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Free SOCPA Fellowship practice questions

Section: Regulations

Question 1 of 15

The amount of unemployment compensation in the first months is calculated as a percentage of

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  1. Question 1

    Section: Regulations

    The amount of unemployment compensation in the first months is calculated as a percentage of

    1. a uniform flat amount
    2. the last wage only
    3. his average contributory wage
    4. the minimum wage
    Show answer and explanation

    Correct answer

    • C. his average contributory wage
    Principle: unemployment compensation is calculated as a percentage of the participant's average contributory wage over a specified prior period, and the percentage decreases as payment continues. Why: the decrease incentivizes the unemployed person to return to the labour market sooner. Common error: thinking it is a flat amount unconnected to the wage.

  2. Question 2

    Section: Regulations

    Among the branches of valuation regulated by the Law of Accredited Valuers is

    1. training programmes
    2. curricula
    3. medical services
    4. economic establishments
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    • D. economic establishments
    Principle: the branches of valuation include real estate, economic establishments, plant and equipment, and jewellery and precious metals. Why: the plurality of branches requires specialization in each branch to ensure accuracy of estimation. Common error: thinking valuation is confined to real estate alone.

  3. Question 3

    Section: Regulations

    Two companies included a clause in their supply contract providing that any future dispute arising from the contract's execution shall be referred to arbitration rather than the courts. Years later, a dispute actually arises. What is this specific type of advance arbitration agreement, embedded within the contract itself before any dispute existed, called?

    1. An arbitration compromise, since any agreement to arbitrate embedded within a broader commercial contract is always classified under this specific term regardless of timing
    2. An arbitration clause (shart al-tahkim), as distinguished from an arbitration compromise (musharatat al-tahkim), which instead concerns an already-existing dispute
    3. This arrangement has no recognized name whatsoever within arbitration terminology, since only agreements made after a dispute already exists are recognized as valid arbitration agreements
    4. A judicial arbitration agreement, a term applying exclusively to arbitration clauses included specifically in supply contracts rather than any other contract type
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    • B. An arbitration clause (shart al-tahkim), as distinguished from an arbitration compromise (musharatat al-tahkim), which instead concerns an already-existing dispute
    The agreement to arbitrate may occur in connection with a dispute already actually existing between the parties, called an arbitration compromise (musharatat al-tahkim), or the agreement may be made in advance within the contract itself to resort to arbitration for any dispute arising from its execution, known as an arbitration clause (shart al-tahkim), which is precisely the scenario described here, embedded in the supply contract before any dispute arose.

  4. Question 4

    Section: Zakat and Tax Fellowship

    A person found rikaz (buried wealth) worth 300,000 SAR. The Zakat due on it =

    1. 30,000 SAR
    2. 15,000 SAR
    3. 7,500 SAR
    4. 60,000 SAR
    Show answer and explanation

    Correct answer

    • D. 60,000 SAR
    Rule: The Zakat on rikaz is one-fifth (20%); it has no nisab and the passage of a lunar year is not required. Solution: 300,000 × 20% = 60,000 SAR. Common error: Applying 2.5% (7,500) or 10% (30,000) to it.

  5. Question 5

    Section: Zakat and Tax Fellowship

    Taxes imposed on most goods and services at the same rate, including sales tax and Value Added Tax. What is their classification within consumption taxes?

    1. Customs duties
    2. Real estate taxes
    3. General taxes
    4. Excise taxes
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    Correct answer

    • C. General taxes

    Correct answer: General taxes.

    General consumption taxes are imposed on most goods and services at the same rate, such as sales tax and Value Added Tax.

    "Excise" taxes are imposed on particular goods (such as harmful and luxury goods) at varying rates. "Customs" taxes concern imports. "Real estate" taxes concern land and buildings.

  6. Question 6

    Section: Zakat and Tax Fellowship

    Which of the following conditions is required for a bad debt to be tax-deductible?

