Question 1

In 2012 the SEC issued an extensive report regarding the use of IFRS by U.S.public companies and listed which of the following as a major obstacle to adopting IASB standards?
A)IASB standards are generally viewed as low quality.
B)IASB's dependence on funding from the major accounting firms.
C)Cross-border financing is decreasing in popularity.
D)The IASB is not a governmental agency and therefore is not positioned to develop accounting standards.

Accepted Answer

The SEC report highlighted concerns about the IASB's reliance on funding from major accounting firms, which could affect its independence and objectivity in setting standards.

Question 2

Which of the following is not recognized as a source of generally accepted accounting principles?
A)Widespread and long-term use of a particular practice.
B)The Financial Accounting Standards Board (FASB).
C)The Securities and Exchange Commission (SEC).
D)Statements of the Committee of Sponsoring Organizations (COSO).

Accepted Answer

The COSO is not a recognized source of generally accepted accounting principles. The FASB and the SEC are recognized sources, while the widespread and long-term use of a particular practice may be considered as an indicator of acceptance but not necessarily a source.

Question 3

Which of the following is not an objective of generally accepted accounting principles?
A)To minimize the amount of income taxes owed.
B)To ensure that both preparers and users of financial statements understand the concepts and assumptions used in presenting information within these statements.
C)To enhance the relevance and verifiability of information contained in financial statements.
D)To increase the comparability of financial statements prepared by different companies.

Accepted Answer

The objective of generally accepted accounting principles is not to minimize the amount of income taxes owed. The other options are all objectives of GAAP: to ensure understanding of concepts and assumptions, enhance relevance and verifiability of information, and increase comparability between financial statements.

Question 4

The FASB takes on a responsibility to do the following,except:
A)Set the objectives of financial reporting.
B)Describe the elements of financial statements.
C)Judge disputes between management and the CPA.
D)Determine the criteria for deciding what information to include in financial statements.

Accepted Answer

The FASB does not have the responsibility to judge disputes between management and the CPA. Its responsibilities are to set the objectives of financial reporting, describe the elements of financial statements, and determine the criteria for deciding what information to include in financial statements.

Question 5

In the phrase "generally accepted accounting principles," the words accounting principles
A)The standards,assumptions,and concepts that serve as "ground rules" for financial reporting.
B)Ethical standards that prohibit fraudulent or misleading financial reporting.
C)The steps in the accounting cycle.
D)The accounting practices authorized by the Financial Accounting Standards Board (FASB).

Accepted Answer

Accounting principles refer to the standards, assumptions, and concepts that serve as the "ground rules" for financial reporting. These principles provide guidelines for preparing and presenting financial statements, ensuring consistency, comparability, and reliability of financial information. Examples of accounting principles include the cost principle, the revenue recognition principle, and the matching principle.

Question 6

The body created by the Sarbanes Oxley Act and charged with oversight of the accounting profession is the:
A)Public Company Accounting Oversight Board.
B)Auditing Standards Board.
C)International Accounting Standards Board.
D)Securities and Exchange Commission.

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) was created by the Sarbanes-Oxley Act of 2002 to oversee the accounting profession and regulate the auditors of public companies. It is responsible for setting auditing and related professional practice standards for registered public accounting firms in the U.S. and for enforcing compliance with those standards. The Auditing Standards Board and International Accounting Standards Board are not part of the PCAOB and have different responsibilities. The Securities and Exchange Commission (SEC) has oversight responsibility for the PCAOB.

Question 7

The Accounting Standards Codification was developed by:
A)The Financial Accounting Standards Board.
B)Certified public accountants.
C)The Securities and Exchange Commission.
D)The Internal Revenue Service.

Accepted Answer

The Accounting Standards Codification (ASC) was developed by the Financial Accounting Standards Board (FASB) as a centralized source of accounting guidance for US Generally Accepted Accounting Principles (US GAAP).

Question 8

The American Institute of Certified Public Accountants has a code of professional conduct that expresses the accounting profession's recognition of its responsibilities to all of the following except:
A)The public.
B)The client.
C)Colleagues.
D)The IRS.

Accepted Answer

The American Institute of Certified Public Accountants recognizes its responsibility to the public, clients, and colleagues, but it does not have a specific responsibility to the IRS.

Question 9

Which of the following has the least impact upon the integrity of financial statements issued by publicly owned corporations?
A)Federal securities laws.
B)Professional judgment of the accountants who prepare the financial statements.
C)Audits of the financial statements by the Internal Revenue Service.
D)Competence and integrity of the CPAs who perform audits.

