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1. In addition to the financial statements andthe accompanying notes, corporate annual reports normally includewhich of the following?

a. Management Discussion and Analysis

b. Report on Internal Control

c. Report on Fairness of the Financial Statements

d. All of these choices are correct.

2. Typical items included in the MD&A wouldinclude all the following except

a. management's analysis and explanations of any significantchanges between the current and prior years' financialstatements.

b. important accounting principles or policies that could affectinterpretation of the financial statements, including the effect ofchanges in accounting principles or the adoption of new accountingprinciples.

c. management's assessment of the company's liquidity and theavailability of capital to the company.

d. a worksheet.

3. An extraordinary item is defined as an eventor transaction that is

a. unusual in nature.

b. infrequent in occurrence.

c. both unusual in nature and infrequent in occurrence.

d. None of these choices are correct.

4. Generally accepted accounting principlesrequire that unusual items

a. be reported within operating income on the incomestatement.

b. be reported separately on the income statement.

c. not be reported on the income statement.

d. None of these choices are correct.

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Casey Durgan
Casey DurganLv2
29 Sep 2019
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Related questions

1. A CPA firm has carried out an audit of the GillespieCorporation. The CPA has uncovered a material misstatement in theinventory balance. However, the CPA does not feel that this problemis so serious as to eliminate the credibility of the financialstatements taken as a whole. What wording will be used to begin theopinion paragraph of the audit report?

A. In our opinion, except for adjustments, if any, that mighthave been found…

B. The scope of our work was not sufficient…

C. In our opinion, except for the effects of…

D. Because of the effects of…

2. When an auditor issues a standard unmodified audit report,the implication is that the auditor:

A. Believes the financial statements are presented fairly inconformity with U.S. GAAP.

B. Does not know if the financial statements are presentedfairly in conformity with U.S. GAAP.

C. Believes the financial statements are presented fairly inconformity with U.S. GAAP except for a specific aspect of them.

D. Does not believe the financial statements are presentedfairly in conformity with U.S. GAAP.

3. A CPA's standard report on audited financial statements wouldbe inappropriate if it referred to

A. Management's responsibilities for the financialstatements.

B. An assessment of the entity's accounting principles.

C. The significant estimates made by management.

D. The CPA's assessment of sampling risk factors.

4. The introductory paragraph of the standard audit reportstates that the financial statements and the opinion expressedabout those statements are:

A. The responsibility of management.

B. The responsibility of the auditor.

C. The joint responsibility of the auditor and management.

4. None of the above.

5. Which of the following procedures would an auditor mostlikely perform to obtain evidence about the occurrence ofsubsequent events?

A. Comparing the financial statements being reported on withthose of the prior period.

B. Confirming a sample of material accounts receivableestablished after year end.

C. Inquiring as to whether any unusual adjustments were madeafter year end.

D. Investigating personnel changes in the accounting departmentoccurring after year end.

6. The date of the management representation letter shouldbe

A. The same date as the latest interim financialinformation.

B. The same date as the latest bank reconciliation.

C. No earlier than the auditor's report.

D. No earlier than the balance sheet.

7. The audit step most likely to reveal the existence ofcontingent liabilities is

A. A review of vouchers paid during the month following theyear-end

B. Mortgage-note confirmation

C. Accounts payable confirmations

D. An inquiry directed to legal counsel

8. The Form 10-K filed by management of a public companyincludes a section on management’s discussion and analysis(MD&A) in addition to the annual financial statements. Which ofthe following best describes the auditor’s responsibility for theMD&A information?

A. The auditor must perform sufficient appropriate auditprocedures to opine on the MD&A information.

B. The auditor has no responsibilities related to the MD&Adisclosures.

C. The auditor must read the MD&A information to determineif there is any material inconsistency with the audited financialstatements.

