Accounting 4632 Midterm Exam 2 Study Guide Spring 2016 Professor Beck The following study guide was prepared with the intention of directing students attention toward many of the important concepts covered in the course that they should know for the second midterm exam I caution students that it is not an exhaustive list However students can expect that the vast majority of exam questions will relate to the issues referenced in this study guide The study guide was prepared in reference to the textbook as the course structure tends to follow the textbook I refer students to the PowerPoint slides and their notes for material covered during lectures All topics covered during lectures are fair game for coverage on the exam and I typically look back through the PowerPoint slides and any practice problem sets that we covered in class as well as any additional practice problem sets that were posted to Blackboard when I write the first several questions on any given exam All assigned readings from the MGP textbook are also fair game for coverage on the exam Note I cover the issues topics in class that I consider to be most important so students should primarily focus their attention on the issues topics from the MGP textbook that were covered in class ALL practice problems covered in class and posted to Blackboard for students to do for practice are also fair game for coverage on the exam I also recommend that students copy and paste all of the Announcements from the course site on Blackboard into a Word document and review any and all comments about the material that were posted to the Announcements section on Blackboard Any additional information I provided there is also fair game Sometimes I add additional tips or hints prior to an exam The lectures emphasize important points and are largely organized around the textbook Many of the lectures contain additional information that I have added to the course that is not discussed in either the MGP Textbook or the Gleim material Students should be sure to review all PowerPoint slides covered in class as well as any notes taken during lectures and make sure that they have a solid grasp of these concepts as well I caution students against trying to memorize lists of items from the PowerPoint slides While some memorization regarding auditor independence issues may be necessary such a strategy will not work well for most material covered in the course The course is highly conceptual in nature and I want students to understand why the auditor is required to or should perform various activities Students need to achieve a higher order understanding of the material and be able to apply the concepts Rather than memorizing I encourage students to always seek to identify the reasoning underlying the various activities that the auditor is required to perform 2 In this study guide certain issues appear in bold indicating that they are of exceptional importance and thus students should be careful to have a very thorough understanding of these issues All issues referenced in the study guide are important but I wanted to highlight that certain issues warrant extra attention from students To test their understanding of the material students will want to work the assigned Gleim CPA Review practice problems Time permitting students may find it beneficial to work additional Gleim problems contained within the assigned study units Notes I have gone ahead and made a decision that on Midterm 2 I will not test any material that we happen to cover in class after Lecture 10 but Lecture 10 will be tested on Midterm 2 assuming that we do get to it in class I mentioned today in class that I will be attending a Deloitte conference this Thursday 3 17 2016 and therefore we will not be holding class this Thursday Instead I will be providing links to some videos and or webcasts pertinent to the material that we are covering in class so that students can gain some insights from practice It is possible that Midterm 2 could include some questions pertaining to these materials I will provide some additional guidance next week regarding which aspects of these videos webcasts are most important to know for the exam after we discuss them in class MGP Chapter 2 Lessons 7 8 1 Be familiar with the 5 different business processes and the general types of activities that would be involved in each 1 The Financing Process Businesses obtain capital through borrowing or soliciting investments from owners and typically invest in assets Businesses also need to repay lenders and provide a return on owners investments 2 The Purchasing Process Businesses must acquire goods and services to support their operations i e Purchase finish goods or raw materials 3 The Human Resource management Process Business organizations hire personal to perform various functions in accordance with the enterprise s mission and strategy 4 The Inventory Management Process varies widely between different types of businesses Manufacturers wholesalers and retailers all typically have significant and often complex transactions belonging to this process Includes transactions like accumulating and allocating costs to inventory and making adjustments to record inventory at the lower of 3 cost or market Service providers rarely have significant inventories to manage since they consist of people most of the time 5 The Revenue Process Businesses generate revenue through sales of good or services to customers They collect the proceeds of those sales in cash either immediately or through collections on receivables Management establishes controls to ensure that sales and collection transactions are appropriately handled and recorded MGP Chapter 3 all prospective client 2 Know the types of factors that a CPA firm should consider when evaluating a a Obtain and review available financial information annual reports b interim financial statements income tax returns etc Inquire of third parties about any info concerning the integrity of prospective client management c Consider whether the prospective client has any circumstances that will require special attention or that may represent unusual business or audit risks such as litigation or going concern issues d Determine if the firm is independent of the entity and able to provide the desired service e Determine if the firm has the necessary technical skills and knowledge of the industry to complete the engagement f Determine if acceptance of the entity would violate any applicable