Deck 15: Accounting and Taxation in Global Business

Question 1

Because differences in culture and business environments leads to differences in the GAAP of countires, in 1970 an international GAAP was developed and is used by all countries today.

Answer 1

False

Question 2

One of the world's first cases of cybercrime occurred in _____.

A) the Soviet Union
B) New Zealand
C) Papua New Guinea
D) India
E) Mexico

Answer 2

B

Question 3

The primary goal of the International Accounting Standards Board is to develop, in the public interest, a single set of high quality, understandable, and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements.

Answer 3

True

Question 4

Pressures for the IASB to harmonize it's accounting standards is coming from cross-border mergers and rapid growth in international capital markets.

Question 5

Given the fact that lenders make money in both direction, both positive and negative trends in financial preformace are good news for lenders.

Question 6

Normally a lower current ratio indicates a better financial position, for it implies that that a company has adequate liquidity to carry out business operations.

Question 7

Financial ratios are helpful in equalizing companies of different sizes for comparison of financial performance.

Question 8

The statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings is called the income statement.

Question 9

A statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings is known as a(n)_____.

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value

Question 10

A typical AIS has two principal objectives:
(1)to provide all the financial information internally needed by management for business decision-making, known as management accounting; and (2)to provide financial information to various external users concerned with the financial activities of the organization, known as financial accounting.

Question 11

The primary external users of accounting information are goverment units, lenders, vendors, credit-rating agencies, stockholders, customers, and employees.

Question 12

In the United States, external audits are usually conducted by independent Certified Public Accountants (CPAs). However, external audits can also be done by the company's internal accountants.

Question 13

Conducting business in a tax haven means that there are no taxes whatsoever.

Question 14

A statement that lists the balances of the asset, liability, and owners' equity accounts of a business on a specific date is known as a(n)_____.

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value

Question 15

Internal auditors review all aspects of operations in search of improvement, as well as review the internal control structure to determine if they are opperating as expected.

Question 16

The highest corporate income taxes can be found in the United States and Japan.

Question 17

A(n)_____ answers the question: What is the firm's financial position at a designated point in time?

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value

Question 18

Internal transfers typically consist of raw materials, semi-finished and finished goods, allocation of fixed costs, loans, fees, and royalties for use of trademarks and copyrights.

Question 19

Of the following, which is NOT one of the four financial statements that represent a business in financial terms?

A) Income statement
B) Balance sheet
C) Statement of retained earnings
D) Statement of cash flows
E) Statement of net value

Question 20

A substantial difference between U.S. GAAP and IFRS concerns leases. Under U.S. GAAP, leases are classified as capital if one or more of the following criteria are met: title transfer, bargain purchase option, lease terms are equal to or greater than 90 percent of the asset's economic life, and if the minimum lease payments are greater than or equal to 40 percent of the asset's fair market value.

Question 21

______ of how money is spent by government organizations is of paramount importance to citizens who pay the taxes that support government operations.

A) Validity
B) Reliability
C) Accountability
D) A balance sheet
E) The GAAP

Question 22

Of the following, which is NOT true about international financial reporting standards?

A) Board members of the IASB come from 25 countries.
B) The IASB is committed to developing, in the public interest, a single set of high quality, understandable, and enforceable global accounting standards.
C) The IASB represents more than 100 worldwide accounting and financial organizations.
D) Most projects require a minimum of three years from formation to standard issuance.
E) Each IASB Member has one vote on technical and other matters.

Question 23

Internal audits are also called _____ audits.

A) human resource
B) management
C) transactional
D) competitive
E) federal

Question 24

The relationship of a number on the financial statements to another number is called a _____.

A) financial ratio
B) financial statement
C) domestic term
D) management accounting marker
E) financial deposit

Question 25

A(n)_____ answers the question: How much cash was taken in and paid out during the period?

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value

Question 26

Those who rely on financial statements are very concerned about the ____ of the reports they receive.

A) latitude
B) readability
C) validity
D) format
E) length

Question 27

Which of the following statements is NOT true of the IASB?

