ACCT 3110 Chapter 1

Dave is an investor interested in buying shares in a new company. He is currently analyzing financial reports to make his decisions. What is this an example of? a. a user b. a resource c. the entity perspective d. capital allocation

a

Effective capital allocation works to ________ innovation. a. encourage b. prohibit c. discourage d. regulate

a

What would happen if GAAP was no longer used? a. it would be almost impossible to compare financial statements b. companies would be able to generate deals more easily c. it would be easier to compare financial statements d. companies would experience greater communication

a

Which of the following describes the FASB's primary goal in developing the codification? a. to provide in one place all the authoritative literature related to a particular topic b. to change the way GAAP is documented c. to create new GAAP d. to create multiple levels of GAAP

a

Which of the following is inaccurate statement about the CRS? a. it covers all transactions and events b. it can be found online c. it uses a numerical index system d. it is a real-time database

a

Which of the following would be an example of a user looking at general-purpose financial statements? a. Tom is looking at a set of documents for a company he wants to invest in; the information is presented clearly and all aspects of the company's financial operations are mentioned b. Sal is a manager looking at the financial statements for the company, but they use a reporting practice he is unfamiliar with c. Kat is an investor looking over financial documents for a company; she feels that a number of things have been misrepresented in the documents d. Dana is looking at two sets of documents for her company, both of which show only some of the financial operations of her workplace

a

Which of the following is the level of the codification where you will find the substantive content related to the issue researched? a. subtopic b. paragraph c. section d. topic

b

How are the SEC and GAAP related to one another? a. the SEC employees created GAAP b. the SEC requires only CPAs to follow GAAP c. the SEC requires companies to follow GAAP d. the SEC works toward the elimination of GAAP

c

How are the codification and GAAP similar to one another? a. the codification works to eliminate GAAP b. the codification works to recreate GAAP c. the codification works to omit any redundancies within GAAP d. the codification and GAAP work together to comply with the APB

c

After extensive research in the CRS, Dan has given up trying to find the transaction type he was looking for. Instead, he has decided to consult international financial reporting standards. What is the most likely reason for this? a. the transaction is not legal b. his transaction is not GAAP-certified c. he was looking at the wrong system and should have searched the Codification d. the Codification does not cover this transaction type

d

Which of the following scenarios would lead a person to look primarily at the topic portion of the Codification? a. Jamie is looking for a specific area in which he can find information on the accounting topic he is researching b. Tom wants as little information as possible on the topic he is researching; he just needs the answer to the question he has been asked c. Cally is looking for a very particular section regarding the accounting item she is researching d. Riley is looking for as much information as possible on a particular subject, and she is unsure of the exact information she will need

d

Which of the following works to provide online access to the Codification in the form of a database? a. the AICPA b. the FASB c. the APB d. the CRS

d

____________ are not considered to be GAAP documents. a. APB Opinions b. Statements of financial standards issued by the FASB c. Accounting interpretations issued by the FASB d. Pronouncements issued by the SEC

d

Financial statements that are provided only quarterly are often problematic because they a. do not provide up-to-date financial information b. do not provide reporting on soft assets c. are difficult to understand d. do not include reporting on sustainability efforts

a

Having only 7 members rather than 18 members is one way that the ________ differs from the ________ that it replaced. a. FASB; APB b. APB; CAP c. AcSEC; AICPA d. Wheat Committee;

a

How are general-purpose financial statements and generally accepted accounting principles related to one another? a. Both the general-purpose financial statements and the generally accepted accounting principles are designed for internal and external users b. Both the general-purpose financial statements and the generally accepted accounting principles ensure that anyone can read the financial information, regardless of their background c. Both the general-purpose financial statements and the generally accepted accounting principles work to appeal to external users of company data d. Both the general-purpose financial statements and the generally accepted accounting principles are organized in such a way as to only be understood by internal users

a

How did the role of the AICPA change after the establishment of the FASB? a. They have a reduced role in issuing accounting standards for public companies b. They no longer develop and grade the CPA examination c. They no longer issue accounting guidelines for specific industries d. They have a reduced role in providing preliminary guidance for reporting topics

a

Joe is one of the lead accountants for his company. Last month he was pressured to get the financial reports completed quicker than usual, which led to errors that went undetected. Joe's manager was very upset about this, and explained that he was negatively impacting the whole company with his mistakes. Why does the manager react in this manner? a. The resources at Joe's company are limited, and financial reports that are timely and reliable will help attract investment capital b. The resources at Joe's company are abundant, and correct financial reports will help attract investment capital c. In order to increase the productivity rate at the company and decrease the capital allocation, they need to have reliable financial reports d. In order to lower the company's capital allocation, they need to have timely, reliable financial reports

