Question 1

Wall Street analysts focus primarily on a company's ________.

Accepted Answer

A) return on assets 
B) gross profit 
C) dividends per share 
D) earnings per share 
A) return on assets 
B) gross profit 
C) dividends per share 
D) earnings per share D

Question 2

Tim's Tams has been using LIFO to value its inventory because it gives a higher cost of goods sold,lower income,and lower taxes.This year Tim's Tams has decided to make a permanent switch to FIFO,even though it will then have to pay more taxes on its higher reported income.This accounting choice would be considered ________.

Accepted Answer

A) conservative 
B) fundamental 
C) basic 
D) aggressive 
A) conservative 
B) fundamental 
C) basic 
D) aggressive D

Question 3

The city of Morgantown gave a piece of land to Acme,Inc.so that the company would build its new factory in Morgantown and create many local jobs.One appraiser said the land was worth $500,000,while a second appraiser said the land was worth $520,000.
1.What effect will it have on Acme's earnings per share if it records the land at $500,000 rather than $520,000?
   2.What effect will it have on Acme's total assets if it records the land at $500,000 rather than $520,000?
   3.Name one ratio that will be affected by Acme's choice of value for the land.Will this ratio be higher or lower if Acme records the land at $500,000 rather than $520,000?
4.Explain the relationship between management's choice of recorded value for the land and the company's quality of earnings.

Accepted Answer

1.No effect,because land is not depreciated.
2.Total assets will be decreased.
3.(a)return on assets; higher or (b)asset turnover ratio; higher
4.Choosing a more conservative accounting method leads to reporting lower total assets.Conservative choices make it less likely that total assets (and net income)are overstated.

Question 4

Which of the following is evidence of a company's positive ethical climate?

Accepted Answer

A) X Company has a written ethics policy,which all new employees are required to sign. 
B) Y Company's president has been indicted for fraud,but the case has not yet gone to trial.In the meantime,it is business as usual. 
C) Z Company skipped its annual audit this year because it was too expensive. 
D) To ensure the statements are prepared properly,the company pays its external auditors extra to prepare its financial statements as well as audit them. 
A) X Company has a written ethics policy,which all new employees are required to sign. 
B) Y Company's president has been indicted for fraud,but the case has not yet gone to trial.In the meantime,it is business as usual. 
C) Z Company skipped its annual audit this year because it was too expensive. 
D) To ensure the statements are prepared properly,the company pays its external auditors extra to prepare its financial statements as well as audit them.

Question 5

Who is responsible for hiring,paying,and overseeing the work done by a company's external auditors?

Accepted Answer

A) management 
B) the audit committee of the board of directors 
C) the company's internal auditors 
D) the United States Congress 
A) management 
B) the audit committee of the board of directors 
C) the company's internal auditors 
D) the United States Congress

Question 6

Which financial statement is the best place to look to find earnings per share?

Accepted Answer

A) Income Statement 
B) Statement of Changes in Shareholders' Equity 
C) Balance Sheet 
D) both the Income Statement and Balance Sheet 
A) Income Statement 
B) Statement of Changes in Shareholders' Equity 
C) Balance Sheet 
D) both the Income Statement and Balance Sheet

Question 7

The ethical climate of a company is determined by the board of governors.

Accepted Answer

A) True 
 B)False

Question 8

U.S.GAAP is more rule-based than IFRS.

Accepted Answer

A) True 
 B)False

Question 9

The ethical climate of a company is determined by the external auditors.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is evidence of a company's positive ethical climate?

Accepted Answer

A) The company president's brother-in-law is the company's biggest supplier. 
B) The company president has a very,very close personal relationship with his secretary. 
C) The aunt of the company president manages the CPA firm that performs the company's annual audit. 
D) The company's executives require all new employees to attend an ethics workshop. 
A) The company president's brother-in-law is the company's biggest supplier. 
B) The company president has a very,very close personal relationship with his secretary. 
C) The aunt of the company president manages the CPA firm that performs the company's annual audit. 
D) The company's executives require all new employees to attend an ethics workshop.

Question 11

Who must approve any rules set by the PCAOB?

Accepted Answer

A) the SEC 
B) the IRS 
C) the United States Congress 
D) no one,because the PCAOB is autonomous 
A) the SEC 
B) the IRS 
C) the United States Congress 
D) no one,because the PCAOB is autonomous

Question 12

Who created the Sarbanes-Oxley Act (SOX)?

Accepted Answer

A) the SEC 
B) the PCAOB 
C) the United States Congress 
D) the IRS 
A) the SEC 
B) the PCAOB 
C) the United States Congress 
D) the IRS

Question 13

For the past twenty years,Ace Electronics has had a policy of expensing all assets that cost less than $50,even if they are expected to last for more than a year,because it is simpler and easier than depreciating low-cost assets over their useful lives.This year Ace Electronics decided that because of inflation it would begin expensing all assets that cost less than $100.This accounting choice would be considered ________.