A) The IASB's purpose is to create a single set of high quality, understandable, and enforceable global accounting standards.
B) The publication of a Standard, Exposure Draft, or final SIC Interpretation requires approval by nine of the Board Members.
C) The IASB is a set of international accounting standards that require transparent and comparable information in general purpose financial statements.
D) The IASB represents accounting and financial organizations from more than 100 countries
E) The IASB is independent and privately funded.

Question 28

There are two major categories of auditing: _____ auditing and _____ auditing.

A) small; large
B) domestic; international
C) transactional; transformational
D) descriptive; evaluative
E) external; internal

Question 29

All of the following are the highest level of the primary sources of authoritative accounting literature, EXCEPT:

A) AICPA Accounting Interpretations
B) Non-superseded sections of the Accounting Research Bullentins issued by the Committee on Accounting Procedures
C) Statements of Financial Accounting Standards issued by FASB
D) Interpretations issued by the FASB
E) Statements and Interpretations of the Governmental Accounting Standards Board

Question 30

_____ refers to an independent, privately funded accounting standard-setter based in London, U.K., that issues International Financial Reporting Standards.

A) GAAP
B) SFAS
C) IASB
D) IFRS
E) PAWS

Question 31

The last step of an audit typically is to _____.

A) communicate audit results
B) arrive at audit opinion
C) plan the audit
D) obtain and evaluate evidence
E) brainstorm ideas for the audit

Question 32

Differences between U.S. and International GAAP are influenced by all of the following EXCEPT:

A) political and legal systems
B) language used
C) taxation
D) sources of capital
E) inflation

Question 33

Accountants who work in the _____ accounting field need to be licensed by the state or states in which they work; the license is designated Certified Public Accountant (CPA).

A) public
B) AIS of a firm
C) AIS of a government entity
D) private
E) certified

Question 34

_____ provide the procedures for dealing with specific accounting matters.

A) GIIP
B) ASEAN
C) CPAP
D) SFAS
E) GAAP

Question 35

The first step of an audit typically is to _____.

A) communicate audit results
B) arrive at audit opinion
C) plan the audit
D) obtain and evaluate evidence
E) brainstorm ideas for the audit

Question 36

When members of a corporate family are located in different countries, _________.

A) taxes are avoided altogether
B) taxes are handled under international law
C) transfer pricing affects taxes owed and company profits
D) transfer pricing does not affect taxes owed but does affect profits
E) transfer pricing does affect taxes owed but does not affect company profits

Question 37

Of the following, which is NOT a LOWER level of authoritative accounting literature?

A) Interpretations issued by the FASB
B) APB Statements
C) AICPA Issues Papers
D) Minutes of the FASB Emerging Issues Task Force
E) Guidelines published by SEC and other regulatory agencies

Question 38

Which of the following external users would require financial statement information, specifically information concerning ability to meet financial obligations?

A) Governmental units
B) Lenders
C) Vendors
D) Employees
E) Customers

Question 39

An evaluation of a company's financial statements in order to identify significant trends or relationships among the items is called a(n)_____ analysis.

A) relative
B) financial statement
C) domestic
D) management accounting
E) accounting

Question 40

Types of taxes include all of the following EXCEPT:

A) payroll
B) sales
C) service
D) value-added
E) labor

Question 41

Of the following statements about tax rates in selected countries, which is NOT true?

A) Only developed nations impose a corporate income tax.
B) Tax rates and other business-related information can be obtained from the OECD.
C) Most OECD countries are high-income economies.
D) Corporate income taxes range from high levels, for example, 35 percent in the U.S. to low levels, for example, 12.5 percent in Ireland.
E) Countries that have little or no corporate income tax are known as tax havens.

Question 42

_____ pricing refers to the pricing of goods and services that are transferred (bought and sold)internally between members of a corporate family.

A) Environmental
B) Tax
C) Value
D) Economic
E) Transfer

Question 43

Statement that summarizes the revenues earned and the expenses incurred by a business over a period of time is called the ______.

Question 44

Which of the following statements is NOT true about corporate income tax rates and economic activity?

