
2. Entity theory - included as a component of stockholders equity.
Q: Define two types of pension plans.
1. Defined contribution plan - amount of contribution is specified.
2. Defined benefit plan - amount of benefit to be received is specified. Contribution is calculated based upon actuarial tables.
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Regulation
Q: Define constructive receipt:
Constructive receipt occurs when income is made available to the taxpayer and the actual receipt and/or acceptance of the income is a matter of the taxpayer's discretion. In other words, the taxpayer has an unrestricted right to the income.
Q: What are the steps to elect S corporation status?
Steps to elect S corporation status are as follows:
1. All shareholders on election date, plus shareholders who held stock during the taxable year but before election date, must consent.
2. Form 2553 must be completed.
3. Election must be filed during the previous year or by the 15th day of the 3rd month of the effective year.
(Note: S corporation election is effective until terminated.)
Q: What is the tax treatment for gambling winnings and losses?
Gambling winnings must be included in gross income.
Gambling losses are deductible only to the extent of gambling winnings.
(Note: Losses are deductible as a miscellaneous itemized deduction not subject to the 2% of AGI floor.)
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Business Environment & Concepts
Q: What are some of the different types of trusts?
1. Testamentary - created by will; effective upon death of creator.
2. Intervivos - created and effective during lifetime of creator.
3. Others - active, charitable, clifford and spendthrift.
Q: What partnership actions require unanimous approval of all partners?
Partnership actions requiring approval are as follows:
1. Admission of a new partner.
2. Assignment of partnership property.
3. Conversion to surety or guarantor.
4. Handling of certain claims.
5. Disposition of goodwill
6. Any act which infringes upon business.
Q: Define a flexible budget.
A flexible budget is a projecting based upon several different sales volume activity levels. A flexible budget provides cost allowances for different levels of activities.
(Note: A flexible budget is often used in conjunction with standard costs.)
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NASD Series 7: General Securities Representative
Q: What is a yield curve?
Yield curve is a graphical representation of interest rate yields for a bond. Although yield curves can be flat or slope downward, they normally slope upward illustrating the direct relationship between increases in interest rates and increases in bond maturities.
Q: What is the standard deviation?
Standard deviation is a measurement of risk and/or return around a mean. Calculation considers difference between average return and individual observations.
Q: Distinguish between a long position and a short position in a futures contract?
Long position: involves purchasing a contract for future delivery. Long position increases in value if underlying security increases in value.
Short position: involves selling a contract for future delivery. Short position increases in value if underlying security decreases in value.
Q: Discuss the Black-Scholes option valuation model.
The Black-Scholes model values a call option based on the following:
- Market price of security
- Exercise price of option
- Expiration period
- Risk-free rate of return
- Volatility of returns
Model assumes no cash dividends during exercise period.
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EA (Enrolled Agents)
Q: What is the relationship between the standard deduction and itemized deductions?
Taxpayers may take the larger of the standard deduction or itemized deductions. Standard deduction is based on filing status and can be increased due to certain conditions.
(blindness or age 65 and over).
Q: Distinguish between a gift of present interest and a gift of future interest.
1. Present Interest - unrestricted right to immediate use, possession or enjoyment of property or the income from property.
2. Future Interest - reversions, remainders and other interests restricted in use, possession or enjoyment until the future.
(Note: Exclusion is permitted for gifts of present interest and not future interest.)
Q: What is a short sale?
Short sale occurs when a seller delivers borrowed stock to the buyer. Capital gain or loss is recognized when short sale is closed. Holding period of short sale is holding period of property used to close short sale.
Q: When may a corporation claim a deduction for life insurance premiums?
A corporation may claim a deduction for premiums paid for key man life insurance if the corporation is not the beneficiary. If the corporation is the beneficiary, it may not deduct the premiums and the proceeds are not taxable.
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CMA Exam Review:
Business Analysis
Q: What type of opinion should an auditor issue if financial statements are not presented in conformity with GAAP or when there is inadequate disclosure?
Disagreements regarding GAAP or inadequate disclosure would be reported as follows:
1. Unqualified - if immaterial
2. Qualified - if material
3. Adverse - if very material
Q: What types of controls should be included in an effective system of internal control?
An effective system of internal control should include the following:
1. Preventative Controls: prevent errors and irregularities.
2. Detective Controls: detect errors.
3. Corrective Controls: fix errors detected.
Q: What are the two approaches used in measuring gross domestic product?
1. Income Approach: wages, interest, rent, profits, depreciation, business taxes (indirect and corporate), distributed and undistributed business earnings.
(Note: U.S. income earned overseas is not included.)
2. Expenditure Approach: personal consumption, private domestic investments, government expenditures and net exports.
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Management Accounting & Reporting
Q: Appraisal costs are one of the four categories of product quality costs. Give some examples of appraisal costs.
Appraisal costs are costs incurred from inspection and statistical quality control programs.
Q: What are some of the advantages and disadvantages of electronic data interchange?
1. Advantages: allows for increased speed, decreased typographical errors and efficiencies through elimination of clerical functions and costs (i.e., document preparation and mailing).
2. Disadvantages - data safeguarding and security concerns, need for programming expertise and communication infrastructure requirements.
Q: Distinguish between process costing and job-order costing.
1. Process Costing: method used to account for continuous manufacturing of homogenous units.
2. Job-Order Costing: method used to account for production output of heterogeneous units.
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Strategic Management
Q: What elements determine the net cost of the investment?
