Exam 6: Doing Business Day to Day

Research indicates that there is no evidence of a relation between top management relying heavily on budget targets to judge performance and lower-level managers creating more slack in their budgets.

One of the FASB's objectives in setting accounting standards is to allow investors and creditors to make more accurate investment and lending decisions about particular companies.

Two strategies that companies use to "manage earnings" are "accruals management" and "real earnings management."

A manager who gets a bonus based on reported profits for the year decides to reduce the company's advertising and research expenditures in order to meet her bonus target, even though she believes that the advertising and research would have long-term benefits for the company. This is an example of what type of reaction to accounting measurement?

An argument for a detailed, "rules-based" approach to standard-setting is

An example of people acting to look good on a measurement, while not actually doing what is desired, would be

An example of a pressure to commit financial reporting fraud might be a CEO's desire to avoid violating loan covenants.

A company is concerned that its lenders will declare the loans in default if the company reports its true earnings, so management lies and reports high enough earnings to appear to comply with its loan agreements. Which element of the fraud triangle is most clearly involved?

Research indicates that earnings management techniques are always used to make companies more profitable, and never to make them look less profitable.

Judging employees by a "balanced scorecard" is one approach that management can use to try to prevent the dysfunctional behavior that arises when employees focus too much on a single performance measure.

One sensible way that a company may increase investor faith in its profit reports is to

If a company fraudulently overstates its sales, no other account will be affected by this overstatement.

An employee feels underpaid, and starts stealing from the company, because she feels she is "just getting what the company really owes her." Which element of the fraud triangle is most clearly involved?

Under FASB rules, if the present value of the minimum lease payments is over 90% of the fair value of the leased property, the lessee must classify this as an "operating" lease.

"Off -balance sheet financing" can help a company look better on solvency and liquidity measures.

The text discussed the concept of "off-balance sheet financing."

The accounting measurement system can be seen as a game with numerous players, taking place over numerous time periods.

A car dealership decides to give a monthly prize to the salesperson who makes the most sales during a month, in the hopes of making more money by making more sales. One salesman reacts by getting another salesman to give him credit for cars sold by the other man, in order to come in first in the contest. This behavior can best be characterized as

Judging people based on their individual performance has been found, in research, to help promote teamwork and cooperative behavior.

What is the name of the following quotation? "The more any quantitative social indicator (or even some qualitative indicator) is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor."