ACG3173 Ch. 1
T
Managerial and cost accounting have an internal orientation and are concerned primarily with making decisions relating to the future of an organization. (T/F)
T
Note disclosures are required in financial reporting because management knows more about its business activities than do other financial statement users, and the decisions made by "outside" users are improved if note to the financial statements are provided. (T/F)
T
Accounting is often referred to as the "language of business" because investors and creditors rely on accounting data to make decisions and informed judgments. (T/F)
F
Accounting rules are codified laws that have been set by the U.S. Congress and must be followed by all who practice in the accounting profession. (T/F)
T
Public accountants must be independent of the firms they audit in order to maintain their credibility. (T/F)
T
Accounting standards may differ significantly from one country to another. (T/F)
F
An Accounting Standards Update is a quarterly newsletter sent by the AICPA to all of its individual and corporate members. (T/F)
A) A financial statement presenting the amount that the entity expects to earn next year.
As it relates to financial reporting, which of the following is not required of an accounting entity? A) A financial statement presenting the amount that the entity expects to earn next year. B) A financial statement presenting the financial position of the entity at a point in time. C) A financial statement presenting the results of the entity's operations for a period of time. D) A financial statement summarizing the entity's cash flows for a period of time.
T
Cost accounting is the subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs. (T/F)
Public Company Accounting Oversight Board (PCAOB)
Established in 2002 with authority to set and enforce auditing and ethics standards for public companies and their auditing firms
A) Estimating the number of employees the firm will hire during the next year.
Examples of how investors, creditors, and others commonly use reported earnings figures and the related information about the elements of financial statements include all of the following except: A) Estimating the number of employees the firm will hire during the next year. B) Evaluating management's past performance. C) Predicting future earnings. D) Assessing the risks of future cash flows.
T
Financial accounting has an external orientation, and is required to inform users of the organization's financial position, results of operations, and changes in financial position between two points in time. (T/F)
T
Integrity and objectivity are two of the key elements of ethical behavior for a professional accountant. (T/F)
F
The CIA designation is used by accountants employed by the Central Intelligence Agency. (T/F)
T
The Securities Act of 1933 and the Securities and Exchange Act of 1934 passed by the U.S. Congress give the SEC the legal right to prescribe and regulate the accounting principles for large firms whose securities are traded on stock exchanges. (T/F)
T
The Statements of Financial Accounting Concepts (SFAC) series does not establish standards prescribing accounting procedures or disclosure practices, and thus are not part of the FASB Accounting Standards Codification. (T/F)
T
The internal auditor's interest in his/her organization goes beyond the CPA's interest in the organization to include such things as the efficiency and effectiveness with which the organization operates. (T/F)
T
The objectives of financial reporting for nonbusiness entities focus on providing information for resource providers rather than investors. (T/F)
F
Well-qualified internal auditors who hold the CIA credential are allowed to express audit opinions about their organization in substitution for the CPA's opinion. (T/F)
Securities and Exchange Commission (SEC)
a unit of the federal government that is responsible for establishing regulations and ensuring full disclosure to investors about companies and their securities that are traded in interstate commerce (reviewing for compliance of all required information)
Employees
assessing a company's ability to offer future job prospects and retirement
Financial Accounting Standards Board (FASB)
body responsible for establishing U.S. GAAP
Cash Flow
cash receipts or disbursements of an entity
Controller
chief accounting officer of an organization, usually responsible for financial and managerial accounting functions
Managerial Accounting
concerned with the *internal* use of economic and financial information to plan and control many of the activities of an entity and to support the management decision-making process
Financial Accounting
generally refers to the process that results in preparing and reporting of financial statements for an entity (point in time)
International Accounting Standards Board (IASB)
high quality, understandable, enforceable, and accepted financial reporting standards based on clear, articulated principles.
