[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for BEC. 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[ReineMossi]

Please help me understand… How is this sign helping me as an owner

You walk into a little boutique in the nearby mall. As you walk up to the cash register with an item that you wish to purchase, you notice that there appears to be only one employee in this small store. With a limited number of personnel in the store at any given time, what would be the best internal control procedure to provide a reasonable guarantee that all cash sales are being rung up properly and cash put in the cash drawer?

A.
Carefully screen all new employees

Incorrect B.
Require that all sales be rung up on the cash register using barcodes

C.
Increase the minimum number of employees at the store at any given time to three

D.
Post a sign in a visible spot near the checkout counter that states, “If you do not get a receipt, your purchase is free.”

You answered B. The correct answer is D.

Internal controls are designed to provide reasonable assurance that objectives are achieved and compliance to laws and regulations is obtained. All of the items listed would be reasonable control procedures; however, the store receipts may not be able to support a minimum of three employees at the store at any given time. The cost of an internal control procedure is not expected to exceed its benefit. Although it would be important to carefully screen all new employees, it is often difficult to judge an individual's character during one or two short interviews, and in today's litigious society, it is often difficult to get valuable information from prior employees or other references.

Following are some of the internal control goals related to this transaction:

Validity: The owner would want only valid, authorized, and legal transactions to be processed. By requiring all transactions to be rung up on the cash register, the owner has the ability to review all transactions. The owner could examine items sold, discounts given, and any other adjustments recorded in sales. However, when only one employee is in the store, it would be difficult to enforce the use of the cash register for cash sales.
Accuracy of recording and evidence of supportability: The owner would want transactions to be recorded free of omissions. By using the customer as a part of the internal control process, the customer can be a “monitor” of the transaction when the owner is not in the store and/or when only one employee is on the selling floor. The transaction would need to be entered into the cash register (recorded) in order to print a register receipt. Given that it may be necessary to have only one employee in the store at slower times during the day, the owner has a final “backup” to have reasonable assurance that the employees are using the other required internal control procedures—thus making this procedure key in the internal control process.

[ReineMossi]

Here is another one, I am not sure I understand why C is correct , I picked D

Brad CPA has been approached by a small-business client and asked to provide a list of potential internal controls for his small office. Brad included such things as segregation of duties, authorization for return and adjustments, the use of hash totals as an information processing control, additional employee training, the preparation of a formal company manual, and reconciliations. After reviewing the list, the small-business owner had raised concerns related to the implementation of some of the suggestions. All of these concerns were potentially valid except:

A.
the staff size did not lend itself to segregation of duties.

B.
the small business could not handle the cost of some of the recommended internal control activities.

C.
all members of the small staff of the company were longtime, trusted employees.

Incorrect D.
the efficiency and effectiveness of employee performance was felt to be adequate.

You answered D. The correct answer is C.

Control activities are only designed to provide reasonable assurance related to the achievement of the company's stated objectives; however, risk will never be completely eliminated since there are limitations related to the control process. Limitations would include the following:

Small staff size, resulting in the inability to effectively segregate duties
The cost of the implementing a control being higher than the benefit of having that control
The need for rapid responses by employees, thus affecting their judgment and performance
Breakdowns in communication, training, and technology
The collusion of two or more employees
The override of various controls by management for illegitimate purposes

[Anonymous]

The first one I was surprised by as well-I answered B as well but I guess the explanation makes sense in that the customer is acting as a control in a sense, forcing the employee to ring up the purchase. I don't think that's a very good approach as employee could totally steal things from the store when no one is around or give the merchandise to their friends when no one is looking…

On the 2nd one, I think the one about the employees being trusted is an obvious choice as that's not a good enough reason to not implement any internal controls…

[CPYay]

@ReineMossi

Question regarding the sign: It forces the employee to issue receipts to customers, thus running the transaction through the register. Sure, the employee could give items to friends, but this would eventually be caught when inventory counts are completed. If there's a discrepancy and no supporting documentation, fraud is a likely cause. As the answer states though, having 1 employee is a challenge in itself.

Question regarding concerns of I/C: All of the answers but C are valid reasons to modify/override a need for internal control. The fraud triangle is always a risk.

