Advanced Accounting - Ch. 16 Exercises

Which section of Form 10-K is used for management's discussion and analysis of financial condition and results of operations? 1. Item 7 2. Item 8 3. Item 1A 4. Item 4A

1. Item 7

Information included in every company's proxy statements includes all the following except 1. details of executive compensation packages 2. statements of income and comprehensive income for the last three years 3. biographies of members of the board of directors 4. related party transactions, if any

2. statements of income and comprehensive income for the last three years

SOX requires the SEC to review company filings at least every 1. year 2. two years 3. three years 4. five years

3. three years

What is the name of the SEC's online database of company filings? 1. XBRL 2. DRVA 3. VaR 4. EDGAR

4. EDGAR

After the Enron accounting scandal, the SEC encouraged the FASB to quickly develop a new standard on what topic? 1. Consolidation of special purpose entities 2. Convergence with IFRS 3. Mark-to-market accounting for financial instruments 4. Valuation of equity-based compensation

1. Consolidation of special purpose entities

Nonfinancial statement disclosures are specified in which of the following? 1. Regulation S-K 2. Financial Reporting Releases 3. Staff Accounting Bulletins 4. Accounting and Auditing Enforcement Releases 5. Regulation S-X

1. Regulation S-K

In cases of false or misleading disclosure in a registration statement that the SEC has allowed to becoming effective in conjunction with the public sale of securities, investors have the potential for legal recourse (for example, damage suits) against all of the following except 1. the Securities and Exchange Commission 2. the issuing entity 3. the underwriter (managing broker) of the sale 4. the issuing entity's external accountant `

1. the Securities and Exchange Commission

What is a "non-accelerated filer"? 1. A company with fewer than five employees 2. A company having a public float of less than $75 million 3. A not-for-profit organization 4. A financial services organization

2. A company having a public float of less than $75 million

The 1933 Securities Act provides for a waiting period between the filing and effective dates of the registration. During this waiting period the registrant is prohibited from engaging in which of these activities? 1. Preparing any amendments to the registration statement 2. Accepting offers from potential investors to purchase securities being registered 3. Placing an advertisement indicating who will accept orders for the securities being registered 4. Issuing a prospectus in preliminary form

2. Accepting offers from potential investors to purchase securities being registered

Which of the following are not requirements imposed by the Securities Exchange Act of 1934 and its amendments? 1. Proxy solicitation requirements 2. Prospectus requirements 3. Insider trading requirements 4. Tender offer requirements 5. Accounting, recordkeeping, and internal control requirements

2. Prospectus requirements

SEC comment letters and company responses related to its periodic filings are 1. not publicly available 2. available on the EDGAR database 3. available on the website of the external auditor 3. available on the website of the Division of Enforcement

2. available on the EDGAR database

Shareholders may ask or allow others to enter their vote at a shareholders meeting that they are unable to attend. The document furnished to shareholders to provide background information for their vote is a 1. registration statement 2. proxy statement 3. 10-k report 4. prospectus

2. proxy statement

The SEC requires Form 8-K to be filed with the commission within four days after the end of the month in which a significant event transpired. However, financial statements accompany Form 8-K only under certain conditions. Which events require financial statements to accompany Form 8-K? 1. A material default on a senior security 2. A write-down, write-off, or abandonment of assets, where such assets represent more than 15% of total assets 3. An acquisition in which the acquired company represents more than 15% of total assets or revenues of the registering company. 4. An increase or decrease of more than 5% in any class of outstanding security 5. A change in the registrant's certifying accountants.

3. An acquisition in which the acquired company represents more than 15% of total assets or revenues of the registering company.

Which of these events does not require a company to file a Form 8-K? 1. Acquisition of disposition of a significant amount of assets 2. Change in certifying public accountants 3. Election of new vice-president of finance to replace the retiring incumbent 4. Default in the payment of principal, interest, or sinking fund installment

3. Election of new vice-president of finance to replace the retiring incumbent

Which of the following laws requires companies to maintain accurate accounting records and a system of effective internal accounting controls? 1. Securities Exchange Act of 1934 2. Securities Investor Protection Act of 1970 3. Foreign Corrupt Practices Act of 1977 4. Dodd-Frank Act of 2010

3. Foreign Corrupt Practices Act of 1970

SEC regulations provide for a procedure known as incorporation by reference. Which of the following best illustrates the concept of incorporation by reference? 1. A partnership is incorporated by reference to the U.S. Tax Code 2. The incorporation of a proprietorship or partnership 3. Inclusion of information on officers' renumeration in Form 10-K by reference to the same information in the shareholders' proxy statement 4. Footnote reference to market data per share since incorporation 5. Footnote disclosure that financial statements are incorporated into the annual report by reference from Form 1-K

3. Inclusion of information on officers' renumeration in Form 10-K by reference to the same information in the shareholders' proxy statement.

