ACCT 3200 Exam 1

Four financial statements that are needed for an annual report to be complete

- a statement of cash flows - a statement of shareholders' equity - a balance sheet - a combined income and other comprehensive income statement

The involvement of accounting professionals and management in accounting scandals resulted in Congress passing the Sarbanes-Oxley Act. What is the purpose of the Sarbanes-Oxley Act?

- provide penalties for violators - require CEO accountability - regulate auditors - prevent conflicts of interests

Private accounting standard setting bodies (oldest to youngest)

1. Committee on Accounting Procedure 2. Accounting principles board 3. Financial accounting standards board

Steps of ethical decision making

1. Determine the facts of the situation 2. identity the ethical issue and stakeholders 3. identify the values related to the situation 4. specify the alternative courses of action 5. evaluate the courses of action in terms of their consistency

The FASB's standard setting process begins when the board adds a project to its technical agenda.

1. The board deliberates at one or more public meetings 2. the board issues an exposure draft or discussion paper 3. the staff analyzes comment letters 4. the board issues an accounting standards update

The organization responsible for the Code of Professional Conduct for certified public accountants is the

American Institute of Certified Public Accountants

The acronym for the private sector organization that sets accounting standards in the United States

FASB

Fair Value Hierarchy Level

Level 1 - quoted market prices in active markets for identical assets or liabilities Level 2 - inputs other than quoted prices that are observable for the asset or liability Level 3 - unobservable inputs that reflect the entity's own assumptions

The ___ has the authority to set accounting standards for companies, but has delegated the task to the private sector

SEC

Enhancing characteristics of financial information

comparability and timeliness

Enhancing qualitative characteristics

comparability, consistency, verifiability, timeliness, and understandability

Financial accounting is chiefly concerned with providing information to ___ users

external

Historical cost bases measurement on the amount ___ or ____ in the exchange transaction

given received

Financial statements of a company presume the business is a ___ ____ and will operate indefinetly

going concern

Predictive value, confirmatory value, and ____ all relate to the fundamental characteristic of relevance

materiality

Relevance

predictive value and confirmatory value

External users receive financial information in a variety of formats including news releases, management forecasts, ____, and reports filled with regulatory agencies

prospectuses

Recognition

recording information in the basic financial statements