Question 1

The FASB has made more extensive use of research than did its predecessors.

Accepted Answer

The FASB has made more extensive use of research than did its predecessors. The board is empowered to conduct research and to seek information and advice from experts in various fields, including accounting, economics, and law. This has allowed the FASB to develop accounting standards that are based on sound research, analysis, and informed judgment. Previous standard-setting bodies did not have this mandate to conduct research and seek expert advice.

Question 2

The Accounting Standards Executive Committee of the AICPA (ASEC) and the Emerging Issues Task Force (EITF) were established to solve the problems of particular industries as well as narrow technical issues.

Accepted Answer

The ASEC and EITF were both established to address accounting standards and provide solutions for specific industries and technical issues.

Question 3

FASB statements have resulted in a more conservative balance sheet and immediate recognition of events on the income statement.

Accepted Answer

FASB statements, such as ASC 740, have resulted in more conservative reporting of financial statements and require immediate recognition of certain events on the income statement, such as changes in tax laws or estimates.

Question 4

The AICPA has exclusive authority in the private sector for promulgating auditing rules.

Accepted Answer

The AICPA (American Institute of Certified Public Accountants) does not have exclusive authority in the private sector for promulgating auditing rules; this role is primarily held by the PCAOB (Public Company Accounting Oversight Board) for public companies and the AICPA for private companies, with the AICPA's standards also being influenced by other bodies and regulations.

Question 5

The Securities Act of 1933 and the Securities and Exchange Act of 1934 were the first national securities legislations in the United States.

Accepted Answer

The Securities Act of 1933 and the Securities and Exchange Act of 1934 were indeed the first national securities legislations in the United States.

Question 6

The accounting profession has been regulated by Congress since the 1880s when it became clear that accounting was an important instrument in America for conducting business.

Accepted Answer

The accounting profession began to be significantly regulated by Congress after the 1929 stock market crash, leading to the establishment of the Securities and Exchange Commission (SEC) in 1934, not in the 1880s.

Question 7

The American Accounting Association was originally called the American Society of Certified Public Accountants.

Accepted Answer

The American Accounting Association and the American Institute of Certified Public Accountants are two separate organizations. The American Accounting Association was founded in 1916 as the American Association of University Instructors in Accounting, and later changed its name to the American Accounting Association. The American Institute of Certified Public Accountants was founded in 1887 as the American Association of Public Accountants, and later changed its name to the American Institute of Accountants, and then to the American Institute of Certified Public Accountants.

Question 8

The Committee on Accounting Procedures (CAP) used a formalized deductive approach to develop a comprehensive accounting theory.

Accepted Answer

The Committee on Accounting Procedures (CAP) primarily used an inductive approach, focusing on addressing practical accounting issues through the issuance of Accounting Research Bulletins rather than developing a comprehensive accounting theory through a formalized deductive approach.

Question 9

The Trueblood Study Group formed the FASB and called for significant changes in the establishment of financial accounting standards.

Accepted Answer

The answer of The Trueblood Study Group formed the FASB...

Question 10

The responsibility of the Financial Accounting Foundation is to elect the board of trustees, which selects FASB members, funds the board's activities, and performs the oversight role.

Accepted Answer

This statement accurately describes the responsibility of the Financial Accounting Foundation.

Question 11

APB Opinions were originally expected to be based on in-depth research studies.

Accepted Answer

APB (American Institute of Certified Public Accountants' Auditing Standards Board) Opinions are based on in-depth research studies and analysis to provide guidance to auditors in performing financial statement audits.

Question 12

A normal four-to-three majority vote is required for passing new accounting standards.

Accepted Answer

According to the Financial Accounting Standards Board (FASB), a simple majority, or four out of seven votes, are required to pass new accounting standards.

Question 13

Most of the responsibility for establishing accounting principles has remained with the private sector rather than the SEC.

Accepted Answer

The Financial Accounting Standards Board (FASB), a private organization, is primarily responsible for establishing accounting principles in the United States, rather than the SEC.

Question 14

The Journal of Accountancy was founded by the American Association of Public Accountants in 1905.

Accepted Answer

The Journal of Accountancy was founded by the American Association of Public Accountants in 1905.