Accepted Answer

Audits of financial statements by the Internal Revenue Service have no impact on the integrity of statements because the IRS is concerned with tax compliance rather than financial reporting. The other options listed have varying degrees of impact on the integrity of financial statements: federal securities laws set standards for financial reporting, professional judgment can influence how financial statements are presented, and the competence and integrity of auditors is essential to ensuring the accuracy of financial statements.

Question 10

Which organization best serves the professional needs of a CPA?
A)FASB.
B)AICPA.
C)SEC.
D)AAA.

Accepted Answer

AICPA (American Institute of Certified Public Accountants) is a professional organization that serves the professional needs of a CPA. They provide resources, education, and advocacy for CPAs in the United States. FASB (Financial Accounting Standards Board) and SEC (Securities and Exchange Commission) are regulatory bodies that establish accounting standards and oversee financial reporting, but they do not serve the professional needs of CPAs directly. AAA (American Accounting Association) is an academic organization for accounting educators and researchers, rather than a professional organization for CPAs.

Question 11

The work of accountants practicing in public accounting may best be described as:
A)Providing various types of accounting services to a wide variety of clients.
B)Preparing income tax returns for individuals and small businesses.
C)Developing and interpreting information tailored to the needs of business managers.
D)Helping governmental agencies carry out their various regulatory responsibilities.

Accepted Answer

Accountants in public accounting provide various accounting services such as auditing, tax preparation, financial consulting, and management advisory services to a wide range of clients including individuals, small and large businesses, nonprofit organizations, and governmental agencies.

Question 12

The primary function of external auditors is to:
A)Express an opinion on the fairness of the company's financial statements.
B)Determine the accuracy of the management reports.
C)Evaluate the efficiency of operations and the degree of compliance with management's policies in all departments within a large organization.
D)Determine that financial statements and all special reports to management are prepared in conformity with generally accepted accounting principles.

Accepted Answer

The primary function of external auditors is to express an opinion on the fairness of the company's financial statements. While they may also review management reports and evaluate the efficiency of operations, these are not their primary functions. External auditors typically focus on ensuring that financial statements comply with accounting standards and accurately reflect the company's financial position.

Question 13

In the phrase "generally accepted accounting principles," the words generally accepted mean that the principles:
A)Have been adopted by Congress or approved by the voters in a general election.
B)Are acceptable to the Internal Revenue Service.
C)Are understood and observed by all the participants in the financial reporting process.
D)Have been approved by a majority of the members of the Financial Accounting Standards Board.

Accepted Answer

The phrase "generally accepted" means that the principles are commonly understood and observed by the participants in the financial reporting process, such as accountants, auditors, and investors, rather than being legally mandated or approved by a particular organization or group. While the Financial Accounting Standards Board has a role in developing and updating accounting standards, their approval does not necessarily make a principle generally accepted, as it must still be widely recognized and used in practice. Likewise, IRS acceptability is not the determining factor in whether a principle is generally accepted.

Question 14

The basic purpose of audited financial statements is to:
A)Provide the reporting company with assurance that all assets are protected from theft or embezzlement.
B)Prepare financial statements for companies that do not have their own accounting departments.
C)Provide users of the financial statements with assurance that the statements are verifiable and are presented in conformity with generally accepted accounting principles.
D)Provide both the reporting company and the users of the statements with a written guarantee that the statements are error-free.

Accepted Answer

The basic purpose of audited financial statements is to provide users with assurance that the statements are verifiable and are presented in conformity with generally accepted accounting principles. Audited financial statements are not intended to provide a guarantee that there are no errors or that all assets are protected from theft or embezzlement. Hiring external auditors to prepare financial statements is also not the primary purpose of audited financial statements.

Question 15

The accounting standards and concepts used in the preparation of financial statements are called:
A)Certified principles of accounting (CPA).
B)Generally accepted accounting principles (GAAP).
C)Federal accounting standards and bylaws (FASB).
D)Standards enforcing consistency (SEC).

Accepted Answer

Generally accepted accounting principles (GAAP) are the accounting standards and concepts used in the preparation of financial statements. CPA refers to a professional designation for accountants, FASB is a regulatory body that sets accounting standards, and SEC is a government agency that oversees financial reporting for public companies. Only GAAP specifically refers to the standards and concepts used in financial statement preparation.

Question 16

The Financial Accounting Standards Board is:
A)Responsible for the review and audit of federal income tax returns.
B)Primarily concerned with the preparation of the annual federal budget.
C)A private group that conducts research and determines generally accepted accounting principles.
D)A government agency with legal authority to approve or disapprove the financial statements of corporations that sell their securities to the public.