Accepted Answer

A) conservative 
B) fundamental 
C) basic 
D) aggressive 
A) conservative 
B) fundamental 
C) basic 
D) aggressive

Question 14

What does PCAOB stand for?

Accepted Answer

A) Public Certified Accountants Oversight Board 
B) Public Company Accounting Oversight Board 
C) Private Certified Accountants Oversight Board 
D) Private Company Accounting Oversight Board 
A) Public Certified Accountants Oversight Board 
B) Public Company Accounting Oversight Board 
C) Private Certified Accountants Oversight Board 
D) Private Company Accounting Oversight Board

Question 15

An important factor in good corporate governance is ________.

Accepted Answer

A) an ethical climate set by top management 
B) an audit committee that reports directly to the company's CFO 
C) a board of directors that delegates all major financial decisions to management 
D) a board of directors whose members all have financial backgrounds 
A) an ethical climate set by top management 
B) an audit committee that reports directly to the company's CFO 
C) a board of directors that delegates all major financial decisions to management 
D) a board of directors whose members all have financial backgrounds

Question 16

An indication of good corporate governance ________.

Accepted Answer

A) is a board of directors with highly qualified directors who are independent of the management team 
B) is a set of financial statements that are transparent 
C) is the hiring of independent external auditors who will stand up to the executives on any given accounting issue 
D) all of these 
A) is a board of directors with highly qualified directors who are independent of the management team 
B) is a set of financial statements that are transparent 
C) is the hiring of independent external auditors who will stand up to the executives on any given accounting issue 
D) all of these

Question 17

IFRS differ from U.S.GAAP,in that IFRS ________.

Accepted Answer

A) allow long-term assets to be adjusted up to fair market values 
B) require only probable contingent liabilities to be recorded 
C) allow LIFO 
D) do not allow internally generated intangible assets to be recorded 
A) allow long-term assets to be adjusted up to fair market values 
B) require only probable contingent liabilities to be recorded 
C) allow LIFO 
D) do not allow internally generated intangible assets to be recorded

Question 18

Paying a cash dividend ________.

Accepted Answer

A) increases earnings per share 
B) decreases earnings per share 
C) has no effect on earnings per share 
D) increases shareholders' equity 
A) increases earnings per share 
B) decreases earnings per share 
C) has no effect on earnings per share 
D) increases shareholders' equity

Question 19

The town of Columbia gave a piece of land to Wind Energy,Inc.so that the company would build its new factory in Columbia and create many local jobs.One appraiser said the land was worth $200,000,while a second appraiser said the land was worth $220,000.If Wind Energy,Inc.records the land at $220,000,this accounting choice would be considered ________.

Accepted Answer

A) conservative 
B) fundamental 
C) basic 
D) aggressive 
A) conservative 
B) fundamental 
C) basic 
D) aggressive

Question 20

Corporate governance eliminates the need for internal controls.

Accepted Answer

A) True 
 B)False

Wall Street analysts focus primarily on a company's ________.

Which of the following is evidence of a company's positive ethical climate?

Who is responsible for hiring,paying,and overseeing the work done by a company's external auditors?

Which financial statement is the best place to look to find earnings per share?

The ethical climate of a company is determined by the board of governors.

U.S.GAAP is more rule-based than IFRS.

The ethical climate of a company is determined by the external auditors.

Which of the following is evidence of a company's positive ethical climate?

Who must approve any rules set by the PCAOB?

Who created the Sarbanes-Oxley Act (SOX)?

What does PCAOB stand for?

An important factor in good corporate governance is ________.

An indication of good corporate governance ________.

IFRS differ from U.S.GAAP,in that IFRS ________.

Paying a cash dividend ________.

Corporate governance eliminates the need for internal controls.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

The Purchase and Sale of Inventory

Acquisition and Use of Long-Term Assets

Accounting for Liabilities

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Filters

Exam 11: Quality of Earnings, corporate Governance, and Ifrs

Wall Street analysts focus primarily on a company's ________.

Which of the following is evidence of a company's positive ethical climate?

Who is responsible for hiring,paying,and overseeing the work done by a company's external auditors?

Which financial statement is the best place to look to find earnings per share?

The ethical climate of a company is determined by the board of governors.

U.S.GAAP is more rule-based than IFRS.

The ethical climate of a company is determined by the external auditors.

Which of the following is evidence of a company's positive ethical climate?

Who must approve any rules set by the PCAOB?

Who created the Sarbanes-Oxley Act (SOX)?

What does PCAOB stand for?

An important factor in good corporate governance is ________.

An indication of good corporate governance ________.

IFRS differ from U.S.GAAP,in that IFRS ________.

Paying a cash dividend ________.

Corporate governance eliminates the need for internal controls.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

The Purchase and Sale of Inventory

Acquisition and Use of Long-Term Assets

Accounting for Liabilities

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Filters