a

Kaitlyn runs a U.S. company that often does a lot of business with companies in London and Ireland. Sean runs a company in London that often does business with many companies in the U.S. What is implied here about their reporting standards? a. Kaitlyn will likely use GAAP, whereas Sean will likely use IFRS b. Both Sean and Kaitlyn will likely use GAAP c. Both Sean and Kaitlyn will likely use IFRS d. Kaitlyn will likely use IFRS, whereas Sean will likely use GAAP

a

Maci is preparing the income statement for her company. Jon is preparing a report that needs to be filed with one of the government agencies the company reports to. What is implied here? a. Maci is preparing a formal financial statement, while Jon is engaged in financial reporting b. Both Maci and Jon are engaged in financial reporting c. Both Jon and Maci are preparing formal financial statements d. Jon is preparing a formal financial statement, while Maci si engaged in financial reporting

a

Marci is accessing accounting principles in an online database that changes as the principles are updated. Everything is organized by topic, which makes her research easier. What is Marci using? a. the codification b. FASB online c. AICPA d. the CRS

a

Morgan is researching a very specific topic. He wants to find the exact area in which his topic is discussed in the Codification. What area should he search to find this information? a. paragraph b. sections c. topic d. subtopics

a

The Accounting Principles Board issued which of the following pronouncements? a. APB Opinions b. Statements of Financial Accounting Concepts c. Accounting Research Bulletins d. APB Statements of Position

a

An FASB Staff Position a. provides a consensus on how to account for new and unusual financial transactions b. provides interpretation of existing standards c. provides interpretive guidance d. provides timely guidance on select issues

b

An organization approached the SEC to get advice about the best method for solving an accounting issue. The organization most likely to approach the SEC for this type of advice is the a. FASAC b. FASB c. AICPA d. APB

b

Companies that are preparing reports about their sustainability efforts are attempting to address the financial reporting challenge of a. timeliness b. nonfinancial measurements c. forward-looking information d. soft assets

b

How are FASB and GAAP related when it comes to user groups? a. the FASB usually pressures user groups to change GAAP b. User groups often pressure the FASB to influence GAAP c. GAAP usually pressures the FASB to change user groups d. User groups often pressure GAAP to influence the FASB

b

Jonas is the CFO for his company. For more than 10 years he has been personally reviewing the company's financial statements to ensure they are correct. This was not an expectation of his position 25 years ago. What is responsible for this change? a. the ethical guidelines b. the Sarbanes-Oxley Act c. the expectations gap d. the formation of the PCAOB

b

Lucus Enterprises is a publicly-traded company. In the first quarter of 2017, they submitted their financial statements to the SEC. What can Lucas expect to happen if the SEC finds irregularities in the financial statements? a. Nothing will happen b. They will receive a deficiency letter and have to correct the problem c. They will have to appear before the AcSEC to defend their actions d. the CEO and CFO will be subject to criminal trial

b

Mara is working on a project for the accounting department. She has found an event that is not covered by the Codification. What should she do? a. Search the subtopics and sections instead b. Look in other accounting literature, such as the FASB Concept Statements c. Search the CRS to see if the event can be found there d. Look again because all events are covered by the Codification

b

Meg has been learning about GAAP in class, and she is interested in how the principles are applied to financial accounting as a whole. She has also been learning about the purpose behind companies producing one general-purpose financial statement. Meg believes these two concepts are very similar. Is she correct? a. Yes, both the general-purpose financial statements and the generally accepted accounting principles work to appeal to external users of company data b. Yes, both the general-purpose financial statements and the generally accepted accounting principles are designed for internal and external users c. No, the general-purpose financial statement was designed primarily with internal users in mind, whereas the generally accepted accounting principles were designed with external users in mind d. No, the general-purpose financial statement was designed primarily with internal users in mind, whereas the generally accepted accounting principles were designed with all users in mind

b

Moore Industries is a public company that has stocks listed on the NASDAQ. Therefore, they faithfully adhere to GAAP. This is a requirement of the a. FASB b. SEC c. AICPA d. AcSEC

b

Runa runs a company in Norway that is listed with the U.S exchange. What accounting standards will Runa's company use? a. GAAP b. IFRS c. FASB d. IASB

