Certified Public Accountant Business Environment & Concepts 3

Question 1

Which risk management strategy involves transferring risk to a third party, such as an insurance company?

Accepted Answer

Risk transfer

Answer

Risk avoidance

Answer

Risk reduction

Answer

Risk acceptance

Question 2

In capital budgeting, what is the internal rate of return (IRR) used to evaluate?

Accepted Answer

The discount rate that makes NPV equal to zero

Answer

The accounting profitability of a project

Answer

The payback period of an investment

Answer

The net book value of project assets

Question 3

Under the Sarbanes-Oxley Act (SOX), which section requires management to assess and report on the effectiveness of internal controls over financial reporting?

Accepted Answer

Section 404

Answer

Section 201

Answer

Section 302

Answer

Section 401

Question 4

What type of market structure exists when a single seller controls the entire supply of a product with no close substitutes?

Accepted Answer

Monopoly

Answer

Perfect competition

Answer

Oligopoly

Answer

Monopolistic competition

Question 5

Which budgeting approach starts each period from zero and requires managers to justify all expenditures rather than using prior-year amounts?

Accepted Answer

Zero-based budgeting

Answer

Incremental budgeting

Answer

Flexible budgeting

Answer

Rolling budgeting

Question 6

What is the primary goal of enterprise risk management (ERM) as defined by the COSO ERM framework?

Accepted Answer

Align risk with strategy to create value

Answer

Eliminate all organizational risks

Answer

Maximize shareholder dividends

Answer

Comply with SEC reporting requirements