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CPA-Test – Certified Public Accountant Test: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, Regulation

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Showing 13–15 of 20 questions

Question 13 (Business Environment and Concept)

Eugene Entrepreneur developed his waste collections and disposal business from one truck 20 years ago to a fleet of 2,000 trucks serving an entire region today. Gene is looking to retire and knows that he cannot find a suitable buyer for the entire business. Gene has developed a series of short range plans with his senior management group that include generous bonuses, funded in part by deferred repair and maintenance expenses and prior earnings, sales of business segments where possible or transfers of assets to the counties and municipalities that had engaged the waste collection and disposal service.

Gene has frozen all new capital investment. The mission that Eugene Entrepreneur has mapped out for his company can best be described as:

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    Build.
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    Hold.
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    Harvest.
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    Sunset.
Question 14 (Auditing and Attestation)

An accountant's compilation report on a financial forecast should include a statement that:

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    The forecast should be read only in conjunction with the audited historical financial statements.
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    The accountant expresses only limited assurance on the forecasted statements and their assumptions.
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    There will usually be differences between the forecasted and actual results.
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    The hypothetical assumptions used in the forecast are reasonable in the circumstances.
Question 15 (Business Environment and Concept)

In 1990, ABC Corp., a closely held corporation, was formed by Adams, Frank, and Berg as incorporators and stockholders. Adams, Frank, and Berg executed a written voting agreement which provided that they would vote for each other as directors and officers. In 1994, stock in the corporation was offered to the public. This resulted in an additional 300 stockholders. After the offering, Adams holds 25%, Frank holds 15%, and Berg holds 15% of all issued and outstanding stock. Adams, Frank, and Berg have been directors and officers of the corporation since the corporation was formed. Regular meetings of the board of directors and annual stockholders meetings have been held.

For this question refer to the formation of ABC Corp. and the rights and duties of its stockholders, directors, and officers.

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    Adams, Frank, and Berg must be elected as directors because they own 55% of the issued and outstanding stock.
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    Adams, Frank, and Berg must always be elected as officers because they own 55% of the issued and outstanding stock.
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    Adams, Frank, and Berg must always vote for each other as directors because they have a voting agreement.