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 advising a client on business succession planning should FIRST assess:
Answer: The current market value of the business and the owner's personal financial goals
Succession planning begins with understanding what the business is worth and what the owner wants to achieve — financial and personal goals drive the strategy.
A CPA providing CAS recommends implementing a rolling 13-week cash flow forecast. The PRIMARY benefit over a static annual budget is:
Answer: It provides near-term, actionable visibility updated regularly to reflect current reality
Rolling 13-week forecasts are updated continuously, giving management accurate near-term cash visibility to make timely operational decisions.
Under the AICPA's definition, which of the following BEST distinguishes CAS from traditional accounting services?
Answer: CAS provides real-time, forward-looking insights and strategic advice beyond historical compliance reporting
CAS is distinguished by its focus on proactive, advisory, and forward-looking support rather than solely historical compliance tasks.
A client engaged in a CAS agreement requests the CPA recommend a specific investment portfolio for the company's idle cash. The CPA should:
Answer: Clarify that investment advice requires separate licensure (e.g., Series 65/RIA) and limit advice to general cash management principles
Providing specific investment advice typically requires RIA or broker-dealer registration; CPAs should stay within their authorized scope and refer to licensed advisors.
A CPA providing CAS notices that a client's inventory turnover ratio has declined significantly. The advisory insight this MOST likely signals is:
Answer: Potential overstocking, obsolete inventory, or declining sales demand
Declining inventory turnover indicates inventory is sitting longer, which may mean overpurchasing, slow sales, or obsolete stock tying up working capital.
In a CAS engagement, the CPA helps the client prepare a flexible budget. A flexible budget differs from a static budget in that it:
Answer: Adjusts budgeted amounts for actual activity levels, enabling meaningful variance analysis
A flexible budget recalculates expected costs and revenues at the actual output level, making variances more meaningful than comparing to a static plan.
A CPA advising a client on pricing strategy using cost-plus pricing must ensure the markup percentage is sufficient to cover:
Answer: All costs (fixed and variable) plus a desired profit margin
Cost-plus pricing must recover total costs — both fixed and variable — plus generate the desired profit margin to be financially viable.