    1. That it have previously been included in income, and that it actually be written off in the books with reasonable evidence that collection is not possible.
    2. That the debt be owed by a related party.
    3. That more than three years have passed on the debt only.
    4. That the board of directors approve it in writing.
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    Correct answer

    • A. That it have previously been included in income, and that it actually be written off in the books with reasonable evidence that collection is not possible.
    For a bad debt to be deducted, it must arise from a taxable activity and have previously been included in income, it must actually be written off in the books with reasonable evidence that it cannot be collected, and it must not be owed by a related party.

  7. Question 7

    Section: Business Environment

    The industrial revolution associated with the emergence of the steam engine and mechanization is:

    1. The Second Industrial Revolution.
    2. The First Industrial Revolution.
    3. The Third Industrial Revolution.
    4. The Fourth Industrial Revolution.
    Show answer and explanation

    Correct answer

    • B. The First Industrial Revolution.

    Concept: The first revolution was based on the steam engine and mechanization that turned manual production into machine production.

    Distinction from the distractors: The second is electricity and mass production, the third is the computer and digital automation, and the fourth is cyber-physical systems, the Internet of Things, and artificial intelligence.

  8. Question 8

    Section: Business Environment

    The difference between the public cloud and the private cloud in terms of cost and control is:

    1. Public is always higher cost than private.
    2. Public is lower cost and lower control, and private is higher cost and higher control and privacy.
    3. Private provides no additional control.
    4. There is no difference between them in cost or control.
    Show answer and explanation

    Correct answer

    • B. Public is lower cost and lower control, and private is higher cost and higher control and privacy.

    Distinction: Public is lower cost and lower control, and private is higher cost and higher control and privacy.

    Why the distractors are wrong: Public is not always higher cost, private provides greater control, and the difference exists in both cost and control.

  9. Question 9

    Section: Business Environment

    The correct relationship among artificial intelligence, machine learning, and deep learning is:

    1. Deep learning encompasses all of artificial intelligence.
    2. The three terms are completely synonymous.
    3. Machine learning is a branch of artificial intelligence, and deep learning is a branch of machine learning.
    4. Machine learning has no relationship to artificial intelligence.
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    Correct answer

    • C. Machine learning is a branch of artificial intelligence, and deep learning is a branch of machine learning.

    Hierarchical relationship: Artificial intelligence is the broadest, machine learning is a branch of it, and deep learning (deep neural networks) is a branch of machine learning.

    Why the distractors are wrong: Deep learning does not encompass all of artificial intelligence, the three are not synonyms, and machine learning has a direct relationship to artificial intelligence.

  10. Question 10

    Section: Cost, Managerial, and Governmental Accounting

    Which of the following items is a period cost (not a product cost) under absorption costing?

    1. Wages of production-line workers.
    2. Depreciation of factory machinery.
    3. Direct product-packing materials.
    4. Sales representatives' commissions and general-administration salaries.
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    Correct answer

    • D. Sales representatives' commissions and general-administration salaries.
    Product costs are manufacturing costs (materials, labor, and manufacturing overhead). Period costs are selling and administrative costs such as sales commissions and administrative salaries, and they are charged to the period immediately.

  11. Question 11

    Section: Cost, Managerial, and Governmental Accounting

    Direct labor is 200,000 riyals, manufacturing overhead is applied at 150% of direct labor, and direct materials are 250,000 riyals. Compute conversion cost.

    1. Conversion cost is 450,000 riyals.
    2. Conversion cost is 750,000 riyals.
    3. Conversion cost is 500,000 riyals.
    4. Conversion cost is 550,000 riyals.
    Show answer and explanation

    Correct answer

    • C. Conversion cost is 500,000 riyals.
    Manufacturing overhead = 150% × 200,000 = 300,000. Conversion cost = labor + overhead = 200,000 + 300,000 = 500,000. Trap: inserting direct materials (250,000) into conversion; they belong to prime cost, not conversion.