A) The income tax is the primary sources of revenues for national governments around the world.
B) Before the Great Depression, state and local government expenditures in the U.S. were much lower than federal expenditures.
C) Since 1939, state and local government expenditures have been much lower than federal expenditures.
D) The great majority of U.S. government expenditures are on nondefense items such as health, economic support, and education.
E) From 2005-2008, the average gross savings rate of OECD countries increased.

Question 45

Complete the following equation: Debt Ratio = __? __ / Total Assets.

A) Losses
B) Net Profit
C) Total Liabilities
D) Total Assets
E) Cash Flows

Question 46

The ______ refers to the Statement showing the company's inflows and outflows of cash.

Question 47

Complete the following equation: Current Ratio = Current Assets /__? __ .

A) Losses
B) Net Profit
C) Total Liabilities
D) Current Liablities
E) Current Cash Flows

Question 48

The ______ refers to the record that lists the balances of the asset, liability, and owners' equity accounts of a business on a specific date

Question 49

A rule of thumb for a "good" current ratio is that companies should have a current ratio between _____ and _____.

A) 1; 2
B) 1; 5
C) 5; 10
D) 50; 75
E) 75; 100

Question 50

_______ is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

Question 51

The ______ refers to a system which has two principal objectives:
(1)to provide all the financial information needed internally by management for business decision making, known as management accounting, and (2)to provide financial information to various external users concerned with the financial activities of the organization, known as financial accounting.

Question 52

_____ has the highest federal corporate income tax rate.

A) The United States
B) Australia
C) Greece
D) Ireland
E) Finland

Question 53

_______ is part of the highest level of the United States' generally accepted accounting principles (GAAP), issued by the Financial Accounting Standards Board (FASB).

Question 54

_______ refers to the component of the accounting information system that provides financial information needed by external users such as investors and lenders.

Question 55

_______ is an independent, privately funded accounting standard-setter based in London, U.K., that issues International Financial Reporting Standards.

Question 56

_______ refers to the principles by which financial statements are prepared.

Question 57

Of the following statements about financial ratios, which is NOT true?

A) Financial ratios are designed to assess different aspects of the firm's financial situation.
B) Financial ratios enable meaningful comparisons among companies of different sizes to assess which companies are performing better and which are performing worse.
C) The Debt Ratio = Total Liabilities/Current Assets
D) A rule of thumb is that companies should have a current ratio between 1 and 2.
E) The current ratio is often important in debt covenants.

Question 58

______ is the recording, summarizing, and reporting of the economic activities and events of an organization.

Question 59

______ refers to a statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings.

Question 60

_______ refers to the component of the accounting information system that provides the financial information needed internally by business managers for efficient (timely)and effective (correct)decision-making.

Question 61

Scenario - Brininger Enterprises
Rapid City, South Dakota has been home to Brininger Enterprises since 1984. This company is recognized around the world for its superior cutlery and currently ranks as number three within the industry. In 2011, Brininger Enterprises recorded gross sales of over sixteen million dollars. From its gross sales, the company claimed net profits of four million dollars. Brininger Enterprises is quite proud of its performance. It realizes the company's financial records truly show this organization is doing something right.
Brininger Enterprises conducts extensive internal audits to insure the reliability and accuracy of its accounting records. Which one of the following is least likely a step in its internal auditing process?

A) Communicate the results
B) Obtain and evaluate evidence
C) Arrive at an audit opinion
D) Plan the audit
E) Publicize its results in the financial news

Question 62

Describe and differentiate between the US GAAP and the International GAAP.

Question 63

"Unfortunately, auditing is not necessary for effective financial reporting." Do you agree with this statement? Defend your position.

Question 64

Describe the two parts of the accounting information system.

Question 65

Are International Financial Reporting Standards important to global business operations? Explain.