Question 15

Congress has recently been concerned with the laxity of auditors in detecting and disclosing fraud.

Accepted Answer

This statement is true as Congress has expressed concerns about auditors not being vigilant enough in detecting and reporting fraudulent activities in companies. This has led to debates and discussions around the role of auditors and the need for stronger regulations to ensure their independence and objectivity in financial reporting.

Question 16

The Federal Litigation Reform Act of 1995 replaced the previous proportionate liability requirement with joint and several liability for damages suffered by third parties who rely on the financial statement of firms attested to by CPAs.

Accepted Answer

The Private Securities Litigation Reform Act of 1995 actually aimed to limit securities fraud lawsuits against issuers and to implement several significant changes to the securities laws, including provisions affecting the liability of auditors in certain circumstances, but it did not replace a proportionate liability requirement with joint and several liability for the specific scenario described.

Question 17

The SEC was created by Congress to replace the AICPA's standard-setting group.

Accepted Answer

The SEC (Securities and Exchange Commission) was created by Congress to regulate and oversee the securities industry, while the AICPA (American Institute of Certified Public Accountants) is a professional organization for accountants and does have a standard-setting group but does not have regulatory power over the securities industry.

Question 18

An important role of the AICPA is to curb "shopping for accounting principles."

Accepted Answer

The AICPA has established and maintains generally accepted accounting principles (GAAP) to ensure consistency and comparability in financial reporting, and to prevent companies from selectively choosing principles to achieve desired financial results. This helps maintain the integrity of financial reporting and protects investors and stakeholders.

Question 19

The SEC is legally empowered to regulate accounting principles.

Accepted Answer

The Securities and Exchange Commission (SEC) is legally empowered to regulate accounting principles for public companies in the United States under the Securities Act of 1933 and the Securities Exchange Act of 1934. This includes establishing Generally Accepted Accounting Principles (GAAP) and enforcing compliance with accounting standards.

Question 20

The Committee on Accounting Procedures (CAP) represented the profession's first sustained attempt to develop workable financial accounting rules.

Accepted Answer

The statement is true. CAP was established in 1939 and was responsible for issuing 51 Accounting Research Bulletins between 1939 and 1959, which provided guidance on various accounting topics. The CAP was replaced by the Accounting Principles Board (APB) in 1959.

Quiz 3: Development of Institutional Structure of Financial Accounting

The FASB has made more extensive use of research than did its predecessors.

The Accounting Standards Executive Committee of the AICPA (ASEC) and the Emerging Issues Task Force (EITF) were established to solve the problems of particular industries as well as narrow technical issues.

FASB statements have resulted in a more conservative balance sheet and immediate recognition of events on the income statement.

The AICPA has exclusive authority in the private sector for promulgating auditing rules.

The Securities Act of 1933 and the Securities and Exchange Act of 1934 were the first national securities legislations in the United States.

The accounting profession has been regulated by Congress since the 1880s when it became clear that accounting was an important instrument in America for conducting business.

The American Accounting Association was originally called the American Society of Certified Public Accountants.

The Committee on Accounting Procedures (CAP) used a formalized deductive approach to develop a comprehensive accounting theory.

The Trueblood Study Group formed the FASB and called for significant changes in the establishment of financial accounting standards.

The responsibility of the Financial Accounting Foundation is to elect the board of trustees, which selects FASB members, funds the board's activities, and performs the oversight role.

APB Opinions were originally expected to be based on in-depth research studies.

A normal four-to-three majority vote is required for passing new accounting standards.

Most of the responsibility for establishing accounting principles has remained with the private sector rather than the SEC.

The Journal of Accountancy was founded by the American Association of Public Accountants in 1905.

Congress has recently been concerned with the laxity of auditors in detecting and disclosing fraud.

The Federal Litigation Reform Act of 1995 replaced the previous proportionate liability requirement with joint and several liability for damages suffered by third parties who rely on the financial statement of firms attested to by CPAs.

The SEC was created by Congress to replace the AICPA's standard-setting group.

An important role of the AICPA is to curb "shopping for accounting principles."

The SEC is legally empowered to regulate accounting principles.

The Committee on Accounting Procedures (CAP) represented the profession's first sustained attempt to develop workable financial accounting rules.