Question 1

The cash basis of accounting recognizes _________when cash is received and recognizes when cash is paid.

Accepted Answer

Revenues, expenses

Question 2

_________is responsible for the preparation of the financial statements, including the notes, and the_________ attests to the fairness of the presentation.

Accepted Answer

Management, auditor's report

Question 3

The_________ requires all public companies to file a Form 10-K report annually.

Accepted Answer

SEC

Question 4

The FASB has congressional authority to set accounting policies.

Accepted Answer

While the Financial Accounting Standards Board (FASB) is a private organization that sets accounting standards, it does not have congressional authority. However, its standards are recognized and enforced by the Securities and Exchange Commission (SEC), which is a government agency.

Question 5

Management exercises control over the budget level and timing of------expenditures.

Accepted Answer

The answer of Management exercises control over the budget level...

Question 6

Information that is significant enough to make a difference in a decision is considered to be immaterial.

Accepted Answer

Information that is significant enough to make a difference in a decision is considered to be material. Material information is important and relevant to a decision, while immaterial information is not significant enough to impact a decision.

Question 7

The sharper and clearer the picture presented through the financial data and the closer that picture is to financial reality, the higher the_________ financial statements and reported earnings.

Accepted Answer

The answer of The sharper and clearer the picture presented...

Question 8

The Management Discussion and Analysis is of potential interest to the analyst because it contains information that cannot be found in the financial data.

Accepted Answer

The Management Discussion and Analysis provides an explanation and analysis of the financial statements, as well as information about the company's future plans, risks, and opportunities. This information cannot be found solely in the financial data and is valuable to analysts assessing the company's overall health and stability.

Question 9

The _________was passed in 2002 and was one of the most sweeping corporate reforms since the Securities Act of 1934.

Accepted Answer

The answer of The _________was passed in 2002 and was...

Question 10

A corporate annual report contains_________financial statements.

Accepted Answer

The answer of A corporate annual report contains_________financial statements....

Question 11

The SEC regulates U.S.companies that issue securities to the public and requires the issuance of a prospectus for any new security offering.

Accepted Answer

This statement is true. The Securities and Exchange Commission (SEC) regulates the issuance and trading of securities in the United States, and requires companies to file a prospectus with the SEC before they can make a public offering of securities. The prospectus provides detailed information about the company, its financial performance, and risks associated with the investment, among other things.

Question 12

External auditors are required to audit the internal control assessment of the company as well as the financial statements.

Accepted Answer

External auditors are responsible for auditing both the internal control assessment of the company and the financial statements to provide an opinion on the accuracy and reliability of these reports. This helps ensure that the company is following established accounting standards and internal controls to prevent fraud and errors.

Question 13

GAAP-based financial statements are prepared according to the accrual basis of accounting.

Accepted Answer

GAAP requires that financial statements be prepared according to the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred, regardless of when cash is received or paid.

Question 14

Congress passed the Sarbanes-Oxley Act of 2002 in hopes of ending future accounting scandals and renewing investor confidence in the marketplace.

Accepted Answer

The Sarbanes-Oxley Act of 2002 was indeed passed by Congress with the goal of preventing future accounting scandals and restoring investor confidence in the market.

Question 15

A firm's annual report contains only two pieces of information: the financial statements and the notes to the financial statements.

Accepted Answer

A firm's annual report typically includes more than just the financial statements and the notes to the financial statements. It often contains a letter from the CEO, management's discussion and analysis (MD&A), auditor's report, and other relevant information about the company's performance and strategy.

Question 16

The European Union began requiring publicly traded companies to use U.S.GAAP in 2005.

Accepted Answer

The European Union began requiring publicly traded companies to use International Financial Reporting Standards (IFRS) in 2005, not U.S. Generally Accepted Accounting Principles (GAAP).

Question 17

The time period assumption assumes a two year time frame with interim reporting occurring daily and weekly.

Accepted Answer

The time period assumption assumes that an organization's activities can be divided into specific time periods, such as months, quarters, or years, and that financial information should be prepared and reported for each period. However, there is no specific requirement for daily or weekly interim reporting.

Question 18

The_________ is a document used to solicit shareholder votes.

Accepted Answer

The answer of The_________ is a document used to solicit...

Question 19

One of the generally accepted accounting principles that provide the foundation for preparing financial statements is the _________principle.

Accepted Answer

The answer of One of the generally accepted accounting principles...

Question 20

The _________Assumption is the assumed unit of measurement when preparing financial statements.

Accepted Answer

The answer of The _________Assumption is the assumed unit of...

Quiz 1: Financial Statements: an Overview