Question 1

Auditors face ethical issues because

Accepted Answer

A)  GAAP permits various standards to be used to produce profits. 
B)  auditors may express an opinion that may impact employees of a company. 
C)  auditors may not discover insider trading. 
D)  GAAP does not permit fraud. 
A)  GAAP permits various standards to be used to produce profits. 
B)  auditors may express an opinion that may impact employees of a company. 
C)  auditors may not discover insider trading. 
D)  GAAP does not permit fraud.

Question 2

The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is not a commonly required report?

Accepted Answer

A)  Form 10-Q. An extensive quarterly report, including financial statements. 
B)  Form S-2. A registration statement 
C)  Form 10-K. An extensive annual report, including financial statements 
D)  Form 8-K. A report used to describe significant events that may affect the company. 
A)  Form 10-Q. An extensive quarterly report, including financial statements. 
B)  Form S-2. A registration statement 
C)  Form 10-K. An extensive annual report, including financial statements 
D)  Form 8-K. A report used to describe significant events that may affect the company.

Question 3

For foreign companies that issue securities in the United States to raise capital, the SEC

Accepted Answer

A)  requires these companies to file form 20-F which reconciles certain amounts reported in their financial statements with US GAAP. 
B)  accepts all financial statements that use IFRS. 
C)  accepts only financial statements that are fully stated under US GAAP. 
D)  accepts financial statements from foreign companies that use English-language IFRS without exception. 
A)  requires these companies to file form 20-F which reconciles certain amounts reported in their financial statements with US GAAP. 
B)  accepts all financial statements that use IFRS. 
C)  accepts only financial statements that are fully stated under US GAAP. 
D)  accepts financial statements from foreign companies that use English-language IFRS without exception.

Question 4

Conversion to IFRS reporting by all U.S. companies would be best accomplished with a transition plan for all of the following reasons except

Accepted Answer

A)  it would have to be a multi-year process. 
B)  it needs to be an orderly process with a minimum of cost and disruption to the participants. 
C)  certain IFRS need further improvement through continued convergence efforts. 
D)  careful planning would enable maximum manipulation of the IFRS for the financial benefit of the United States. 
A)  it would have to be a multi-year process. 
B)  it needs to be an orderly process with a minimum of cost and disruption to the participants. 
C)  certain IFRS need further improvement through continued convergence efforts. 
D)  careful planning would enable maximum manipulation of the IFRS for the financial benefit of the United States.

Question 5

"In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities." This is the Integrity Principle of the AICPA Code of Professional Conduct.

Accepted Answer

A) True 
 B)False

Question 6

How many FASB members currently make up the Board?

Accepted Answer

A)  5 
B)  7 
C)  21 
D)  33 
A)  5 
B)  7 
C)  21 
D)  33

Question 7

Which of the following statements about the FASB Accounting Standards Codification is true?

Accepted Answer

A)  It only exists as an electronic database; paper copies are not available. 
B)  When the Codification was adopted in 2009, it caused major changes in the contents of U.S. GAAP. 
C)  It is reviewed and periodically updated by the SEC. 
D)  It is only one of a large number of authoritative pronouncements that have been issued over time, all of which comprise U.S GAAP. 
A)  It only exists as an electronic database; paper copies are not available. 
B)  When the Codification was adopted in 2009, it caused major changes in the contents of U.S. GAAP. 
C)  It is reviewed and periodically updated by the SEC. 
D)  It is only one of a large number of authoritative pronouncements that have been issued over time, all of which comprise U.S GAAP.

Question 8

Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets?

Accepted Answer

A)  Accounting Principles Board 
B)  Securities and Exchange Commission 
C)  Financial Accounting Standards Board 
D)  Committee on Accounting Procedure 
A)  Accounting Principles Board 
B)  Securities and Exchange Commission 
C)  Financial Accounting Standards Board 
D)  Committee on Accounting Procedure

Question 9

Three major organizations in the private and public sector develop U.S. and International Financial Reporting Standards. They include all of the following except the

Accepted Answer

A)  EU European Union). 
B)  SEC Securities and Exchange Commission). 
C)  FASB Financial Accounting Standards Board). 
D)  IASB International Accounting Standards Board). 
A)  EU European Union). 
B)  SEC Securities and Exchange Commission). 
C)  FASB Financial Accounting Standards Board). 
D)  IASB International Accounting Standards Board).

Question 10

Define:
1) What are assets?
2) What are liabilities?
3) What is shareholder's equity?
4) In which financial statement would one find assets, liabilities and shareholder's equity?

Accepted Answer

1) Assets are resources the firm owns th

Question 11

Which Principle of the AICPA Code of Professional Conduct is: As a member one should continually strive to improve competence and the quality of services, observe all technical and ethical standards, and provide professional responsibility to the best of his/her ability?