  12. Question 12

    Section: Audit

    What is the correct distinction between "management" and "those charged with governance" in the auditing standards?

    1. The two roles can never overlap in one person in any circumstances
    2. Those charged with governance are always the members of the audit committee and no one else
    3. Management is responsible for executive running of operations and governance oversees reporting
    4. They are synonymous terms that refer to the same party within the entity
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    Correct answer

    • C. Management is responsible for executive running of operations and governance oversees reporting
    Correct: management has executive responsibility for conducting the entity's operations, and those charged with governance oversee the strategic direction and accountability, including oversight of the financial reporting process, and the two roles may overlap in some entities. By contrast, treating them as synonymous terms eliminates a distinction on which many communication requirements rest. As for always confining those charged with governance to the audit committee, that narrowing contradicts the diversity of governance structures. As for the view that the two roles can never overlap, that contradicts the reality of entities whose owners participate in management. (ISA 200; ISA 260: definitions).

  13. Question 13

    Section: Audit

    What is the purpose of determining performance materiality?

    1. Determining the threshold at which detected misstatements are communicated to management
    2. Determining the accounts that are excluded from the scope of the audit procedures
    3. Determining the sample sizes that will be examined in each of the accounts
    4. Reducing the probability that the aggregate of undetected misstatements exceeds materiality
    Show answer and explanation

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    • D. Reducing the probability that the aggregate of undetected misstatements exceeds materiality
    Correct: reducing to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. By contrast, making the purpose the threshold at which misstatements are communicated to management is the purpose of the clearly trivial threshold. As for making it the direct determination of sample size, that is a secondary effect, not the original purpose. As for making it the determination of accounts to be excluded from the audit, that is a misuse that leads to dropping items from the scope of work. (ISA 320: performance materiality).

  14. Question 14

    Section: Financial Accounting

    An entity has two classes of inventory at year end that it values item by item. The first class has a cost of 180,000 riyals and a net realisable value of 195,000 riyals, and the second class has a cost of 240,000 riyals and a net realisable value of 220,000 riyals. The inventory amount that appears in the statement of financial position is:

    1. 415,000 riyals
    2. 400,000 riyals
    3. 420,000 riyals
    4. 435,000 riyals
    Show answer and explanation

    Correct answer

    • B. 400,000 riyals
    Inventories are measured at the lower of cost and net realisable value, and the rule is applied on an item-by-item basis, not to inventories in total. The first class has a cost of 180,000 riyals and a net realisable value of 195,000 riyals, so the lower is cost and it is measured at that with no write-down. The second class has a cost of 240,000 riyals and a net realisable value of 220,000 riyals, so the lower is net realisable value and it is written down to that, and a write-down loss of 20,000 riyals is recognised. The inventory amount is therefore 400,000 riyals. The importance of applying the rule item by item is that the surplus on the first class does not cover the shortfall on the second, because an unrealised gain is not recognised.

  15. Question 15

    Section: Financial Accounting

    An entity's net profit was 600,000 riyals. Its expenses included depreciation of 90,000 riyals, and the receivables balance rose during the year by 50,000 riyals. There were no other changes. Net cash flow from operating activities under the indirect method is:

    1. 740,000 riyals
    2. 690,000 riyals
    3. 640,000 riyals
    4. 460,000 riyals
    Show answer and explanation

    Correct answer

    • C. 640,000 riyals
    The indirect method starts from net profit and then adjusts it for non-cash items and for changes in working capital. Depreciation expense of 90,000 riyals is added back because it is an expense that reduced profit without a corresponding cash outflow. The increase in receivables of 50,000 riyals is deducted because it means that part of the revenue recognised has not yet been collected in cash. Net operating cash flow is therefore 640,000 riyals. The general rule is that an increase in an operating current asset is deducted and a decrease is added, and the opposite applies to operating current liabilities.

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