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Financial Services · Series 28

FINRA Series 28 – Introducing Broker/Dealer Financial and Operations Principal Exam Practice Test

Series 28 practice addresses the financial and operational oversight of an introducing broker-dealer. The subject matter includes accounting records, financial reporting controls, expense and receivables review, and decisions that affect the firm’s capital position. It also calls for understanding how management evaluates financial information and responds to control weaknesses or unusual balances.

Exam overview

Exam providerFinancial Industry Regulatory Authority
Exam codeSeries 28
CategoryFinancial Services

About the FINRA Series 28 – Introducing Broker/Dealer Financial and Operatio… Exam

The role calls for interpreting financial reports rather than simply recording transactions. Relevant tasks include comparing actual results with budgets, investigating cost changes, assessing whether receivables are collectible, and ensuring that account reconciliations receive independent review. Candidates should understand basic accounting treatments such as depreciation and changes to estimates, along with controls that protect financial systems from unauthorized access. Broker-dealer financial oversight also involves evaluating whether proposed owner distributions are permissible and recognizing how changes in aggregate indebtedness can affect minimum net capital requirements. These skills connect routine accounting work to the firm’s ability to maintain reliable books, meet financial obligations, and identify issues requiring management attention.

Sample Practice Questions

Review a selection from this exam's published US Practice Tests practice bank.

Question 1

A broker-dealer’s management receives a report showing a sharp increase in transaction-processing costs. Which action best supports informed financial oversight?

  1. AAccept the total without examining its drivers
  2. BAnalyze the increase by relevant cost categories and investigate significant changes
  3. CReclassify the costs as assets solely to avoid a current-period expense
  4. DWait until the next annual audit before asking questions
Show answerCorrect answer: B

Breaking down a material cost change can reveal whether it reflects higher volume, pricing, errors, or an unusual event. Investigating significant movements supports accurate reporting and timely management decisions.

Question 2

A broker-dealer plans to pay a cash dividend to its owners. Which consideration is most directly relevant to whether the payment is financially permissible?

  1. AWhether the firm has sufficient resources after the payment to meet applicable capital requirements and other obligations.
  2. BWhether the dividend is smaller than the prior year's dividend.
  3. CWhether all employees have received annual performance reviews.
  4. DWhether the dividend can be recorded as a customer liability.
Show answerCorrect answer: A

A distribution to owners reduces firm resources. The firm should assess its post-distribution financial condition, including applicable capital requirements and ability to meet obligations, before making the payment.

Question 3

A broker-dealer receives an invoice for legal services that are disputed. What is the soundest general practice while the dispute is being evaluated?

  1. ADelete the invoice from the accounting records until the dispute is resolved
  2. BRecord and assess the obligation under the firm’s accounting policies, documenting the dispute and its status
  3. CPay the invoice immediately without review
  4. DRecord the invoice as revenue because it has not been paid
Show answerCorrect answer: B

A dispute does not by itself justify ignoring a potentially incurred obligation. The firm should assess the facts under its accounting policies, maintain appropriate documentation, and update the accounting treatment as the dispute develops.

Question 4

A firm’s finance staff prepares a reconciliation of a significant bank account. Which review practice best strengthens the reliability of that reconciliation?

  1. AHaving the preparer approve their own work without further review
  2. BRequiring a reviewer independent of preparation to inspect and evidence approval
  3. CReconciling only when the bank reports an error
  4. DRemoving reconciling items from the schedule to simplify review
Show answerCorrect answer: B

Independent review can identify mistakes, unsupported reconciling items, or unusual transactions that the preparer may have missed. Evidence of review also supports accountability and a consistent control process.

Question 5

A firm’s management compares actual expenses with its approved budget and finds a substantial unfavorable variance in technology costs. What is the most useful follow-up?

  1. AIdentify the underlying transactions and determine whether the variance is explained, recurring, or in need of action
  2. BAutomatically change the actual figures to match the budget
  3. CAssume the variance is immaterial without reviewing its size or cause
  4. DStop recording technology expenses for the rest of the period
Show answerCorrect answer: A

Variance analysis is useful when it explains differences between planned and actual results. Reviewing the underlying transactions and causes helps management assess whether the difference reflects timing, changed business needs, an error, or a matter requiring action.

Question 6

A firm’s financial statements show a large increase in accounts receivable. Which follow-up is most directly useful in assessing whether the balance is collectible?

  1. AReview the aging of receivables and subsequent collections
  2. BCompare the number of employee training sessions
  3. CReview the firm’s office floor plan
  4. DCalculate the percentage of fixed assets that are depreciated
Show answerCorrect answer: A

An aging analysis identifies how long receivables have been outstanding, and subsequent receipts provide evidence about collection. Together they help assess credit quality and whether an allowance or write-off may be needed.

Question 7

A firm records depreciation on office equipment. What does depreciation generally represent in financial reporting?

  1. AAllocation of an asset’s depreciable cost over its useful life
  2. BA cash reserve set aside to replace the equipment
  3. CA revaluation of the equipment to its current market price each month
  4. DRepayment of principal on a loan used to buy the equipment
Show answerCorrect answer: A

Depreciation allocates the depreciable amount of a tangible long-lived asset to expense over its estimated useful life. It is an accounting allocation and does not itself set aside cash or repay debt.

How to use this practice test

The free practice bank contains 50 published questions. Each session presents up to 20 questions selected at random, with results shown after the session. Use the questions to test financial oversight judgments, then review any missed items by tracing the relevant accounting, reconciliation, internal-control, or net-capital reasoning.

Preparation tips

  • For net-capital scenarios, distinguish aggregate indebtedness from net capital and work through how a change in one affects the applicable minimum requirement.
  • Practice investigating financial statement changes by linking a balance or variance to evidence, such as aging details for receivables or supporting documentation for expenses.
  • For reconciliations, identify who prepares the work, who independently reviews it, and what evidence supports adjustments or unresolved differences.
  • Separate accounting recognition from cash movement: for example, explain depreciation as an allocation of an asset’s cost over its useful life.
  • When evaluating a dividend or disputed invoice, identify the financial records and obligations that must be assessed before determining the appropriate action.
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