Intro to Business Chapter Seven Quiz

The three kinds of basic financial statements that are prepared in financial accounting are:

balance sheet, income statement, and statement of cash flows.

The overstating of needs or setting low budget goals by managers in a budgeting process can result in _____.

budgetary slack

_____ is a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period.

Budgeting

Which of the following is a difference between managerial accounting and financial accounting?

Financial accounting is governed by a set of generally accepted accounting principles, whereas managerial accounting uses procedures developed internally that are not required to follow generally accepted accounting principles.

In the context of budget preparation, which of the following is a disadvantage of participatory budgeting?

It can lead to budgetary slack.

In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

Middle managers are likely to be highly motivated to achieve budgetary goals.

__________is the profit or loss a firm earns in the time period covered by the income statement.

Net income

A public accounting firm takes up a contract to perform an external audit for an oil manufacturing company. The firm, however, is already in a consulting contract with the oil company. Because of its prior association with the oil company and the hefty fee the oil company pays the firm, the firm manipulates the audit report. Which of the following laws is violated in this scenario?

The Sarbanes-Oxley Act

Costs are deducted from revenue in several stages to show how net income is determined. The first step in this process is to deduct:

costs of goods sold.

To give the company's stockholders, creditors, and other external stakeholders an accurate idea of the company's overall performance, Rowensport Corporation, a multinational company, releases statements that contain details of the company's profits and losses over the past five years. In this scenario, the company is most likely involved in _____.

financial accounting

In the context of financial statements of a company, cash flow statements commonly begin with _____.

net income

To preserve independence and impartiality, the Financial Accounting Standards Board (FASB) members are required to:

sever all ties with any firms or institutions they served prior to joining the board.

If an auditor doesn't find any problems with the way a firm's financial statements were prepared and presented, the report will offer a(n) _____ opinion.

unqualified