ACCT 3304 Chapter 1 Homework

The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the - AICPA. - SEC. - APB. - FASB.

SEC.

Which of the following statements includes the most useful guidance for practicing accountants concerning the FASB Accounting Standards Codification? - The Codification is the sole source of U.S. GAAP, for nongovernmental entities. - The Codification significantly modified the content of GAAP when it became effective. - The Codification includes only FASB Statements. - An accountant can be sure that all SEC rules are included in the Codification.

The Codification is the sole source of U.S. GAAP, for nongovernmental entities. (The Codification is the sole source of U.S. GAAP, for nongovernmental entities is correct. The Codification includes all authoritative GAAP for nongovernmental entities.)

What is the primary protection for investors against fraudulent financial reporting by corporations? - The requirement that financial statements be audited. - The fact that all firms must report the same way. - The integrity of management. - Criminal statutes.

The requirement that financial statements be audited. (The audit of the financial statements by independent third parties is the primary protection, because independent third-party CPAs provide a more objective opinion of the accuracy of the statements. The auditors do not prepare the information, nor do they have employment ties with either the reporting firm or the intended audience of the financial statements.)

The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is - the FASB issues exposure drafts of proposed standards. - a majority of the members of the FASB are CPAs who are drawn from public practice. - all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions. - all members of the FASB possess extensive experience in financial reporting.

all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.

The Financial Accounting Standards Board Accounting Standards Codification - does not create new GAAP. - eliminates nonessential information. - simplifies user access to all authoritative U.S. generally accepted accounting principles. - all of these answer choices are correct.

all of these answer choices are correct.

The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except - grading the CPA exam. - developing and enforcing professional ethics. - developing auditing standards for public companies. - providing professional education programs.

developing auditing standards for public companies.

Characteristics of generally accepted accounting principles include all of the following except - each principle is approved by the SEC. - practice has become universally accepted over time. - authoritative accounting that the rule-making body has established as a principle of reporting. - standards are considered useful by the profession.

each principle is approved by the SEC.

General-purpose financial statements are the product of - financial accounting. - managerial accounting. - both financial and managerial accounting. - neither financial nor managerial accounting.

financial accounting.

Rule 203 of the Code of Professional Conduct addresses: - ethical requirements. - advertising to obtain clients. - auditing financial statements. - financial statements being based on generally accepted accounting principles.

financial statements being based on generally accepted accounting principles.

GAAP stands for: - generally accepted attest principles. - government audit and attest policies. - generally accepted accounting principles. - governmental auditing and accounting practices.

generally accepted accounting principles.

Accrual accounting is used because - it provides past ability to generate negative cash flows. - it provides a better indication of a company's ability to generate cash flows than the cash basis. - cash flows are considered less important. - it recognizes revenues when cash is received and expenses when cash is paid.

it provides a better indication of a company's ability to generate cash flows than the cash basis.

The purpose of the International Accounting Standards Board is to - issue enforceable standards which regulate the financial accounting and reporting of multinational corporations. - promote uniform accounting standards among countries of the world. - arbitrate accounting disputes between auditors and international companies. - develop a uniform currency in which the financial transactions of companies through-out the world would be measured.

promote uniform accounting standards among countries of the world.

The purpose of the Emerging Issues Task Force is to - lobby the FASB on issues that affect a particular industry. - provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis. - develop a conceptual framework as a frame of reference for the solution of future problems. - do research on issues that relate to long-term accounting problems.

provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis.

The __________ requires that members prepare financial statements in accordance with GAAP. - AICPA's Code of Professional Conduct. - International Accounting Standards Board (IASB). - Financial Accounting Standards Board (FASB). - Internal Revenue Service (IRS).

AICPA's Code of Professional Conduct.

Fundamental considerations the FASB must keep in mind in its rule-making activities include - Improvement in financial reporting. - International convergence. - Simplification of the accounting literature. - All of these choices are correct.

All of these choices are correct.

Which of the following user groups influence the formulation of accounting standards? - All of these choices are correct. - Government. - Academicians. - CPAs and accounting firms.

All of these choices are correct.

Which of the following is a requirement for an accounting principle to be called "generally accepted"? - Each company develops its own standards. - The principle has been accepted as appropriate because of its universal application. - An authoritative accounting rule-making body has established it in an official pronouncement. - An authoritative accounting rule-making body has established it or it has been accepted because of its universal application.

An authoritative accounting rule-making body has established it or it has been accepted because of its universal application.

The FASB is currently the rule-making body for GAAP. The Board has codified well over one hundred Statements of Financial Accounting Standards, and Interpretations of those standards. The FASB is a private-sector body, the third such body serving as the entity which creates GAAP for U.S. businesses. The FASB has no authority to enforce GAAP, however. What group currently writes the Generally Accepted Accounting Principles? -Financial Accounting Standards Board. - Securities and Exchange Commission. - Internal Revenue Service. - Financial Accounting Foundation.

Financial Accounting Standards Board. (The FASB is currently the rule-making body for GAAP. The Board has codified well over one hundred Statements of Financial Accounting Standards, and Interpretations of those standards. The FASB is a private-sector body, the third such body serving as the entity which creates GAAP for U.S. businesses. The FASB has no authority to enforce GAAP, however.)

The _______ has oversight and enforcement authority and establishes auditing, quality control, and independence standards and rules. - PCAOB (Public Company Accounting Oversight Board). - FASB (Financial Accounting Standards Board). - SEC (Securities and Exchange Commission). - IRS (Internal Revenue Service).

PCAOB (Public Company Accounting Oversight Board).

What is the objective of financial reporting? - Provide information that is useful to management in making decisions. - Provide information that clearly portrays non-financial transactions. - Provide information that excludes claims to the resources. - Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.

Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.