The net cost of the investment is the gross cash outlay minus any cash recoverable upon sale of the asset being replaced (if any). Cash recoverable upon sale must be adjusted for any tax implications. In addition, any necessary working capital reserves resulting from the new investment are included in the net cost of the investment.
Q: What are the two types of probabilities?
1. Objective: calculations based upon logic.
2. Subjective: estimates based upon judgment.
Q: What are the components of a target marketing plan?
A target marketing plan is comprised of the following components:
1. Market Segmentation: identify the unique characteristics and needs of all portions of the broad market. Describe the unique products or services these segments demand.
2. Market Targeting: choose the market segment the firm wishes to service.
3. Market Positioning: develop products or services to fulfill the segment's needs and communicate the benefits of these products or services to the segment.
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Business Applications
Q: What are the basic relationships that exist within an organizational structure?
1. Authority: the power to direct and expect output from others.
2. Responsibility: obligation to perform required tasks.
3. Accountability: the duty to account for the failure to fulfill a responsibility.
Q: Why may line managers conflict with staff managers?
Line managers have direct responsibility for organization’s objectives. Staff managers do not have such responsibility. However, line managers may have no authority over staff managers in case their actions deviate from organizational objectives.
Q: Define communication. Distinguish between formal and informal communication.
Communication is the process of transferring ideas from one person to another. Formal communication is the process of transferring ideas through official organizational channels such as interoffice memorandums, financial reports, etc. Informal communication is the process of transferring ideas outside the official organizational channels (the grapevine.) Managers mostly engage in oral/informal communication.
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CFP Exam Review
Q:What is the liquidity preference function?
The liquidity preference function is the demand curve for money. It addresses the relationship between the demand for money and interest rates.
Q: Define the following national income measurements: Disposable Income | Gross Income | Net Investment
1. Disposable Income: personal income - income taxes.
2. Gross Income: total addition to capital.
3. Net Investment: gross investment - capital consumption (depreciation).
Q: At what point are assets and liabilities recorded on the balance sheet?
Assets and liabilities should be recorded when the following are satisfied:
• Fixed and determinable amount is determined.
• Receipt or payment not contingent on another event.
• Receipt or payment does not require future performance of services.
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Investment Planning
Q: Define Perpetuity
Perpetuity refers to the regular income stream from an investment. It can be calculated as follows:
Price= Dividend / required rate of return.
Q: Distinguish between bull markets and bear markets
Bull Market: market condition whereby the trend of stock prices is increasing.
Bear Market: market condition whereby the trend of stock prices are decreasing.
Q: What is the uptick rule?
The uptick rule is an SEC rule stating that before a short sale may be executed, the stock must trade at an increase (uptick) or price equal to previous increase (zero tick).
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Estate Planning
Q: What is a power of attorney?
A power of attorney is a legal document separate from the will that authorizes an individual to act on behalf of another. The individual (agent) does not hold title the other parties (principal) property. The principal must be of sound mind and legal age to issue such authority.
Q: What are three types of trusts?
The three types of trusts are as follows:
1. Simple trust: all annual income earned is distributed. No distributions of principal are allowed. The trust is not permitted to make charitable contributions.
2. Complex trust: permitted to distribute any quantity of income or principal, and make charitable contributions. Charitable deduction allowed for payments to be recognized charities our of gross income. Payments from principal are not deductible.
3. Grantor trust: grantor or grantor's spouse of trust retains rights to income and principal. Income from grantor trust is generally taxed to grantor, not to trust or beneficiaries.
Q: What are the requirements for a charitable gift?
To quality as a charitable gift, the following criteria must be satisfied:
• Gift must be cash or property
• Donee must be a qualified charity
• Gift cannot be a partial interest
Gift must be made before year-end and deductible amount is reduced by any value received by donor.
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Income Tax Planning
Q: Distinguish between a gift or present interest and gift of future interest.
1. Present interest: unrestricted right to immediate use, possession or enjoyment of property or the income from property.
2. Future interest: reversions, remainders and other interests restricted in use, possession or enjoyment until the future.
(Note: Exclusion is permitted for gifts of present interest and not future interest.)
Q: How does a corporation distribute money and/or property to its shareholders?
A corporation distributes money or property to its shareholders under the following methods:
1. Dividends and return of capital
2. Wages and fringe benefits
3. Rents
4. Loans
Q: Describe the corporate tax filing process:
Corporate tax filing process is as follows:
1. File form 1120 each year even if no taxable income. Return must be filed by 15th of the third month following close of year.
2. Estimated payments must be made if expected tax is $500 or more.
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Insurance Planning
Q: What are the primary insurance company rating agencies?
• Standard & Poors
• Duff & Phelps
• Moody's
• AM Best
• Weiss Research
Q: What is the impact of continued employment on Social Security old age benefits?
Social Security old age benefits will be reduced based upon a graduated scale.
Q: What are the most common exclusions in a homeowner's policy?
Common exclusions are as follows:
Law or ordinance, movement of earth, floods (water damage), power failure, neglect, intentional damage, ware and radiation.
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Retirement Planning
Q: Describe the ratio percentage test:
The ratio percentage test requires coverage of non-highly compensated employees of at at least 70% of highly compensated employees covered.
Q: What are the vesting guidelines for a 403(b) plan?
Participant is 100% vested on all salary deferrals and earnings on salary deferrals. This treatment is similar to the guidelines for 401(k) plans. Plan assets should be invested in annuity contracts from insurance companies or mutual funds held in custodial accounts.
Q: What is section 457 plan?
A Section 457 plan is a non qualified plan with no minimum coverage requirements and can be discriminatory. It is most often utilized by governmental units/agencies and non-church tax-exempt organizations.
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