Question 1

Which of the following is a public sector accounting standard setter?
A) FASB
B) SEC
C) APB
D) CAP

Accepted Answer

The SEC (Securities and Exchange Commission) is a public sector entity responsible for enforcing federal securities laws and regulating the securities industry, which includes setting accounting standards indirectly through its authority over publicly traded companies. The FASB (Financial Accounting Standards Board), APB (Accounting Principles Board), and CAP (Committee on Accounting Procedure) are private sector entities involved in the development and establishment of financial accounting and reporting standards, primarily for the private sector.

Question 2

Considering and understanding how business decisions affect the financial statements is
A) The sole responsibility of the Securities and Exchange Commission.
B) Provided in the auditor's report.
C) Referred to as an economic consequence perspective.
D) Interpreted strictly by the company's suppliers.

Accepted Answer

The economic consequence perspective refers to understanding how business decisions can impact financial statements, and it is important for managers, investors, and other stakeholders to consider this perspective in making informed decisions. The SEC is responsible for regulating financial markets, but understanding the economic consequences of decisions is not their sole responsibility. The auditor's report may provide some information on the impact of business decisions on financial statements, but it is not the primary source of this information. Suppliers may have some interest in the financial health of a company, but they do not typically interpret financial statements strictly in relation to business decisions.

Question 3

Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?
A) The independence of the members of the APB. The individuals serving on the board had full-time responsibilities elsewhere that might influence their views of certain issues.
B) The structure of the board. The largest eight public accounting firms (at that time) were automatically awarded one member, and there were usually five or six other public accountants on the APB.
C) Harmonization. The accounting standards developed were dissimilar to those developed by the International Accounting Standards Committee.
D) Response time. The emerging accounting problems were not being investigated and solved quickly enough by the part-time members.

Accepted Answer

Harmonization was not a criticism of the development of accounting standards by the Accounting Principles Board, rather it was a goal that they aimed to achieve. The other criticisms listed (A, B, and D) were all raised about the APB.

Question 4

What is the purpose of Emerging Issues Task Force?
A) Provide interpretation of existing standards.
B) Provide timely guidance on select issues.
C) Provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis.
D) Provide interpretive guidance

Accepted Answer

The purpose of the Emerging Issues Task Force (EITF) is to provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis. The EITF discusses emerging accounting and financial reporting issues affecting multiple entities with the goal of issuing timely guidance to provide consistency in practice. The other options (A, B, and D) are not completely accurate, as the EITF does not primarily provide interpretation, interpretive, or timely guidance on select issues.

Question 5

Which of the following types of pronouncements are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting?
A) Statements of Concepts
B) Statements of Financial Accounting Standards
C) APB Opinions
D) Accounting Standards Updates

Accepted Answer

Statements of Concepts are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting. Statements of Financial Accounting Standards provide specific guidance on accounting and reporting standards, APB Opinions are the opinions of the Accounting Principles Board which was replaced by the FASB, and Accounting Standards Updates amend or update the guidance provided in previous accounting standards.

Question 6

Some accountants maintain that accounting standards are as much a product of political action as they are of careful logic or empirical findings. This belief is an example of the concept of
A) Standard setting as a political process
B) Standards overload
C) Economic consequences
D) The role of ethics in accounting

Accepted Answer

The statement that accounting standards are influenced by political action suggests the concept of standard setting as a political process, which implies that accounting standards are not solely determined by careful logic or empirical findings, but also by social, economic, and political factors.

Question 7

Which of the following committees recommended abolishing the Accounting Principles Board and replacing it with the Financial Accounting Board?
A) Wheat
B) Cohen
C) Trueblood
D) Anderson

Accepted Answer

The Wheat Committee recommended abolishing the Accounting Principles Board (APB) and replacing it with the Financial Accounting Standards Board (FASB) to improve the standard-setting process in the United States.

Question 8

Which of the following bodies has the ultimate authority to issue accounting pronouncements in the United States?
A) Securities and Exchange Commission
B) Financial Accounting Standards Board
C) International Accounting Standards Committee
D) Internal Revenue Service

Accepted Answer

The Securities and Exchange Commission (SEC) has the ultimate authority to issue accounting pronouncements in the United States, although it often delegates this responsibility to the Financial Accounting Standards Board (FASB).

Question 9

Which of the following is not a consequence of the standards overload problem to small businesses?
A) If a small business omits a GAAP requirement from audited financial statements, a qualified or adverse opinion may be rendered.
B) Small businesses do not need to keep financial records
C) The cost of complying with GAAP requirements may cause a small business to forgo the development of other, more relevant information.
D) Small CPA firms that audit smaller companies must keep up to date on all the same requirements as large international firms, but they cannot afford the specialists that are available on a centralized basis in the large firms.

