Deck 1: The Development of Accounting Theory

Question 1

Which of the following is a public sector accounting standard setter?

A)FASB
B)SEC
C)APB
D)CAP

Answer 1

B

Question 2

Some accountants maintain that accounting standards are as much a product of political action as they are of careful logic or empirical findings.This belief is an example of the concept of

A)Standard setting as apolitical process
B)Standards overload
C)Economic consequences
D)The role of ethics in accounting

Answer 2

A

Question 3

The impact of accounting reports on various segments of our economic society is the definition of the concept of

A)Standard setting as apolitical process
B)Standards overload
C)Economic consequences
D)The role of ethics in accounting

Answer 3

C

Question 4

What controversy originally highlighted the need for standard setting groups to have more authority?

A)Accounting for stock options
B)Accounting for derivatives
C)Accounting for marketable securities
D)Accounting for the investment tax credit

Question 5

Which organization was responsible for issuing Accounting Research Bulletins?

A)The Committee on Accounting Procedure
B)The Accounting Principles board
C)The Financial Accounting Standards Board
D)The Securities and Exchange Commission

Question 6

Which of the following is the professional organization of university accounting professors?

A)American Accounting Association
B)American Institute of Certified Public Accountants
C)American Institute of Accountants
D)Financial Executives Institute

Question 7

Which of the following committees recommended abolishing the Accounting Principles Board and replacing it with the Financial Accounting Board?

A)Wheat
B)Cohen
C)Trueblood
D)Anderson

Question 8

Which of the following types of pronouncements now establishes generally accepted accounting principles?

A)Statements of Concepts
B)Statements of Financial Accounting Standards
C)APB Opinions
D)Accounting Standards Updates

Question 9

Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?

A)The independence of the members of the APB.The individuals serving on the board had full-time responsibilities elsewhere that might influence their views of certain issues.
B)The structure of the board.The largest eight public accounting firms at that time)were automatically awarded one member,and there were usually five or six other public accountants on the APB.
C)Harmonization.The accounting standards developed were dissimilar to those developed by the International Accounting Standards Committee.
D)Response time.The emerging accounting problems were not being investigated and solved quickly enough by the part-time members.

Question 10

Which of the following bodies has the ultimate authority to issue accounting pronouncements in the United States?

A)Securities and Exchange Commission
B)Financial Accounting Standards Board
C)International Accounting Standards Committee
D)Internal Revenue Service

Question 11

Which of the following companies was involved in an accounting failure that caused the public accounting firm Arthur Andersen to gout of business?

A)Goldman Sachs
B)Wachovia
C)Enron
D)AIG

Question 12

Considering and understanding how business decisions affect the financial statements is

A)The sole responsibility of the Securities and Exchange Commission.
B)Provided in the auditor's report.
C)Referred to as an economic consequence perspective.
D)Interpreted strictly by the company's suppliers.

Question 13

Which of the following is a source of nonauthoritative accounting guidance and literature?

A)Financial Accounting Standards Board Statements
B)Financial Accounting Standards Board Interpretations
C)Financial Accounting Standards Board Technical Bulletins
D)Practices that are widely recognized and prevalent either generally or in the industry

Question 14

Which of the following pronouncements were issued by the Accounting Principles Board?

A)Accounting Research Bulletins
B)APB Opinions
C)Statements of Financial Accounting Concepts
D)Accounting Standards Updates

Question 15

Who has been given credit or developing the double-entry system of bookkeeping?

A)Francis Wheat
B)Fra Luca Pacioli
C)A.C.Littleton
D)William Paton

Question 16

Economic consequences of accounting standard-setting means:

A)Standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
B)Standard-setters must ensure that no new costs are incurred when a new standard is issued.
C)The objective of financial reporting should be politically motivated to ensure acceptance by the general public.
D)Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.

Question 17

Which of the following types of pronouncements are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting?

A)Statements of Concepts
B)Statements of Financial Accounting Standards
C)APB Opinions
D)Accounting Standards Updates

Question 18

Which of the following is not a consequence of the standards overload problem to small businesses?

A)If a small business omits a GAAP requirement from audited financial statements,a qualified or adverse opinion may be rendered.
B)Small businesses do not need to keep financial records
C)The cost of complying with GAAP requirements may cause a small business to forgo the development of other,more relevant information.
D)Small CPA firms that audit smaller companies must keep up to date on all the same requirements as large international firms,but they cannot afford the specialists that are available on a centralized basis in the large firms.

Question 19

What is the purpose of Emerging Issues Task Force?

A)Provide interpretation of existing standards.
B)Provide timely guidance on select issues.
C)Provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis.
D)Provide interpretive guidance

Question 20

Financial accounting standard-setting in the United States can be described as:

A)A democratic process in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
B)A research process based on empirical findings
C)A political process which reflects actions of various interested user groups as well as a product of research and logic.
D)A legalistic process based on rules promulgated by governmental agencies

Question 21

Discuss why standard setting may be viewed as a political process.

Question 22

What were the purposes of the Wheat and Trueblood committees?

Question 23

Why is the development of a general theory of accounting important?

Question 24

How did the Sarbanes-Oxley Act change the way the FASB is funded?

Question 25

To work generally for the improvement and harmonization of regulations,accounting standards,and procedures relating to the presentation of financial statements.

Question 26

Discuss the FASB ASC including the reasons for its adoption and the FASB's goals in developing it.

Question 27

Discuss the evolution of accounting during the 1930s.

Question 28

What is the difference between normative and positive theory?

Question 29

What controversy caused the AICPA to issue Rule 203 that requires companies to use GAAP when issuing financial statements?

Question 30

Discuss the role of ethics in accounting.

Question 31

What is a special purpose entity and how do they work?

Question 32

The mission of the International Accounting Standards Board IASB)is to

A)Develop a uniform currency in which the financial transactions of companies throughout the world would be measured.
B)Issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.
C)Develop a single set of high-quality and understandable IFRS for general-purpose financial statements.
D)Arbitrate accounting disputes between auditors and international companies.

Question 33

The deferred method,which treated the tax credit as a reduction in the cost of the asset and therefore was reflected over the life of the asset through reduced depreciation charges.

Question 34

What was the purpose of the GAAP Hierarchy?