Accepted Answer

The Financial Accounting Standards Board (FASB) is a private non-profit organization that is responsible for establishing and improving financial accounting and reporting standards, known as generally accepted accounting principles (GAAP). The FASB has no authority to review or audit tax returns, prepare the federal budget, or approve or disapprove financial statements.

Question 17

The measures used by an organization to provide reasonable assurance that the organization produces reliable financial reports,complies with applicable laws and regulations,and conducts its operations in an efficient and effective manner are collectively
A)Generally accepted accounting principles.
B)Financial accounting standards.
C)Securities and exchange regulations.
D)The internal control structure.

Accepted Answer

The measures used by an organization to provide reasonable assurance that the organization produces reliable financial reports, complies with applicable laws and regulations, and conducts its operations in an efficient and effective manner are collectively known as the internal control structure. This includes the processes, procedures, and policies put in place by management to ensure that risks are identified, assessed, and managed appropriately. The internal control structure is an essential component of an organization's risk management and corporate governance framework.

Question 18

Generally accepted accounting principles are the "ground rules" used in the preparation of:
A)Income tax returns.
B)All accounting reports.
C)Reports to federal and state regulatory agencies.
D)Financial statements.

Accepted Answer

Generally accepted accounting principles (GAAP) are the guidelines, procedures, and rules used in the preparation of financial statements. These principles help to ensure consistency, accuracy, and comparability of financial reports among different companies, industries, and countries. GAAP are not specific to income tax returns or regulatory reports, although they may be used as a basis for such reports.

Question 19

An accounting principle must receive substantial authoritative support to qualify as generally accepted.Among the organizations and agencies that have been influential in the development of generally accepted accounting principles,which of the following has provided the most influential leadership?
A)Internal Revenue Service.
B)Institute of Management Accountants.
C)Financial Accounting Standards Board.
D)New York Stock Exchange.

Accepted Answer

The Financial Accounting Standards Board (FASB) has been the most influential in the development of generally accepted accounting principles. FASB is the primary organization responsible for developing and issuing accounting standards in the United States. The other organizations listed have also been influential in accounting, but FASB's role as the primary standard-setting body makes it the most influential.

Question 20

Which of the following is true?
A)The existence of generally accepted accounting principles (GAAP)virtually eliminates the need for professional judgment except in very unusual circumstances.
B)Federal securities laws regarding the issuance of misleading financial statements apply not only to the independent auditors,but to management of the company as well.
C)Attaining a passing score on the part of the Uniform CPA Examination that covers professional ethics is evidence of integrity and commitment to ethical conduct.
D)A professional accountant should resign his position rather than become involved in the distribution of financial statements indicating insolvency.

Accepted Answer

Federal securities laws apply to both independent auditors and management, as both parties have a responsibility to ensure accurate and truthful financial statements are presented to investors. The other choices are incorrect: A is false as professional judgment is still necessary even with GAAP; C is not necessarily true as passing an exam does not guarantee ethical behavior; and D is too extreme as resigning is not always necessary, as the accountant could potentially work with management to improve the financial situation.

Quiz 1: Accounting: Information for Decision Making

In 2012 the SEC issued an extensive report regarding the use of IFRS by U.S.public companies and listed which of the following as a major obstacle to adopting IASB standards?

Which of the following is not recognized as a source of generally accepted accounting principles?

Which of the following is not an objective of generally accepted accounting principles?

The FASB takes on a responsibility to do the following,except:

In the phrase "generally accepted accounting principles," the words accounting principles

The body created by the Sarbanes Oxley Act and charged with oversight of the accounting profession is the:

The Accounting Standards Codification was developed by:

The American Institute of Certified Public Accountants has a code of professional conduct that expresses the accounting profession's recognition of its responsibilities to all of the following except:

Which of the following has the least impact upon the integrity of financial statements issued by publicly owned corporations?

Which organization best serves the professional needs of a CPA?

The work of accountants practicing in public accounting may best be described as:

The primary function of external auditors is to:

In the phrase "generally accepted accounting principles," the words generally accepted mean that the principles:

The basic purpose of audited financial statements is to:

The accounting standards and concepts used in the preparation of financial statements are called:

The Financial Accounting Standards Board is:

The measures used by an organization to provide reasonable assurance that the organization produces reliable financial reports,complies with applicable laws and regulations,and conducts its operations in an efficient and effective manner are collectively

Generally accepted accounting principles are the "ground rules" used in the preparation of:

An accounting principle must receive substantial authoritative support to qualify as generally accepted.Among the organizations and agencies that have been influential in the development of generally accepted accounting principles,which of the following has provided the most influential leadership?

Which of the following is true?