Question 66

_______ is the relationship of a number on the financial statements to another number.

Question 67

Scenario - The Williams Company
Based in South Dakota, USA, the Williams Company has been in operation since 1967. It has five branches located in China, Europe, South America, Mexico, and Canada. Its exquisite product line of fine custom-made jewelry is highly desired throughout the world. This company has maintained a very healthy balance sheet.
The Williams Company is known within the industry for integrity and fair business practices. This company maintains an accounting system that is open for any stakeholder to view. It prides itself on being honest and trustworthy. The company feels it is this honesty in business practice that has led it to be a billion dollar organization.
Which one of the following would the Williams Company expect to establish a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements?

A) GAAP
B) AIS
C) SFAS
D) IFRS
E) NAACP

Question 68

_______ is an evaluation of a company's financial statements in order to identify significant trends or relationships among the items.

Question 69

Scenario - Brininger Enterprises
Rapid City, South Dakota has been home to Brininger Enterprises since 1984. This company is recognized around the world for its superior cutlery and currently ranks as number three within the industry. In 2011, Brininger Enterprises recorded gross sales of over sixteen million dollars. From its gross sales, the company claimed net profits of four million dollars. Brininger Enterprises is quite proud of its performance. It realizes the company's financial records truly show this organization is doing something right.
Brininger Enterprises conducts international business. It realizes there are sometimes different accounting guidelines that need to be followed when dealing on an international level. In essence, there are differences between U. S. and international generally accepted accounting principles. Which one of the following is not a factor that would influence the development of accounting and financial reporting?

A) Numbering system
B) Sources of capital
C) Inflation
D) Culture
E) Legal systems

Question 70

Scenario - The Williams Company
Based in South Dakota, USA, the Williams Company has been in operation since 1967. It has five branches located in China, Europe, South America, Mexico, and Canada. Its exquisite product line of fine custom-made jewelry is highly desired throughout the world. This company has maintained a very healthy balance sheet.
The Williams Company is known within the industry for integrity and fair business practices. This company maintains an accounting system that is open for any stakeholder to view. It prides itself on being honest and trustworthy. The company feels it is this honesty in business practice that has led it to be a billion dollar organization.
The Williams Company places a high value on maintaining integrity in its operations. Part of ensuring this integrity is maintained involves having frequent audits of the company's accounting records performed. Which one of the following would not be considered an objective of a financial statement audit?

A) Ensure dividends are allocated for stakeholders
B) Ensure all items are properly presented on the financial statements
C) Ensure there is proper valuation of assets
D) Ensure expenses are not overstated
E) Ensure financial statements are complete

Question 71

Briefly describe the most important reports produced by the accounting information system.

Question 72

Briefly explain how financial statement analysis can be used to evaluate a company's financial situation.

Question 73

Scenario - The Williams Company
Based in South Dakota, USA, the Williams Company has been in operation since 1967. It has five branches located in China, Europe, South America, Mexico, and Canada. Its exquisite product line of fine custom-made jewelry is highly desired throughout the world. This company has maintained a very healthy balance sheet.
The Williams Company is known within the industry for integrity and fair business practices. This company maintains an accounting system that is open for any stakeholder to view. It prides itself on being honest and trustworthy. The company feels it is this honesty in business practice that has led it to be a billion dollar organization.
If the company's stakeholders requested to be shown a financial statement that would identify the Williams Company's assets, liabilities, and equity for a given period of time, which one of the following statements would they most likely be requesting?

A) Income statement
B) Cash flow statement
C) Retained earnings statement
D) Balance sheet
E) Trial balance sheet

Question 74

Scenario - Brininger Enterprises
Rapid City, South Dakota has been home to Brininger Enterprises since 1984. This company is recognized around the world for its superior cutlery and currently ranks as number three within the industry. In 2011, Brininger Enterprises recorded gross sales of over sixteen million dollars. From its gross sales, the company claimed net profits of four million dollars. Brininger Enterprises is quite proud of its performance. It realizes the company's financial records truly show this organization is doing something right.
Brininger Enterprises maintains accurate and thorough accounting records. Which piece of the company's accounting records would be needed to identify what cash monies were received and what cash was paid out by the company?

A) Statement of cash flows
B) Income statement
C) Balance sheet
D) Retained earnings statement
E) Petty cash fund