After the credit crisis of 2008, the SEC encouraged the FASB to quickly develop a new standard on what topic? 1. Consolidation of special purpose entities 2. Convergence with IFRS 3. Mark-to-market accounting for financial instruments 4. Valuation of equity-based compensation

3. Mark-to-market accounting for financial instruments

Formation and meaningful utilization of an audit committee of the board of directors is required of publicly traded companies that are subject to the rules of which of the following? 1. Securities and Exchange Commission 2. Financial Accounting Standards Board 3. New York Stock Exchange 4. National Association of Securities Dealers

3. New York Stock Exchange

Which of the following categories is not registered by the SEC? 1. Securities brokers who deal in over-the-counter markets 2. Securities brokers who deal only in interstate markets 3. Public accounting firms 4. Securities exchanges 5. Securities of publicly traded companies

3. Public accounting firms

Two important topics concerning the SEC are the role it plays in developing accounting principles and the impact the SEC has on the accounting profession and business in general. Which statement concerning the SEC's authority relative to accounting practice is false? 1. The SEC has the statutory authority to regulate and to prescribe the form and content of financial statements and other reports it receives 2. Regulation S-X of the SEC is the principal source relating to the form and content of financial statements to be included in registration statements and financial reports filed with the SEC. 3. The SEC has little, if any, authority over disclosures in corporate annual reports mailed to shareholders with proxy solicitations. Here, the type of information disclosed and the format to be used are left to the discretion of management. 4. If the SEC disagrees with some presentation in the registrant's financial statements but the principles used by the registrant have substantial authoritative support, the SEC may accept footnotes to the statements in lieu of correcting the statements to the SEC view, provided the SEC has not previously expressed its opinion on the matter in published material

3. The SEC has little, if any, authority over disclosures in corporate annual reports mailed to shareholders with proxy solicitations. Here, the type of information disclosed and the format to be used are left to the discretion of management.

Within four days after any event of material importance to the shareholders occurs, a company must file a Form 8-K with the SEC to disclose the event. Which of these is an example of the type of event to be disclosed? 1. Salary increases to the officers 2. A change in projected earnings per share from $12 to $12.11 per share 3. The purchase of bank certificates of deposit 4. Acquisition of a large subsidiary

4. Acquisition of a large subsidiary

Which one of the following items need not be filed with Form 10-Q? 1. Matters reported on Form 8-K during the quarter 2. A description of legal proceedings 3. Income statements for the most recent quarter and for the equivalent quarter from the preceding year, and year-to-date data for both years 4. An audit report from an independent accountant

4. An audit report from an independent accountant

The SEC's antifraud rules prohibit trading on the basis of inside information of a business corporation's stock by which of these? 1. Officers 2. Officers and directors 3. Officers, directors, and beneficial holders of 10% of the corporation's stock 4. Anyone who bases his or her trading activities on inside information

4. Anyone who bases his or her trading activities on inside information

Which of the following is not required for the registration statements filed under the Securities Act of 1933? 1. Nature and history of the issuer's business 2. Description of the securities being registered 3. Estimate of the net proceeds and the expected uses of the proceeds 4. Financial forecasts for the next two fiscal years

4. Financial forecasts for the next two fiscal years

Which of the following describes Regulation S-X? 1. Specifies the information that can be incorporated by reference from the annual report into the registration statement filed with the SEC 2. Specifies the regulations and reporting requirements of proxy solicitations 3. Provides the basis for generally accepted accounting principles 4. Specifies the general form and content of financial statements filed with the SEC

4. Specifies the general form and content of financial statements filed with the SEC

Which of the following is not a purpose of the Securities Exchange Act of 1934? 1. To establish federal regulation over securities exchanges and markets 2. To prevent unfair practices on securities exchanges and markets 3. To discourage and prevent the use of credit in financing excessive speculation in securities 4. To approve the securities of corporations that are to be traded publicly 5. To control unfair use of information by corporate insiders

4. To approve the securities of corporations that are to be traded publicly

In the registration and sale of new securities issues, the SEC 1. provides a rating of the investment quality of the security 2. may not allow the registration to go effective if it judges the security's investment risk to be too great 3. allows all registrations to go effective if the issuing company's external accountant is satisfied that disclosures and representations are not misleading 4. makes no guarantees regarding the registration statement's material accuracy

4. makes no guarantees regarding the registration statement's material accuracy

Which of these items is not required by the SEC in either the Securities Act of 1933 or the Securities Exchange Act of 1934? 1. Identification of directors and executive officers with the principal occupation and employer of each 2. Line-of-business or product-line reports for the last five fiscal years 3. Identification of the principal markets in which the firm's securities are traded 4. Range of market prices and dividends for each quarter of the two most recent fiscal years 5. Comfort letter to the underwriter and legal counsel from the company's independent accountant

5. Comfort letter to the underwriter and legal counsel from the company's independent accountant