b

Sadie is looking over the expenses and revenue of the company in order to prepare the company's income statement. After this is completed, she will likely look at all other transactions so that other reports can be completed as well. What is this an example of? a. compiling reports for managerial accounting b. compiling financial statements c. organizing reports for financial accounting d. engaging in financial reporting

b

Statements of Financial Accounting Concepts are used to a. modify or extend an existing FASB Accounting Standards Update b. form a conceptual framework for solving existing and emerging problems c. determine the need for FASB involvement in an emerging issue d. establish GAAP

b

The due process system employed by the Financial Accounting Standards Board a. identifies the accounting issues that are the most important b. enables interested parties to express their views on issues under consideration c. requires that all accountants must receive a copy of financial standards d. is an efficient system for collecting dues from members

b

The organization responsible for overseeing the development of financial auditing standards is the a. Accounting Standards Executive Committee b. Public Company Accounting Oversight Board c. Committee on Accounting Procedure d. Auditing Standards Board

b

What is the difference between effective capital allocation and poor capital allocation? a. Effective capital allocation leads to fewer external users, whereas poor capital allocation leads to more external users b. Effective capital allocation leads to a healthy economy, whereas poor capital allocation can negatively affect the securities market c. Effective capital allocation leads to an influx in the securities market, whereas poor capital allocation can lead to a drop in internal users d. Effective capital allocation leads to fewer internal users, whereas poor capital allocation leads to more internal users

b

Which of the following companies is most focused on addressing the financial reporting challenge of timeliness? a. Washington Industries, which publishes monthly newsletters detailing their sustainability efforts b. Freeman Enterprises, which publishes daily online updates to financial statements c. Payne International, which provides quarterly financial reports in both GAAP and IFRS d. Dixon Company, which provides quarterly financial reports in both technical and lay-person language

b

Which of the following organizations regularly consults with the FASB on major policy issues? a. Committee on Accounting Procedure b. Financial Accounting Standards Advisory Council c. Accounting Principles Board d. American Institute of Certified Public Accountants

b

Why do companies provide financial reports using XBRL? a. in response to the financial reporting challenge of understandability b. in response to the financial reporting challenge of timeliness c. in response to the financial reporting challenge of nonfinancial measurements d. in response to the financial reporting challenge of forward-looking information

b

Matthew is an accountant at Larson Enterprises. He frequently feels pressured to make unethical accounting decisions in order to report a higher profit for the company. What situation is most likely to make him feel this way? a. the CEO frequently stresses in employee meetings the importance of taking the company to the next level b. the CFO was caught skimming money from some of the company accounts c. the CEO frequently forces production managers to cut corners in order to minimize product costs d. the CFO encourages accountants to make financial documents that use both GAAP and IFRS

c

Morris is part of a government organization that is responsible for standardizing the information that companies present to stockholders. He reviews the financial reports from multiple companies within this organization's jurisdiction. What organization does Morris work for? a. the FASB b. the APB c. the SEC d. the CAP

c

Paul is an accountant at a company that has recently issued its financial statements. The public feels that more information should be included in the statements, but Paul believes that he and the other accountants provided all of the information that they could. What is this an example of? a. the PCAOB b. the Sarbanes-Oxley Act c. the expectations gap d. the APB

c

The SEC believes that accounting standards should come from a. the government b. the public sector c. the private sector d. certified public accountants

c

The organization(s) that have contributed to U.S. accounting standard setting is(are) a. The Financial Accounting Standards Board b. The Committee on Accounting Procedure c. All of these answer choices are correct d. the Accounting Principles Board

c

What is the connection between the Wheat Committee and the APB? a. the Wheat Committee led to the creation of the APB b. the APB led to the scandal surrounding the Wheat Committee c. the Wheat Committee ultimately led to the replacement of the APB d. the APB ultimately led to the replacement of the Wheat Committee

c

Which of the following four statements are true? 1. Technical competence in accounting is not enough when encountering ethical decisions in business. 2. The pressures "to bend the rules," "to play the game," or "to just ignore it" can be considerable for accountants. 3. Time, job, client, personal, and peer pressures do not complicate the process of ethical sensitivity and selection among alternatives for accountants. 4. The decision about what is right and wrong in accounting may be easier because there is no comprehensive ethical system to provide guidelines. a. 1, 2, 3, and 4 are all true b. 2 and 4 are true c. 1 and 2 are both true d. 1, 2, and 4 are all true

c

Which of the following is an inaccurate expectation of the codification? a. to reduce the time to research accounting issues b. to reduce the risk of noncompliance with GAAP c. to create multiple levels of GAAP d. to help users stay current with GAAP