D. The auditor must provide a disclaimer of opinion related tothe MD&A information.

1. The budget informationprepared by a company must be a part of financial statementsincluded in form 10-k.

A. True B. False

2. MD&A ( included in form 10-k) stands for:

A. Minor disclosure and Analysis

B. Management's disclosure and Analysis

C. Management's discussion and Analysis

3. The statement of cash flows can provide statement users withinformation about which of the following:

A. how a company is generating its cash

B. whether the income reported on the income statement isrealized as cash

C. how the company used its cash resources.

D. All of the above

4. A process cost accounting system is best suited to accumlatethe manfacturing costs for which of the following products?

A. Construction of an electric power generation facility

B. a house

C. Paper clips

D. an automobile

5. The statement of cash flows focuses only on what happenedto:

A. revenues and expenses

B. fixed asset purchases

C. the issuance of stock and bonds

D. cash

6. The balance sheet equation ( the accounting equation) can bedefined as which of the following:

A. Assets - liabilities = stock holder equity

B. Assets + liabilities = stockholders equity

C. Assets= liabilities - stockholders equity

D. Assets + stockholders equity= Liabilities

7. One of the major criticisms aimed at financial accountants isthat their information is not

A. accurate

B. timely

C.proper

D. Added correctly

8. Which of the following provides the greatest level ofdetail?

A. general ledger system

B. balance sheet

C. income statement

D. cost accounting system

9. Which audit opinion states " The financial statements followGAAP except in the following sentences..."?

A. Unqualifed

B. Qualified

C. Adverse

D. Disclaimer of Opinion

10. Which of the following management functions orcharacteristics are most enhanced by the budget process?

A. timeliness and responsiveness

B. planning and accuracy

C. control and accountability

D. focus and accountability

Chapter 1 Financial Accounting and Accounting Standards

The essential characteristics of accounting are (1) theidentification, measurement, and communication of financialinformation about (2) economic entities to (3) interested partiesFinancial accounting is_________________________________________________________________________________________________________________________________________________.For example accounting information is used by financial accountingto decide whether to invest in the company, evaluate borrowingcapacity to determine the extent of a loan to grant or buy, sell,hold equity and debt instruments.

Managerial accounting is_________________________________________________________________________________________________________________________________________________.

The financial statements* most frequently provided are (1)_______________________ (2) _______________________ (3)_______________________ (4) _______________________ *Also part ofthe financial statements are the notes of the financial statements.Other means of financial reporting that are not financialstatements include the president’s letter or supplementaryschedules in the corporate annual report, prospectuses, reportsfiled with government agencies, news releases, managementforecasts, and social or environmental impactstatements.

a) The objectives of Financial Reporting The objective;__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

General-purpose financialstatements_______________________________________________________________________________________________________________________________________________________________.

Entity perspective____________________________________________________________________

Provide decision-useful_________________________________________________________________________________________________________________________________________________.

The accounting profession has developed a set of standards andprocedures called _________________________________________________________

Which of the following represents a form of communicationthrough financial reporting but not through financialstatements?

A. Notes to financial statements. B. Balance sheet. C.President's letter. D. Income statement.

The objective of financial reporting places most emphasison:

A. providing specific guidance related to specific needs. B.providing information to individuals who are experts in the field.C. reporting on stewardship. D. reporting to capital providers.

General-purpose financial statements are prepared primarily for:A. external users. B. auditors. C. internal users. D. governmentregulators.

LO 1.2 Identify the major policy-setting bodies and their rolein the standard-setting process.

Three organizations: Securities and Exchange Commission (SEC):______________________________

American Institute of Certified Public Accountants (AICPA):_______________________________________________________________

Financial Accounting Standards Board (FASB):____________________________

The federal government established the SEC to help develop andstandardize financial information presented to stockholders. Mostcompanies that issue securities to the public or are listed on astock exchange are required to file audited financial statementswith the SEC._____________________________________________________________________________________________________________________________________.

Under the direction of the SEC the__________________________________ was created by the AICPA in_______. It was the first private sector organization that had thetask of setting accounting standards in the United States. ___________________________________________________ that narrowedthe wide range of alternative accounting practices then inexistence. In _______. the __________________________________ wasformed to meet the demand for more structured accounting standards.The APB issued pronouncements on accounting principles until_______. the pronouncements where known as _________________, whenit was replaced by the __________________________________ .WheatCommittee’s recommendations resulted in creation of FASB.

