Question 1

Which regulatory body sets auditing standards and oversees the audits of public companies in the United States?

Accepted Answer

The PCAOB is responsible for setting auditing standards and overseeing the audits of public companies in the U.S.

Question 2

Which of the following statements correctly identifies accounting standard setters?

Accepted Answer

The Financial Accounting Standards Board (FASB) sets accounting standards in the U.S., while the International Accounting Standards Board (IASB) issues international accounting standards.

Question 3

Standard setters develop accounting standards based on natural economic laws.

Accepted Answer

Standard setters develop accounting standards based on principles, concepts, and frameworks that aim to provide useful financial information, rather than on natural economic laws.

Question 4

How does accounting help in the capital allocation process?

Accepted Answer

The answer of How does accounting help in the capital...

Question 5

Which of the following types of information would be categorized as financial information?

Accepted Answer

Financial information includes asset values, footnote disclosures, and auditor's reports as they all relate to the financial health and reporting of an entity.

Question 6

The SEC permits the use of IFRS-based financial statements by international companies with shares trading on U.S. stock exchanges.

Accepted Answer

The SEC allows foreign private issuers to file financial statements prepared in accordance with IFRS as issued by the IASB without reconciliation to U.S. GAAP.

Question 7

Equity investors include all but which of the following?

Accepted Answer

Bondholders are not equity investors; they are creditors who lend money to a company and receive interest payments, unlike equity investors who own a portion of the company.

Question 8

What is meant by general-purpose financial statements?

Accepted Answer

The answer of What is meant by general-purpose financial statements?...

Question 9

When accountants work on the financial statements of U.S. companies with foreign subsidiaries prepared under IFRS in the home countries, the accountants do not convert the subsidiaries' financial statements to U.S. GAAP.

Accepted Answer

Accountants typically convert the financial statements of foreign subsidiaries from IFRS to U.S. GAAP to ensure consistency and compliance with U.S. financial reporting standards.

Question 10

Accounting standards setters do which of the following?

Accepted Answer

Accounting standards setters are responsible for developing concepts, rules, and guidelines for financial reporting to ensure consistency and comparability in financial statements.

Question 11

The FASB promulgates accounting standards in the U.S. and the IFRS issues international accounting standards.

Accepted Answer

The answer of The FASB promulgates accounting standards in the...

Question 12

List four reasons why it is important for an accountant in the United States to learn international accounting standards.

Accepted Answer

The answer of List four reasons why it is important...

Question 13

In what ways does accounting information proactively interact with its environment?

Accepted Answer

The answer of In what ways does accounting information proactively...

Question 14

Accountants in the United States do not need to learn international accounting standards.

Accepted Answer

Accountants in the United States may need to learn international accounting standards, especially if they work for multinational companies or firms that operate globally, as these standards facilitate international financial reporting and transactions.

Question 15

Which of the following statements is false?

Accepted Answer

A working knowledge of IFRS is important for accountants in the United States due to globalization and the presence of international companies operating in the U.S.

Question 16

IFRS refers to generally accepted accounting standards that apply globally.

Accepted Answer

IFRS stands for International Financial Reporting Standards, which are designed to be a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

Question 17

The American Institute of Certified Public Accountants tests IFRS on the uniform CPA exam.

Accepted Answer

The American Institute of Certified Public Accountants (AICPA) includes International Financial Reporting Standards (IFRS) as part of the content tested on the Uniform CPA Examination.

Question 18

The FASB and the IFRS have been working together to converge U.S. and international standards to eliminate differences.

Accepted Answer

The answer of The FASB and the IFRS have been...

Question 19

Which of the following is not a reason why an accountant in the United States should learn international accounting standards?

Accepted Answer

The United States does not have immediate plans to adopt IFRS, so learning international accounting standards for this reason is not necessary.

Question 20

What group or organization both protects investors and oversees the accounting standard-setting process in the United States?

Accepted Answer

The United States Securities and Exchange Commission (SEC) is responsible for protecting investors and overseeing the accounting standard-setting process in the U.S. It ensures that the financial markets operate fairly and efficiently.

Quiz 1: The Financial Reporting Environment