[CPASF1]

Can someone please help me understand the “Master Budget Preparation” material
so to get the order right: i made my own mneumonic since my book doesn't have one:SAL Produced Direct Direct Raw Materials in Cash F/S's

Sales Budget
Production Budget
Direct/ Raw Materials purchases budget
Cash Disbursement Budget
Budgeted F/S's (budgeted-I/S, cash flow. B/S)

but i dont' understand how to get the “Budgeting Material Purchases and Payments” material down ( i have read it a few times but I just don't understand the flow and I am want to understand it rather than memorize it) can someone please help me with understanding the flow below:

units sold
+ budgeted increase in finished goods
– budgeted decrease in finished goods
= units to be manufactured
* units of raw materials/ unit of finished goods
= units of raw material required for production
+ budgeted increase in raw materials
– budgeted decrease in raw materials
= budgeted raw materials purchases
+ budgeted decrease in AP
– budgeted increase in AP
= budgeted payments for raw materials

sorry if my order of questions is confusing, as I am a bit confused on this topic as well

[CPYay]

Easiest way (for me) is to understand the flow of materials/goods. I use “purchase” in each equation and substitute that for what the true item is… In other words, my “purch” will always be the flow of goods which are Purchases, WIP input, COGM, COGS

Let's start at units sold… which is COGS in this respect. Cogs is the output from Finished goods.

Finished Goods
Beg + “purch” – End = COGS … In this instance, purch = COGM which comes from WIP
True equation: Beg + COGM – End = COGS

WIP
Beg + “purch” – End = COGM … In this instance, purch = any input into WIP, but for this sake, it's DM
True equation: Beg + Input – End = COGM

DM
Beg + purch – End = to production (WIP) … In this instance, purch = actual purchases
True equation: Beg + purch – End = output to WIP

Purchases come from AP… so you'll adjust your budget for + decreases and – increases to arrive at budgeted payments.
True equation: Beg AP + purchases – End AP = payments

Hope that makes sense… Haha.

[Anonymous]

are you talking about how to figure out what you need for production in terms of budgeting?

The formula is:

Units sold
-Units in beg balance
+Desired ending inventory
=Units to produce

Same formula applies to materials needed for purchase.

But in problems that have both, you start with your sales, then figure out how much you need to produce and then figure out how much material you need in order to produce those units… Unless that's not what you are asking…
Do you have a particular problem you need help getting through?

[x260bm]

Took it today and I have a bad feeling about it. It seemed to get easier with each part. My only hope is I'm stronger in the “hard” parts of the test for everyone else.

When I took FAR the last two parts were like mind rape. I completely bombed the sims and still got an 82.

[Anonymous]

That's exactly how I felt yesterday @x260bm
I did get 2 questions that I had no clue about, they were related to IT.

[afrieband16]

@mrsfabburns this is definitely a good forum to use as a “study partner” as everyone is always so willing to help each other I have found when I used it for FAR. If you are looking for more of a partner/study group though I would definitely be interested and I am sure there might be some more out there

[CPYay]

I have one week left to study and my MCQ results are all over the place. It seriously looks like an EKG chart. One score is 90%-100%… next is 40%-50%.

Looking forward to a power weekend.

[ThomasHallberg]

Yup same exam experience. Good luck on all your studies! Now I just have to wait a month… oh well. Onto reg.

[LIZZ]

hi.

Officially starting to study for BEC with test date 02/06/2017. Tight schedule I know but I can squeeze out about 35 hours of study time a week. I decided to ditch Becker and just use the Ninja 10 point combo to study for BEC.

I just came from the REG study group they were very active and kept me motivated. I'm happy to see this study group has the same type of energy. Is there anyone else just starting the BEC study program?

Good Luck Everyone !

FAR - 05/2015
AUD - 75,11/2014
REG - 07/2015
BEC - 09/2015

[Joe]

@CYay I'm definitely in for a POWER WEEKEND! What is your study plan?

If anyone needs an accountability partner/group please let me know. This has worked EXTREMELY well for me in the past.

HIYA

Joe

[Joe]

@LIZZ I'm about half way through my Ninja MCQs. Welcome to the group!

[Author]

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