Accepted Answer

A)  The Public Interest 
B)  Responsibilities 
C)  Scope and Nature of Services 
D)  Due Care 
A)  The Public Interest 
B)  Responsibilities 
C)  Scope and Nature of Services 
D)  Due Care

Question 12

The accounting equations is

Accepted Answer

A)  Assets + Liabilities = Shareholders' Equity 
B)  Assets -Liabilities = Shareholders' Equity 
C)  Assets = Liabilities - Shareholders' Equity 
D)  Assets + Shareholders' Equity = Liabilities 
A)  Assets + Liabilities = Shareholders' Equity 
B)  Assets -Liabilities = Shareholders' Equity 
C)  Assets = Liabilities - Shareholders' Equity 
D)  Assets + Shareholders' Equity = Liabilities

Question 13

Assume you are tutoring a beginning accounting student who tells you that the members of the FASB must have a great deal of power because they have the authority to issue standards that dictate accounting procedure.
Required:
Explain why accounting standards are the result of compromise and how such compromises are reached.

Accepted Answer

In order for a new standard to be issued

Question 14

The SEC uses its authority to establish accounting standards, while also enforcing regulations on companies, exchanges, and investors.

Accepted Answer

A) True 
 B)False

Question 15

Which statement measures and reports the financial results of a company's performance for a period of time?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  statement of cash flows 
D)  statement of financial position 
A)  income statement 
B)  balance sheet 
C)  statement of cash flows 
D)  statement of financial position

Question 16

A problem arising from equal information is called information asymmetry.

Accepted Answer

A) True 
 B)False

Question 17

What is Financial Reporting?

Accepted Answer

A)  The process of communicating internal accounting information to existing and potential investors, creditors, lenders, and other external decision makers. 
B)  The process of communicating financial accounting information to existing and potential investors, creditors, lenders, and other external decision makers. 
C)  The process of preparing financial accounting information to existing and potential investors, managers, and employees. 
D)  The process of communicating the strategic plan to existing and potential investors, creditors, lenders, and other external decision makers. 
A)  The process of communicating internal accounting information to existing and potential investors, creditors, lenders, and other external decision makers. 
B)  The process of communicating financial accounting information to existing and potential investors, creditors, lenders, and other external decision makers. 
C)  The process of preparing financial accounting information to existing and potential investors, managers, and employees. 
D)  The process of communicating the strategic plan to existing and potential investors, creditors, lenders, and other external decision makers.

Question 18

As a potential equity investor, what information about a company would you be least interested in prior to making an investment decision?

Accepted Answer

A)  What differentiates them from their competition? 
B)  Whether they are generating a profit? 
C)  Whether they have positive cash flows? 
D)  What are the employee benefits and compensation packages? 
A)  What differentiates them from their competition? 
B)  Whether they are generating a profit? 
C)  Whether they have positive cash flows? 
D)  What are the employee benefits and compensation packages?

Question 19

The Securities and Exchange Commission has the legal authority to prescribe accounting principles and reporting practices for

Accepted Answer

A)  all companies issuing publicly traded securities 
B)  all companies issuing any type of securities 
C)  all companies 
D)  all corporations 
A)  all companies issuing publicly traded securities 
B)  all companies issuing any type of securities 
C)  all companies 
D)  all corporations

Question 20

Concerning FASB membership, which statement is not true?

Accepted Answer

A)  Not all members are CPAs from public practice. 
B)  All members are full time and fully paid. 
C)  All members are also members of the Financial Accounting Foundation. 
D)  All members must sever organizational ties with their previous employer. 
A)  Not all members are CPAs from public practice. 
B)  All members are full time and fully paid. 
C)  All members are also members of the Financial Accounting Foundation. 
D)  All members must sever organizational ties with their previous employer.

Exam 1: The Demand for and Supply of Financial Accounting Information

Auditors face ethical issues because

The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is not a commonly required report?

For foreign companies that issue securities in the United States to raise capital, the SEC

Conversion to IFRS reporting by all U.S. companies would be best accomplished with a transition plan for all of the following reasons except

"In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities." This is the Integrity Principle of the AICPA Code of Professional Conduct.

How many FASB members currently make up the Board?

Which of the following statements about the FASB Accounting Standards Codification is true?

Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets?

Three major organizations in the private and public sector develop U.S. and International Financial Reporting Standards. They include all of the following except the

Define: 1) What are assets? 2) What are liabilities? 3) What is shareholder's equity? 4) In which financial statement would one find assets, liabilities and shareholder's equity?

Which Principle of the AICPA Code of Professional Conduct is: As a member one should continually strive to improve competence and the quality of services, observe all technical and ethical standards, and provide professional responsibility to the best of his/her ability?

The accounting equations is

The SEC uses its authority to establish accounting standards, while also enforcing regulations on companies, exchanges, and investors.

Which statement measures and reports the financial results of a company's performance for a period of time?

A problem arising from equal information is called information asymmetry.

What is Financial Reporting?

As a potential equity investor, what information about a company would you be least interested in prior to making an investment decision?

The Securities and Exchange Commission has the legal authority to prescribe accounting principles and reporting practices for

Concerning FASB membership, which statement is not true?

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Understanding Time Value of Money Formulas and Concepts

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