Exam 6: Doing Business Day to Day

Studies indicate that managers who are measured frequently tend to adopt a short-term orientation, and pay less attention to long-term matters.

The FASB developed rules for accounting for pensions without making any compromises for managers' concerns about how changes in pension accounts would affect reported company performance measures.

The ways that companies try to reduce investors' skepticism about the credibility of the companies' financial reports include all of the following except

A company decides to meet its profit target for the year by selling a piece of land, for a gain, in December, even though it believes it could have made significantly more money by waiting two months to sell the land. This is an example of

A company decides it should engage in aggressive "earnings management" because it feels that this will be in the interests of current shareholders, and "everybody else does it," so the company should not look bad in comparison. Which element of the fraud triangle is most clearly involved?

One sign that might indicate a company is fraudulently overstating its sales on credit is a lower accounts receivable turnover.

A company controller starts stealing from the company, in order to pay her gambling debts, even though she knows that the company's auditors may catch her. Which element of the fraud triangle is most clearly involved?

People have criticized accounting measurement and control systems for

In economics, the term for the situation where buyers and sellers have different information is "asymmetric information."

Under FASB rules, if a lease transfers ownership to the lessee, it must be classified as a "capital lease" by the lessee.

The Liu Corporation acquired the Chen Corporation by buying all of the Chen Corporation's stock. The management of Liu wants to use "acquisition accounting" to manage earnings. It wants to report high future earnings. Which of the following actions will help it report higher future earnings?

A company's effort to pay off some payables before year end, to make its current ratio look better, is an example of "accruals earnings management."

The way that utility regulators define profits is completely unrelated to how utilities set prices.

Under FASB rules, if a lease term is over 75% of the expected useful life of the leased asset, the lessee must classify this as an "operating" lease.

Companies who wish to misstate earnings can never just misstate a single account, but must misstate at least two accounts.

What is the name of the following quotation? "When a measure becomes a target, it ceases to be a good measure."

The difference between the budget targets managers ask for, and what they actually think they can achieve, is called "earnings management."

A division manager believes that if he fails to meet a very tight budget target, he will be fired. He starts pushing his employees to under-report their hours worked, in order to meet the target. Which element of the fraud triangle is most clearly involved in the division manager's behavior?

"Accruals management" involves purely accounting actions, such as changing to more favorable accounting policies, or changing accounting estimates in a way that achieves the desired accounting result.

Which of the following is not one of the bad effects sometimes cited for using budgets and variances from budgets to measure managers?