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Cma Real Essay Questions

CMA essay practice questions.




1- What are characteristics of successful budgeting? a-Well planned . A good budget takes time and effort to prepare. Planning a  budget should involve everyone affected by it. The Budget must be aligned with the corporate strategy b-Realistic. The budget must be achievable and to be used as a motivation tool rather than a blame tool. c-Flexible. The budget shall be flexible to meet the unexpected events and to  be adjusted to meet meet the new outcomes. outcomes. d-Clearly communicate. The budget shall be communicated clearly to all employees and to give the involved employees a chance to participate in the  preparation process because that will make the budget accepted and also it shall be supported by the higher level management. 2-Describe the compliance audit: A compliance audit is performed in order to determine to what degree an organization is operating in an orderly way, effectively and visibly conforming to certain specific requirements of its policies, procedures, Standards, or laws and governmental regulations. Compliance auditing is more objective than other internal auditing applications. To perform a compliance audit, the auditor must know exactly what policies, procedures, standards, laws, etc., are required. In a compliance audit, the internal auditor is not interested only in the compliance or lack of compliance, but in case of noncompliance, he or she will also determine the cause of the noncompliance, the cost of the noncompliance and what needs to be done in order to be in compliance. The causes of noncompliance may be faulty procedures, changes in the conditions related to the regulation, or perhaps simply mistakes and lack of review or supervision. 3-describe the operational audit. The purpose of a performance or operational audit is examining and evaluating systems of internal control, overall company operations and the quality of performance in carrying out assigned responsibilities. In order to assess these items, a company must have a standard level of  behavior or output, or something that is to be achieved. The internal auditors will then compare the results of the operations with these standards. The focus of a performance or operational audit is on the three Es efficiency, effectiveness and economy. The main techniques for the auditor in a performance audit are financial analysis, the observation of departmental activities and questionnaire interviews of employees. In addition, as part of an operational audit, the internal auditor will make recommendations about how to improve the process or operation. The scope of the performance or operational audit exceeds that of a financial audit. Internal auditors will evaluate the adequacy and effectiveness of the controls that are in place in relation to operating information, as well as financial records and information, which is the focus of the financial audit. The internal auditors will also look at areas that do not affect the financial statements themselves. This will include controls related to policies,  procedures and decision-making. In auditing controls, the internal auditor evaluates the adequacy and effectiveness of existing controls in responding to risks within the organization's governance, operations, and information systems regarding the • Reliability and integrity of financial and operational information; • Effectiveness and efficiency of operations; • Safeguarding of assets; and • Compliance with laws, regulations, and contracts (Internal Auditing Standard No. 2130.Al). 4- Define transaction control: Applications and transaction controls are designed to prevent, detect, and correct errors and irregularities in transactions that are processed by accounting systems. And these controls are divided into three categories, Input controls, Processing controls and output controls. 5- Define backup control: Control that, is required to prevent loss of critical business information and to ensure continued operation in the face of a major system failure or a destruction of the facility. Two levels of policies and procedures must be set in place :Data backup  policies and Disaster recovery policies and procedures 6- Limitations of the learning curve analysis. It is not effective when machinery performs repetitive tasks such as robotics it is most appropriate for labor intensive contexts that involves repetitive tasks, long production runs and repeated trials. The learning rate is assumed to be constant in the calculations but actual declines in labor time are not constant. Conclusions may be unreliable because observed because observed changes in productivity may be due to factors other than learning curve such as change in labor mix or the product mix or a combination of the two. 7- RI Vs ROI benefits and limitations: -focusing only on ROI is not a good general policy; instead firms should take many factors into account. And the manager may reject a project with  positive ROI if its percentage is less than the aggregate ROI percentage although it will participate in the company total profits. But as it is a percentage it is good to compare different business unit sizes. -RI gives the managers the incentive to select any project that generates returns above the required rate of return, but as it is depend on the absolute value of return coming from the investment it is less useful when comparing different business unit sizes. 8- Balanced score Card benefits and limitations: The BSC gives companies a simple tool that shows them specific financial and non-financial indicators translating the company strategy into four categories: Financial: focusing on profitability. Financial performance is still a priority,  but it is recognized that good long-term financial performance will not be achieved if goals in the other categories are not attained. Some of the more common measures of financial performance are: operating income, revenue growth, revenue from new products, gross margin percentage, cost reductions, EVA and ROI. Customer:  developing the company's customer perspective involves identifying the market segment(s) it wants to target and then measuring its success in those segments. A common method of measuring this success is the trend in the company's share of the market over time: is it increasing in line with management goals? Customer satisfaction is another vital part of the customer perspective, because if customers are not satisfied, they will take their business elsewhere. And without customers, a business has no  business. Customer satisfaction goals relate to how the company wants its customers to view it. This may include pricing goals (becoming the lowest cost supplier); meeting the customers' needs better than the competition; and/or being known for high quality and excellent customer service. Being the lowest cost supplier can be measured by the customer's total cost of using the company's product relative to the customer's total cost to use competitors’ products. How well customers’ needs  are being met can be measured by the number of repeat customers and the percentage of deliveries that are made as promised and when promised. Quality goals can  be measured by means of number of defective products returned and the level of product reliability over time. The level of customer service provided after the sale can be measured with customer surveys. Internal Business Process:  This includes innovation in products and services, innovations and improvements in operations, and customer service/support after the sale. If one of the company's customer goals is to be the lowest cost supplier, that will need to be supported operationally by maintaining efficient, low-cost production, which can be measured by metrics such as the cost of raw materials, the number of employee hours needed to manufacture a unit of product, and plant utilization. Efficient cycle times also keep costs low. Here also is the support for quality in the Learning and Growth: product required to meet the customer satisfaction goals. And meeting customers' needs better than the competition is supported by innovations in products and services. Number of new product introductions is one way to measure this. Technological capability for customer service personnel is necessary to be able to provide excellent customer service, and it is also needed in the manufacturing area to be able to manufacture product efficiently. Employee surveys of customer service Personnel could be used to determine whether those employees have the information they need immediately available to them, or whether they frequently have to put customers on hold to go search out the information. Percentage of manufacturing processes with advanced controls would be a way of measuring manufacturing technology. BSC helps the company to measure the performance not only based solely on financial measures but also depend on non financial measures Companies use BSC as management tool to: - Clarify &communicate the strategy - Align individual and unit goals to the strategy - Link strategy to the budgeting process. - Get feedback for continues strategy improvement. 9- Advantages and disadvantages of ABM: Advantages: - Uses continues improvement to maintain the firm’s competitive advantage. - Allocates more resources to activities, products and customers that add more value, strategically redirecting the management focus. - Eliminate non-value added activities. - Measures process effectiveness and identifies areas to reduce costs or increase customer value. - Works well with JIT Process. - Ties Performance management to ABC to provide consistent inventories for using ABC. Disadvantages: - Changing to ABC/ABM will result in different pricing, process design, manufacturing technology, and product design decisions and the company must be prepared to support managers who embrace this method and discourage managers who continue to use the old methods. - ABC/ABM is not used for external reporting, and needing to prepare reports using traditional methods may influence management decision making enough to dilute the impact of ABC/ABM. - Implementing ABC/ABM is expensive and time consuming, so cost benefit analysis should be done to identify all hidden costs and  benefits. 10-What are the four Ethical Principles: Honestly – Objectivity-Fairness-Responsibility 11-What are the four ethical standards? Competence-Integrity-Confidentiality- Creditability 12-Courses of action to be used in case of ethical conflict resolution: 1-Discuss such problem with your immediate supervisor except when it appears that the supervisor is involved, in that case, present the issue to the next managerial level. 2-If the immediate supervisor is the chief executive officer or equivalent; the reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees or owners. And discussion of the problem with authorities or individuals not employed or engaged by the organization is not appropriate unless the member believes there is a clear violation of law. 3-clarify relevant ethical issues by identifying discussion with an IMA ethics counselor to obtain a better understanding of possible course of action. 4- Consult your own attorney or legal advisor to know the legal rights and obligations concerning the ethical issue.