The FASB represents the current rule-making body within theaccounting profession. The mission of the FASB is to establish andimprove standards of financial accounting and reporting for theguidance and education of the public, which includes issuers,auditors, and users of financial information. The FASB differs fromthe predecessor APB in the following ways: a.__________________________________ b.__________________________________ c.__________________________________ d.__________________________________ e.__________________________________

In 1984, the FASB created the __________________________________The purpose of the Task Force is to reach a consensus on how toaccount for new and unusual financial transactions that have thepotential for creating differing financial reporting practices.

Which organization was responsible for issuing AccountingResearch Bulletins? A. The Accounting Principles Board. B. The SEC.C. The Committee on Accounting Procedure. D. The FASB.

The Financial Accounting Standards Board (FASB) was proposed bythe A. Study Group on the Objectives of Financial Statements. B.American Institute of Certified Public Accountants. C. Study Groupon establishment of Accounting Principles (Wheat Committee). D.Accounting Principles Board.

The major distinction between the Financial Accounting StandardsBoard (FASB) and its predecessor, the Accounting Principles Board(APB), is A. a majority of the members of the FASB are CPAs who aredrawn from public practice. B. all members of the FASB possessextensive experience in financial reporting.C. all members of theFASB are fully remunerated, serve full time, and are independent ofany companies or institutions. D. the FASB issues exposure draftsof proposed standards.

The FASB issues two major types of pronouncements: a. When theFASB issues a new standard it is refers as_________________________________to communicate changes to the FASBCodification. They are considered GAAP and must be followed inpractice. o How the FASB has changed US GAAP, including eachspecific amendment to the FASB Codification o Why the FASB decidedto change US GAAP and background information related to the changeo When the changes will be effective and the transition method. b.__________________________________ The SFACs represent an attemptto move away from the problem-by-problem approach to standardsetting that has been characteristic of the accounting profession.The Concept Statements are intended to form a cohesive set ofinterrelated concepts, a conceptual framework that will serve astools for solving existing and emerging problems in a consistentmanner. Unlike FASB statements, the Concept Statements do notestablish GAAP.

Prior to 2009 the FASB issued several type of pronouncementswhich had different levels of authority. The type of pronouncementsare listed in descending order of relative weight of authority theyhad within GAAP

 __________________________________

 ______________ : these pronouncements refined GAAP byclarifying conflicting or unclear issues relating to previouslyissued standards

 ______________ FASB staff issued pronouncements to providemore timely and consistent application guidance and to make narrowand limited revision of standards.

 ______________: FASB staff issue these pronouncements toclarify and explain, or elaborate on accounting and reportingproblems.  __________________________________

Which of the following is not a publication of the FASB? A.Statements of Financial Accounting Concepts B. Accounting ResearchBulletins C. Interpretations D. Technical Bulletins

_________________________________________________________________________The FASB has established the following procedures for developingaccounting standards. These procedures are used for major projects.Not all of the steps may be necessary for projects focused onnarrower application and implementation issues. Many other stepsare followed during the course of the project that are notspecifically required by the Board’s Rules of Procedures.

Why was it believed that accounting standards that were issuedby the Financial Accounting Standards Board would carry moreweight? A. The FASB board had a smaller membership. B. The FASBboard members were well-paid. C. The FASB follows due process. D.The FASB board members were CPAs.

GAAP

The FASB developed the Financial Accounting Standards BoardAccounting Standards Codification _____________________________ toprovide in one place all the authoritative literature related to aparticulartopic._________________________________________________________________________________________________________________

Major sources of GAAP:

 _______________________________________

 _______________________________________

 _______________________________________

Most countries have recognized the need for more globalstandards. _____________________________________________ and U.S.rule-making bodies are working together to reconcile U.S. GAAP withthe IASB _________________________________________

Major challenges in the financial reporting environment.

______________________________________________________________________

______________________________________________________________________

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