Management
planning, directing, controlling
Managerial and Cost Accounting
primarily an internal orientation
Bookkeeping
procedures that are used to keep track of financial transactions and accumulate the results of an entity's financial activities
Auditing
process of examining the financial statements of an entity by an independent third party with the objective of expressing an opinion about the fairness of the presentation of the entity's financial position, results of operations, changes in financial position, and cash flows
Internal Auditing
professional accountants who perform functions much like those of an external auditor, however, auditing is done within a company by employees of the company rather than public accounting
Certified Management Accountant (CMA)
professional designation earned by passing a broad, two-part exam and meeting certain experience requirements
Certified Public Accountant (CPA)
professional designation earned by passing a comprehensive, four-part exam
International Financial Reporting Standards (IFRS)
pronouncements of the International Accounting Standards Board that are considered to be a "principles-based" set of standards in that they establish broad rules as well as dictating specific treatments. 1.) State of flux 2.) Countries can opt out
Accrual Basis
recognizes revenues and expenses as they occur, even though the cash receipt from the revenue or the cash disbursement related to the expense may occur before or after the event that causes revenue or expense recognition
Public Accounting
segment of the accounting profession that provides auditing, income tax accounting, and management consulting services to clients
Independent Auditor's Report
the report accompanying audited financial statements that explains briefly the auditor's responsibility and the extent of work performed, an opinion about whether the info. contained in the financial statements is presented fairly in accordance with GAAP (unqualified-clean opinion or qualified)
Annual Report
A document distributed to shareholders and other parties that contains the financial statements, notes to the FS, and the management's discussion and analysis of financial and operating factors that affected the firm together with the report of the external auditor's exam of the FS
F
Accounting can be broadly defined as a process of identifying, measuring and communicating economic information about an organization for income tax purposes. (T/F)
F
Accounting is necessary only for profit seeking entities. (T/F)
A financial statement presenting the amount that the entity expects to earn next year.
As it relates to financial reporting, which of the following is not required of an accounting entity? A financial statement presenting the amount that the entity expects to earn next year. A financial statement presenting the financial position of the entity at a point in time. A financial statement presenting the results of the entity's operations for a period of time. A financial statement summarizing the entity's cash flows for a period of time.
F
Financial reporting endeavors to directly measure the value of a business enterprise by recording everything of value as an asset. (T/F)
T
For the most part, managerial and cost accountants do not have to follow accounting standards (similar to those issued by the FASB) in the performance of their work. (T/F)
C) financial accounting, national accounting, cost accounting
Major classifications of accounting activity would not include: A) financial accounting, internal auditing, public accounting B) internal auditing, governmental accounting, managerial accounting C) financial accounting, national accounting, cost accounting D) auditing, income tax accounting, governmental accounting E) financial accounting, managerial accounting, governmental accounting
D) Financial Accounting Standards Board (FASB).
The authoritative financial accounting standards-setting body in the United States is presently the: A) Securities and Exchange Commission (SEC). B) International Accounting Standards Board (IASB). C) Public Company Accounting Oversight Board (PCAOB). D) Financial Accounting Standards Board (FASB). E) Accounting Principles Board (APB).
C) by an auditing firm cannot own any stock in the company being audited.
The ethical concept of independence means that an accountant employed: A) by a corporation cannot prepare financial statements for use by the company's bank. B) by one company cannot work part-time for another company. C) by an auditing firm cannot own any stock in the company being audited. D) by one company cannot accept a job with another company in the same industry. E) an accountant's independence would be impaired in any of the above situations.
B) Probability of success of a new product development.
Which of the following is not an example of a decision or informed judgment that a potential investor would make from accounting information? A) Future profitability based on past profitability. B) Probability of success of a new product development. C) A forecast of dividends. D) Assessment of risk that a company may have more debt than it can repay if the economy enters a recession.
C) The FASB follows a due process procedure that permits input from interested parties before an Accounting Standards Update is issued.
Which of the following statements about the Financial Accounting Standards Board is correct? A) The FASB is an agency of the Federal government. B) The FASB has the authority to fine a noncompliant firm. C) The FASB follows a due process procedure that permits input from interested parties before an Accounting Standards Update is issued. D) The FASB is controlled by the American Institute of CPA's.
C) Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money in the hands of managers they could not directly control.
