Chapter 1

What are the two sets of rules accepted for international use?

1. U.S. GAAP 2. International Financial Reporting Standards(IFRS) developed by the International Accounting Standards board

What did the SOX do?

1. increased resources for SEC 2. established Public company accounting Oversight Board (PCAOB) 3. implements stronger independence rules for auditors 4. Requires CEO and CFO certification of financial statements 5. requires audit committees to be comprised of independent members 6. Requires code of ethics for senior official officers 7. requires public companies to attest to the effectiveness of internal controls

What is the present role of the AICPA?

Not really much of one

Where does the SEC receive its authority?

federal legislation enacted by Congress

What are international standards often referred to as?

iGAAP

What are the two major types of pronouncements the FASB issues?

1. Accounting standards update- updates how FASB issues new accounting standards 2. Statements of Financial accounting Concepts (SFAC)- conceptual framework documents

What are the written communications of the AcSEC? (3)

1. Audit and Accounting Guidelines 2. Statements of Position (SOP) 3. Practice Bulletins

What is the due process for the FASB? (9)

1. Identify a topic 2. Conduct research 3. Issue a Discussion Memorandum (DM) of the pros and cons 4. Hold a public gathering 5. Evaluate feedback and more research 6. Issue an exposure draft 7. Gather more public feedback 8. Evaluate feedback and reach a consensus 9. Issue formal statement of financial accounting standards

How many members are in the FASB and what is its stance with other accounting organizations?

1. Seven full time members, appointed for 5 year terms 2. Independent from other accounting organizations and the SEC

What are the advantages with the FASB?(5)

1. Smaller membership 2. Full time members 3. Greater autonomy from other organizations 4. greater independence of the individual members 5. broader representation from members

What type of powers does the SEC have? (3)

1. They have the ultimate authority to prescribe accounting principles 2. Has the power for a "deficiency letter or a stop order for deficiencies in financial reporting. 3. The department of justice may file criminal criminal charges for violations of certain laws.

Who did the AICPA appoint from 1959-1973? What did they issue?

Accounting Principles Board, they issued APB opinions

APB

Accounting principles Board

ARB

Accounting research bulletin

What is AICPA?

American Institute of Certified Public Accountants, a private sector organization of professional accountants

What did the FASB create to solve issues in creating accounting standards?

Codification

What is the CRS?

Codification research system- online real time database that provides easy access to the Codification.

CAP

Committee on accounting procedure

What is EITF?

Emerging Issue Task Force

What is the IRS?

Internal Revenue Service

What is the organization that sponsors the FASB in decision making?

Financial Accounting Foundations, select members and fund FASB

FASAC

Financial Accounting Standards Advisory Council

What is the FASB?

Financial Accounting Standards Board

What is GAAP? (with definition)

Generally accepted accounting principles- the rules and policies that a company must follow in preparing its financial statements

What is the GASB?

Government Accounting Standards Board

Income Statement

Reports the company's income over a period of time

Balance Sheet

Reports the financial position of the business at a specific point in time

What is the SEC and when was it created?

Securities and Exchange Commision, created by the SEC act of 1934

SOP

Statement of position

What is SFAC?

Statements of Financial Accounting Concepts (not GAAP)

What is SFAS?

Statements of Financial Accounting Standards

Who did the AICPA appoint from 1939-1959? What did they issue?

The Committee on Accounting Procedure (CAP) they issued Accounting research bulletins

What is the SOX? what year?

The Sarbanes Oxley Act 2002. Legislative act enabled by congress as a result of numerous accounting scandals in the years 2000 and 2001.

What is the official role of the SEC in developing accounting theory and practices?

The U.S. Congress has given the SEC broad regulatory power to control accounting principles and procedures in order to fulfill its goal of full and fair disclosure.

What is the Relationship between the FASB and the SEC?

There is no direct relationship as the SEC was created by Congress and the Financial Accounting Standards Board (FASB) was created by the private sector. However, the SEC historically has followed a policy of relying on the private sector to establish financial accounting and reporting stan- dards known as generally accepted accounting principles (GAAP). The SEC does not necessarily agree with all of the pronouncements of the FASB. In cases of unresolved differences, the SEC rules take precedence over FASB rules for companies within SEC jurisdiction.

Statements of Cash Flows

reports the change in cash over a period of time and the reasons for that change

Statement of retained earnings

reports the change in retained earnings over a period of time