Correct Answer: A

Explanation: A system of quality control for a CPA firm, which usually encompasses quality control policies and procedures, assignment of responsibilities, communication, and monitoring, can provide a CPA firm with reasonable assurance of conforming with professional standards.

The remaining answer choices are incorrect for the following reasons:

• Peer review which, as an external study of a firm's quality controls, can help evaluate a firm's professional practice but is not done on a regular, ongoing basis.
• Continuing professional education is one example of an element of quality control.
• Compliance with generally accepted reporting standards could be considered an example of a professional standard with which a firm should conform.

Today's question: REG

Queen paid Pax & Co. to become the surety on a loan which Queen obtained from Squire. The loan is due and Pax wishes to compel Queen to pay Squire. Pax has not made any payments to Squire in its capacity as Queen's surety. Pax will be most successful if it exercises its right to _________________

A)   reimbursement (indemnification).

B)   contribution.

C)   exoneration.

D)   subrogation.

Correct Answer: C

Explanation: Exoneration is the right of a surety prior to payment to get a court order demanding that the debtor pay. Exoneration is the only right the surety may use prior to payment. Reimbursement (the right of a surety to recover from the debtor payments made to the creditor) only occurs after payment by the surety. Subrogation (the right of the surety to gain the creditor's rights once the surety makes full payment) only occurs after payment by the surety. Contribution (the right of a cosuretor to receive a pro rata contribution from other cosuretors for amounts paid the creditor) only occurs after payment by the cosurety. Since Pax the surety has not made any payments to the creditor, the only right Pax can successfully assert is the right of exoneration.

Today's question: BEC

Nile Co.'s cost allocation and product costing procedures follow activity-based costing principles. Activities have been identified and classified as being either value-adding or nonvalue-adding as to each product. Which of the following activities, used in Nile production process, is nonvalue-adding?

A)   Design engineering activity

B)   Heat treatment activity

C)   Drill press activity

D)   Raw materials storage activity

Correct Answer: D

Explanation: In the production process, storing raw materials until they are needed represents a non-value added step, whereas engineering, heat treatment or drilling represents improving the product. In addition, storage requires handling costs, cost of holding inventory, possible breakage or misappropriation, while inventory simply waits for use at a later time.