Which of the following statements related to the origins and traditions of auditing is most true? A) Auditing has always followed a codified set of rules designed to detect and report fraud. B) Little judgment has traditionally been required on the auditor's part because the numbers a firm reports are either correct or they're not. C) Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money in the hands of managers they could not directly control. D) In the early 1920's, auditors became unified in their efforts, and generally accepted auditing procedures were consistently followed to the point that financial statements were considered quite reliable. E) Auditing was traditionally done only for banks.
Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money with managers they could not directly control.
Which of the following statements related to the origins and traditions of auditing is the most appropriate description? Auditing has always followed a codified set of rules designed to detect and report fraud. Little judgment has traditionally been required on the auditor's part because either the numbers a firm reports are correct or they're not. Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money with managers they could not directly control. In the early 1920s auditors became unified in their efforts, and generally accepted auditing procedures were consistently followed to the point that financial statements were considered quite reliable.
Auditing has always followed a codified set of rules designed to detect and report fraud.
Which of the following statements related to the origins and traditions of auditing is the most appropriate description? Auditing has always followed a codified set of rules designed to detect and report fraud. Little judgment has traditionally been required on the auditor's part because either the numbers a firm reports are correct or they're not. Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money with managers they could not directly control. In the early 1920s auditors became unified in their efforts, and generally accepted auditing procedures were consistently followed to the point that financial statements were considered quite reliable.
Cost Accounting
a subset of managerial accounting that relates to the determination and accumulation of *product, process,* or *service costs*
Investor/Shareholders
assessing *amounts, timing* and *uncertainty* of future cash returns on their investment
Creditors/Suppliers
assessing probability of collection (risk of late or non-payment)
Entity
organization, individual, group of organizations or individuals for which accounting services are performed
Financial Accounting
primarily oriented toward the *external* user and primarily concerned with the *historical* results of an entity's performance
Generally Accepted Auditing Standards (GAAS)
standards for auditing that are established by the Auditing Standards Board of the American Institution of Certified Public Accountants unless superseded or amended by the PCAOB
Generally Accepted Accounting Principles *(GAAP)*
(properly reflects underlying economic reality) pronouncements of the (FASB) and its predecessors that constitute appropriate accounting for various transactions used for reporting financial position and results of operations to investors and creditors (since July 2009, FASB codification has represented a single source of U.S. ____)
What Is Accounting?
*identifying, measuring, communicating* economic information about an organization for the purpose of making decisions and informed judgments
F
Because financial statements are based on historical costs, they result in exact measurements of what a business is worth. (T/F)
T
Bookkeeping is a set of procedures designed to accumulate the results of an entity's many activities in a convenient way, and it does not typically involve much judgment. (T/F)
all of the above.
Common examples of "users" of the accounting information related to an organization include the management of the organization. investors and creditors. employees. the Securities and Exchange Commission. all of the above.
D) A Certified Public Accountant.
Which of the following are qualified to express an auditor's opinion about an entity's financial statements? A) A Comptroller. B) A Certified Management Accountant. C) A Certified Internal Auditor. D) A Certified Public Accountant.
F
Readers of financial statements can project an organization's past activities and results of operations into the future with great assurance and little risk because CPAs guarantee all of the numbers when they audit the financial statements. (T/F)
F
The Committee on Accounting Procedures was established in 1973 and is the current standard setting body in the accounting profession. (T/F)
T
The FASB Accounting Standards Codification reorganized divergent sources of U.S. GAAP into a more accessible and researchable format. (T/F)
T
The GASB and FASB develop governmental and financial accounting standards, respectively, and operate under the common rule of the Financial Accounting Foundation (FAF). (T/F)
T
The IASB and FASB have been working for several years to achieve convergence of International Financial Reporting Standards (IFRS) and U.S. GAAP. (T/F)
T
The Public Company Accounting Oversights Board (PCAOB) was created as a result of the Sarbanes-Oxley Act (SOX) of 2002, and has the authority to set and enforce auditing, attestation, quality control and ethics (including independence) standards for public companies. (T/F)
T
The acronym APB stands for Accounting Principles Board. (T/F)
