CPA Business Environment and Concepts (BEC) : Financial Risk Management
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Example Questions
Example Question #2 : Financial Risk Types
If an investor's certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be:
Risk averse
Cautious
Risk seeking
Risk indifferent
Risk seeking
If an investor is seeking lower return for higher risk, he is risk seeking.
Example Question #1 : Financial Risk Types
The numerator for the inventory turnover formula is:
COGM
COGS
Ending inventory
None of the above
COGS
The inventory turnover ratio is used to determine how effectively an entity can manage its inventory. COGS is relevant to determine this.
Example Question #11 : Financial Risk Management
Which of the following criteria is necessary to be an audit committee financial expert, specified in SOX 2002?
Experience in the preparation of tax returns
Education and experience as a certified financial planner
A limited understanding of GAAS
Experience with internal accounting controls
Experience with internal accounting controls
The issuer's audit committee's financial expert must have experience with internal controls. The may be through past experience or education.
Example Question #2 : Sox (Sarbanes Oxley) 2002
An audit committee members of an issuer is required under SOX 2002 to maintain which of the following attributes:
Independence
Integrity
Diligence
Proficiency
Independence
SOX 2002 states that members of the audit committee are to be members of the board of directors but otherwise independent. To be independent, the members may not accept compensation or be an affiliated person.
Example Question #12 : Financial Risk Management
The Sarbanes-Oxley Act of 2002 seeks to improve investor confidence by allowing for greater transparency for all of the following issues except:
Adequacy of internal controls
Means and methods for balancing risk and growth
Competency of audit committees
Compliance of senior officers with a code of ethics
Means and methods for balancing risk and growth
ERM concepts specifically address investor issues surrounding risk and growth however SOX 2002 focuses on less strategic operations and more on financial reporting issues including ethics.
Example Question #4 : Sox (Sarbanes Oxley) 2002
According to the Sarbanes-Oxley Act of 2002, a chief executive officer who misrepresents the company's finances may be penalized by being:
Removed from corporate office and fined
Imprisoned but not fines
Fined and imprisoned
Fined but not imprisoned
Fined and imprisoned
An individual who knowingly executes securities fraud will be both fined or imprisoned not more than 20 years or both.
Example Question #5 : Sox (Sarbanes Oxley) 2002
According to SOX 2002, anyone who knowingly alters, destroys, covers up, or makes false entry in a document with the intent to obstruct an investigation within any agency of the United States may be fined and/or imprisoned for up to:
10 years
20 years
5 years
15 years
20 years
The penalty for altering documents is punished up to 20 years.
Example Question #13 : Financial Risk Management
The SOX 2002 code of ethics for senior officers includes and promotes:
Honest and ethical conduct including handling of conflicts of interest
Full, fair, accurate, and timely disclosures in periodic financial reports
Competitive pay for staff
Compliance with laws, rules, and regulations
Competitive pay for staff
SOX 2002 does not involve or necessitate fair pay for members of a company. It promotes the ethical and legal promotion of business.
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