Exam 6: Doing Business Day to Day

One purpose of a company's budgeting system is to influence the behavior of managers.

A company's decision to postpone some maintenance costs from December until January in order to meet profit targets would be an example of "accruals management."

A reason that managers may manage earnings "downward" would be to

One of the FASB's objectives in setting accounting standards is to allow investors to more accurately compare companies' performance.

An example of people acting in advance of a measurement being finalized, to try to ensure a favorable rule is adopted, would be

Which of the following is not one of the FASB's objectives when setting accounting standards?

Even when people respond to an accounting measurement by taking the actions desired, there are sometimes unintended consequences.

Which of the following factors is, according to the AICPA, an example of the rationalizations part of the fraud triangle?

The term for the process of speaking to analysts, and getting them to reduce their predictions of company performance in advance of the company reporting its results, is called "earnings expectations management."

Goodhart's Law is sometimes expressed as "When a measure becomes a target, it ceases to be a good measure."

An argument for a broad, principles-based approach to standard-setting is that

A reason that managers may manage earnings "upward" would be to

In the 1990s, the FASB considered making a new rule to count stock option awards by companies as expenses. Some companies protested to the FASB, and to Congress, and the FASB at that time decided not to make the new rule. This is an example of what type of reaction to accounting measurement?

A company is concerned that analysts will be disappointed that its earnings per share for 2017 will be $1.50. In the late part of 2017, the company tells analysts its earnings are only likely to be $1.45 per share, so that the analysts will see $1.50 as a pleasant surprise. This is an example of

Studies indicate that when managers are judged based on several different measures, managers will typically concentrate on the measures that are hardest to meet.

Business measurements often affect the behavior of the people or businesses being measured.

One sign that might indicate a company is fraudulently understating its cost of goods sold is a higher inventory turnover.

The practice of leasing, rather than buying, necessary equipment can be a source of "off-balance sheet financing."

"Accruals management" involves taking real actions, with real economic effects, primarily for accounting purposes.

Forging documents, to make profits seem higher, is an example of "window dressing."