Client Advisory Services Flashcards
7 cards from real CPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Client Advisory Services flashcards as text
A CPA providing CAS uses client accounting software to record transactions and close the books monthly. Under AICPA independence rules, this represents a:
Answer: Permitted non-attest service with proper safeguards if the client assumes management responsibility
Bookkeeping services are permitted under AICPA rules as long as the client (a competent manager) assumes all management responsibilities for the records.
A CPA advisor recommends that a client implement a three-way purchase order matching process. This control is designed primarily to prevent:
Answer: Unauthorized or erroneous payments to vendors
Three-way matching (PO, receiving report, invoice) ensures that payments are made only for goods/services that were ordered and received.
A CPA performing CAS for a restaurant chain notices the food cost percentage has increased from 28% to 36% over three months. The MOST appropriate advisory action is:
Answer: Conduct a variance analysis to identify root causes such as theft, waste, or supplier price changes
Variance analysis isolates whether the food cost increase is driven by pricing, theft, waste, or volume — needed before prescribing a solution.
Under a CAS engagement for a nonprofit client, the CPA prepares grant expenditure reports. The primary compliance concern is:
Answer: Adherence to donor/grantor restrictions and applicable grant terms
Nonprofit grant reporting must comply with donor and grantor restrictions; misusing restricted funds can result in grant repayment and legal liability.
A CPA providing fractional CFO services recommends a client pursue a revolving line of credit rather than a term loan. This recommendation is BEST justified when the client's financing need is:
Answer: For seasonal and unpredictable cash flow gaps
A revolving line of credit is ideal for seasonal or irregular cash needs because funds can be drawn and repaid as needed, minimizing interest costs.
When a CPA provides technology consulting under CAS (e.g., selecting accounting software), the MOST critical factor to evaluate for the client is:
Answer: Scalability, integration capabilities, and total cost of ownership relative to the client's needs
Technology selection must be driven by fit-for-purpose analysis including scalability, integration, and cost — not vendor popularity or convenience.
A CPA providing CAS identifies that a client's break-even point is significantly higher than current sales volume. The MOST direct corrective lever to advise the client on is:
Answer: Reducing variable costs per unit and/or increasing the contribution margin per unit
Lowering variable costs or increasing selling prices raises the contribution margin, which lowers the break-even point relative to current sales.