Question 1

A key component of the Sarbanes-Oxley Act of 2002 was increased government oversight over the certification examinations given by the accounting professional organizations such as the Institute of Management Accountants.

Accepted Answer

The Sarbanes-Oxley Act of 2002 did not directly address oversight of certification examinations given by accounting professional organizations. Its main focus was on enhancing corporate governance and financial reporting requirements to prevent accounting fraud and restore investor confidence.

Question 2

The percentage of liabilities in a company's assets plus the percentage of owners' equity in its assets is always equal to 100.

Accepted Answer

This statement is true because a company's assets can be divided into two main categories: liabilities and equity. Liabilities are the obligations or debts that the company owes to others, while equity represents the ownership interest of the shareholders. Therefore, the sum of the percentage of liabilities and the percentage of owners' equity in a company's assets must always add up to 100%.

Question 3

In order to increase the quality of current accountants,the CPA Vision Project has re-asserted the ability to use and calculate large amounts of numerical data as a primary competency for accountants.

Accepted Answer

The CPA Vision Project emphasized broader competencies beyond just numerical data handling, such as strategic thinking, leadership, and communication skills, recognizing the evolving role of accountants in business and society.

Question 4

A firm's controller is often the firm's chief accounting officer.

Accepted Answer

The controller is usually responsible for managing the firm's accounting department and ensuring the accuracy of financial statements, making them the most senior accounting officer within the organization.

Question 5

A company with a very high amount of liabilities will always find it more difficult to secure loans than a company with a very low amount of liabilities.

Accepted Answer

The ability of a company to secure loans depends not only on its amount of liabilities but also on its assets, revenue, profitability, credit history, and the overall financial health of the company. A company with high liabilities might still secure loans if it has strong revenue streams and assets to cover its debts.

Question 6

In the private accounting field,certified management accountants use accounting to investigate and support litigation in crimes against companies.

Accepted Answer

While certified management accountants have the skills and knowledge to investigate financial crimes, supporting litigation is typically handled by forensic accountants or other specialized professionals in the legal field.

Question 7

It is currently very common that a CPA who is hired to audit a firm's finances will also be hired to help design a more efficient financial information system.

Accepted Answer

While a CPA (Certified Public Accountant) can technically offer both auditing and consulting services, professional ethics and regulations often discourage or limit the same CPA or CPA firm from providing both services to the same client simultaneously. This is to maintain independence and objectivity in the audit process.

Question 8

Identify the potential users of accounting information.

Accepted Answer

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Question 9

A tax service can provide management advisory services ranging from personal financial planning to planning corporate mergers.

Accepted Answer

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Question 10

For what types of organizations do forensic accountants work?

Accepted Answer

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Question 11

Which of the following represents the accounting equation?

Accepted Answer

The accounting equation is Assets = Liabilities + Owners' Equity. This equation represents the fundamental relationship between the three key components of a company's financial position. The assets are what the company owns, the liabilities are what the company owes to others, and the owners' equity is the residual interest in the assets after deducting liabilities.

Question 12

Give three examples of management advisory services.

Accepted Answer

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Question 13

A company has an assets-to-liabilities ratio of 3:2 and total assets worth $6 million.What is its owners' equity?

Accepted Answer

The assets-to-liabilities ratio of 3:2 means for every $3 of assets, there are $2 of liabilities. With $6 million in assets, liabilities are $4 million (since 3/2 = 6/x, x = 4). Owners' equity is assets minus liabilities, so $6 million - $4 million = $2 million.

Question 14

Which of the following terms refers to any economic resource that is expected to benefit a firm or individual who owns it?

Accepted Answer

An asset is any economic resource that is expected to benefit a firm or individual who owns it. Assets can be tangible, like property or equipment, or intangible, like patents or trademarks. Liabilities are debts owed by a company or individual, equity represents ownership in a company, an account is a record of financial transactions, and a deposit is a sum of money paid into a bank account.

Question 15

How much profit does a company which has a total of $5 million invested by its owners and $4 million in liabilities need to make in order to have an assets-to-liabilities ratio of 2:1?

Accepted Answer

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Question 16

Which of the following terms refers to the amount of money that owners would receive if they sold all of a company's assets and paid all of its liabilities?

Accepted Answer

This refers to the company's net worth or book value, which is calculated by subtracting the total liabilities from the total assets. If the company were to sell all of its assets and pay off its liabilities, the remaining amount would belong to the owners as their equity.

Question 17

Due to current concerns over accounting fraud,certified public accountants are now licensed by the Securities and Exchange Commission.

Accepted Answer

Certified public accountants are not licensed by the Securities and Exchange Commission. Instead, they are licensed by state boards of accountancy. However, the SEC does play a role in regulating the accounting profession by setting standards for companies that file financial statements with the SEC and by enforcing rules related to auditor independence and ethical behavior.

Question 18

Which of the following describes a liability?

Accepted Answer

A liability is a debt owed by a firm to an outside organization or individual.

Question 19

Discuss the role of a private accountant within large and small firms.

Accepted Answer

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Question 20

Why is a company's owners' equity important for investors and lenders?

Accepted Answer

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Quiz 15: The Role of Accountants and Accounting Information