c

Which of the following is true of generally accepted accounting principles? a. They include detailed practices and procedures as well as broad guidelines of general application b. They change over time as the nature of the business environment changes c. all of these answer choices are correct d. they are influenced by pronouncements of the SEC and IRS

c

When it was established, the purpose of the Accounting Principles Board was to (select all that apply) a. summarize accounting practices for specific industries b. select members of the Financial Accounting Standards Board c. determine appropriate accounting practices d. reduce inconsistencies in accounting practices e. assist the SEC with reporting issues by conducting research and analysis f. publish accounting principles

c d f

Cailyn is looking for a broad array of information on an accounting subject. She wants as much information as possible so that she can sort through it to find what will be relevant for her many areas of research. What part of the Codification will she look at? a. sections b. paragraph c. subtopics d. topic

d

Carolyn is looking over published accounting opinions based primarily on research studies. What organization is Carolyn researching? a. CAP b. AICPA c. SEC d. APB

d

Danielle is looking for information on an accounting principle for class. She does not want to sift through a lot of information to find it, but wants to know the exact location. What area of the CRS results will she look at? a. subtopics b. topic c. sections d. paragraph

d

Mara prepares the financial reports for her company. The assets in the reports are distinct from those of shareholders. Ben believes that financial reports should be tailored primarily toward shareholders. What is implied here? a. Both Ben and Mara are following the proprietary perspective b. Both Ben and Mara are following the entity perspective c. Ben is following the entity perspective, whereas Mara is following the proprietary perspective d. Mara is following the entity perspective, whereas Ben is following the proprietary perspective

d

Marissa is preparing a cash budget for the Chief Financial Officer. What is this an example of? a. financial reporting b. capital allocation c. financial accounting d. managerial accounting

d

Morris and Ted are brothers who work in similar fields. Morris works at an accounting firm and Ted is a financial analyst. Their sister, Rosa, works for the SEC. What do they have in common? a. Morris and Ted are members of user groups that influence the formation of accounting standards, while Rosa is part of a user group that influences internal controls b. Morris, Ted, and Rosa are all members of user groups that influence the PCAOB c. Ted is part of a user group that influences internal controls, while Morris and Rosa are members of user groups that influence the FASB d. Morris, Ted, and Rosa are all part of user groups that influence the formation of accounting standards

d

Pam is working on changing the financial statement for the company to reflect the changes that occurred during this period. Nolan is ensuring that the financial statements he is preparing appeal to both internal and external users. What is implied here? a. Pam is following the objectives of financial reporting, whereas Nolan is following the objectives of the entity perspective b. Nolan is following the objectives of the entity perspective, whereas Pam is following the objectives of accrual-basis accounting c. Pam is following the objectives of financial reporting, whereas Nolan is following the objectives of accrual-basis accounting d. Nolan is following the objectives of financial reporting, whereas Pam is following the objectives of accrual-basis accounting

d

Pam prepares the financial reports for her company. The company has a number of assets that are listed on the reports, but the assets of individual shareholders are considered to be distinct from the company itself and are not included. What is this an example of? a. the proprietary perspective b. decision-usefulness c. stewardship d. the entity perspective

d

Ted has come across a situation while preparing the financial statements for his company. He knows what the GAAP requirements are, but his boss wants him to understate expenses. What is this an example of? a. SEC guidelines b. convergence c. a soft asset dilemma d. an ethical dilemma

d

The entity perspective a. views a company as intertwined with its current shareholders b. believes financial reporting should focus on current shareholders c. believes all financial decisions should be made by current shareholders d. views a company as distinct from its current shareholders

d

When companies concentrate primarily on maximizing the bottom line, what impact does it have on accountants? a. it can create an enjoyable and fast-paced environment b. it can lead to a stronger adherence to GAAP c. it can lead to greater accounting errors d. it can create a stressful work environment prone to conflict

d

Which of the following is a nonfinancial measurement that may be important in future financial reports? a. number of not-for-profit partnerships b. number of new employees c. number of volunteer hours provided for the community d. backlog information

d

Which of the following is a requirement of members of the Financial Accounting Standards Board? a. they must be part-time employees of the FASB b. they are required to hold a CPA certificate c. they must be employed by the American Institute of Certified Public Accountants (AICPA) d. they must be independent of any other generation

d

Which of the following is the only report that is currently able to change, establish, or update GAAP? a. APB Opinions b. Accounting Research Bulletins c. Financial Accounting Concepts d. Accounting Standards Updates

d