Wiley CPAexcel Exam Review April 2017 Study Guide
Business Environment and Concepts

The Wiley CPAexcel Study Guide: Business Environment and Concepts arms CPA test?takers with detailed text and skill?building problems to help identify, focus on, and master the specific topics that may need additional reinforcement to pass the BEC section of the CPA Exam.

This essential study guide:

• Covers the complete AICPA content blueprint in BEC
• Explains every topic tested with 662 pages of study text, 599 multiple?choice questions, and 6 task?based simulations in BEC
• Organized in Bite?Sized Lesson format with 149 lessons in BEC
• Maps perfectly to the Wiley CPAexcel online course; may be used to complement the course or as a stand?alone study tool

About the Business Professors xi

Welcome to Business Environment and Concepts xiii

Corporate Governance 1

Internal Control Frameworks 2

Introduction to COSO, Internal Control, and the COSO Cube 2

17 Principles of Internal Control 6

Types and Limitations of Accounting Controls 10

Internal Control Roles and Responsibilities 13

Internal Control Monitoring—Purpose and Terminology 16

Internal Control Monitoring and Change Control Processes 20

Enterprise Risk Management Frameworks 26

The COSO ERM Model 26

Risk Management Policies and Procedures 32

Other Regulatory Frameworks and Provisions 36

Economic Concepts and Analysis 41

Introduction to Economic Concepts 42

Microeconomics 46

Introduction and Free–Market Model 46

Demand 48

Supply 51

Market Equilibrium 53

Elasticity 56

Consumer Demand and Utility Theory 62

Inputs and the Cost of Production 64

Market Structure and Firm Strategy 67

Introduction to Market Structure 67

Perfect Competition 68

Perfect Monopoly 71

Monopolistic Competition 73

Oligopoly 75

Summary of Market Structure 77

Macroeconomics 78

Introduction to Macroeconomics 78

Aggregate Demand 81

Aggregate Supply 87

Aggregate (Economy) Equilibrium 89

Gross Measures—Economic Activity 91

Gross Measures—Employment/Unemployment 95

Business Cycles and Indicators 98

Price Levels and Inflation/Deflation 101

Money, Banking, and Monetary/Fiscal Policy 105

International Economics 110

Introduction and Reasons for International Activity 110

Issues at the National Level 113

Role of Exchange Rates 116

Issues at Entity Level 120

Currency Exchange Rate Issue 120

International Transfer Price Issue 125

Globalization 129

Introduction to Globalization 129

Globalization of Trade 132

Globalization of Production 136

Globalization of Capital Markets 138

Globalization and Power Shifts 142

Becoming Global 146

Business Strategy and Market Analysis 150

Introduction to Business Strategy and Market Analysis 150

Macro]Environmental Analysis 152

Industry Analysis 154

Entity/Environment Relationship Analysis 157

Generic Strategies 159

Summary and Extensions 163

Financial Management 167

Introduction to Financial Management 168

Concepts and Tools 169

Cost Concepts 169

Time Value of Money Tools 174

Interest Rate Concepts and Calculations 182

Financial Valuation 190

Introduction to Financial Valuation 190

Valuation Techniques—General 193

Valuation Techniques—CAPM 195

Valuation Techniques—Option Pricing 199

Valuation Techniques—Business Entity 202

Hedging and Derivatives 210

Capital Budgeting 218

Introduction and Project Risk 218

Evaluation Techniques 221

Introduction and the Payback Period Approach 221

Discounted Payback Period Approach 223

Accounting Rate of Return Approach 225

Net Present Value Approach 227

Internal Rate of Return Approach 230

Ranking Projects 233

Capital Project Ranking Decisions 236

Financing Options 239

Introduction and Financial/Capital Structure 239

Introduction to Short–Term Financing 240

Short–Term (Working Capital) Financing 241

Payables 241

Standby Credit and Commercial Paper 244

Receivables and Inventory 246

Long–Term (Capital) Financing 248

Introduction to Long–Term Financing 248

Long–Term Notes and Financial Leases 249

Bonds 252

Preferred Stock 256

Common Stock 259

Cost of Capital and Financing Strategies 263

Working Capital Management 266

Introduction to Working Capital Management 266

Cash Management 268

Short]Term Securities Management 274

Accounts Receivable Management 278

Inventory Management 282

Current Liabilities Management 286

Ratios and Measures for Working Capital Management 287

Introduction to Ratio Analysis 287

Liquidity Measures 289

Operational Activity Measures 292

Financial Management Risk Concepts—Summary 295

Information Technology 301

IT Governance and Management 302

Risks and Controls in Computer]Based Accounting–Information Systems 302

The COBIT Model of IT Governance and Management 305

Introduction to Enterprise–Wide and Cloud–Based Systems 307

IT Functions and Controls Related to People 310

Role of Information and Technology in Business 314

IT and Business Strategy 314

System Types by Activity 316

System Types by Data Structure 318

Data Structures, Software, and Databases 320

Information Systems Hardware 324

Transaction Processing 326

Emerging Technologies in AIS 330

Emerging Technologies in AIS: Big Data 333

Information Security/Availability 335

The Protection of Information 335

IT Security Principles 335

Managing Cyber Risk 338

IT Policies 341

Introduction to E–Business and E–Commerce 343

E–Commerce Applications 345

ERM for Cloud Computing 348

Mobile Device, End–User, and Small Business Computing 350

Multi–Location System Structure 353

Computer Networks and Data Communication 354

The Internet—Structure and Protocols 358

Logical and Physical Access Controls 360

Logical Access Controls 360

Physical Access Controls 363

Encryption and Secure Exchanges 365

System Disruption/Resolution 368

Organizational Continuity Planning and Disaster Recovery 368

Backup and Restoration 371

Computer Crime, Attack Methods, and Cyber–Incident Response 373

Processing Integrity(Input/Processing/Output Controls) 377

Program Library, Documentation, and Record Management 377

Input and Origination Controls 379

Processing, File, and Output Controls 382

Accounting System Cycles 384

The Accounting System Cycle: Introduction 384

Revenue Cycle 387

Expenditure Cycle 391

Production Cycle 394

HR and Payroll Cycle 397

General Ledger, Reporting, and Financing Cycle 401

Systems Development and Maintenance 404

System Development and Implementation 404

Operations Management 409

Financial and Nonfinancial Measures of Performance 410

Quality Management 410

Balanced Scorecard and Benchmarking 414

Competitive Analysis 418

Ratio Analysis 422

Risk Management 426

Performance Improvement Tools 429

Cost Accounting 434

Manufacturing Costs 434

Spoilage, Cost, and Inventory Flow 440

Cost Behavior Patterns 444

Cost]Volume]Profit Analysis 447

Absorption and Direct Costing 455

Job Costing 462

Process Costing 466

Joint and By]Product Costing 473

Sales and Direct Cost Variance Analysis 476

Overhead Variance Analysis 482

Process Management 487

Cost Relevance 487

Special Decisions 493

Transfer Pricing 497

Activity]Based Costing and Process Management 501

Planning Techniques 506

Budgeting 506

Forecasting Tech niques 511

Multiple Choice Questions 517

Task–Based Simulations 639

Index 649