Accepted Answer

Small businesses still need to keep financial records, regardless of the standards overload problem. It is important for their own internal management and for tax purposes.

Question 10

Financial accounting standard-setting in the United States can be described as:
A) A democratic process in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
B) A research process based on empirical findings
C) A political process which reflects actions of various interested user groups as well as a product of research and logic.
D) A legalistic process based on rules promulgated by governmental agencies

Accepted Answer

Financial accounting standard-setting in the United States is a political process that takes into account the interests of various user groups and involves input from both public and private organizations. While research and empirical findings do play a role, ultimately the decision to adopt a standard is driven by the political process.

Question 11

The impact of accounting reports on various segments of our economic society is the definition of the concept of
A) Standard setting as apolitical process
B) Standards overload
C) Economic consequences
D) The role of ethics in accounting

Accepted Answer

Economic consequences refer to the impact that accounting reports have on different stakeholders, such as investors, creditors, management, and regulators. Accounting reports play a crucial role in decision-making by providing relevant information that is used to evaluate the financial performance of a company. The economic consequences of accounting reports can impact the valuation of a company's stock, the availability of credit, and the regulatory actions taken against a company. Therefore, understanding the economic consequences of accounting reports is essential in making informed decisions.

Question 12

Which of the following types of pronouncements now establishes generally accepted accounting principles?
A) Statements of Concepts
B) Statements of Financial Accounting Standards
C) APB Opinions
D) Accounting Standards Updates

Accepted Answer

Accounting Standards Updates (ASUs) are issued by the Financial Accounting Standards Board (FASB) to amend the Accounting Standards Codification, which is the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities.

Question 13

Which of the following companies was involved in an accounting failure that caused the public accounting firm Arthur Andersen to gout of business?
A) Goldman Sachs
B) Wachovia
C) Enron
D) AIG

Accepted Answer

Enron was involved in an accounting failure that caused the public accounting firm Arthur Andersen to go out of business.

Question 14

Economic consequences of accounting standard-setting means:
A) Standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
B) Standard-setters must ensure that no new costs are incurred when a new standard is issued.
C) The objective of financial reporting should be politically motivated to ensure acceptance by the general public.
D) Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.

Accepted Answer

Accounting standards can have a significant impact on the wealth levels of the providers of financial information, such as companies, investors, and other stakeholders. For example, if a new accounting standard requires companies to recognize assets or liabilities at fair value, it could result in significant changes in reported financial statements, which could affect investors' perceptions of the company's financial health and value. This, in turn, could impact stock prices, investor confidence, and other economic factors. Therefore, accounting standard-setting must take into account the potential economic consequences of the standards that are issued.

Question 15

What historical evidence of the business operations of the private estate of Apollonius was discovered early in the 20th century?
A) The Iliad
B)Plato's Republic
C) The Zenon papyri
D) Pacioli's work, Summa de Arithmetica Geometria Proportioni et Proportionalita,

Accepted Answer

The Zenon papyri is a collection of ancient Greek documents dating back to the third century BCE, which were discovered in Egypt in the early 20th century. Among these documents are records of business operations, including those of the private estate of Apollonius.

Question 16

Which organization was responsible for issuing Accounting Research Bulletins?
A) The Committee on Accounting Procedure
B) The Accounting Principles board
C) The Financial Accounting Standards Board
D) The Securities and Exchange Commission

Accepted Answer

The Committee on Accounting Procedure was responsible for issuing Accounting Research Bulletins from 1939 to 1959.

Question 17

What controversy originally highlighted the need for standard setting groups to have more authority?
A) Accounting for stock options
B) Accounting for derivatives
C) Accounting for marketable securities
D) Accounting for the investment tax credit

Accepted Answer

The answer of What controversy originally highlighted the need for...

Question 18

Which of the following pronouncements were issued by the Accounting Principles Board?
A) Accounting Research Bulletins
B) APB Opinions
C) Statements of Financial Accounting Concepts
D) Accounting Standards Updates

Accepted Answer

APB Opinions were issued by the Accounting Principles Board. Accounting Research Bulletins were issued by the Committee on Accounting Procedure, Statements of Financial Accounting Concepts were issued by the Financial Accounting Standards Board, and Accounting Standards Updates were issued by the Financial Accounting Standards Board after the elimination of the APB.

Question 19

Which of the following is the professional organization of university accounting professors?
A) American Accounting Association
B) American Institute of Certified Public Accountants
C) American Institute of Accountants
D) Financial Executives Institute

Accepted Answer

The American Accounting Association is the professional organization of university accounting professors, while the other three organizations are focused on different aspects of the accounting profession. The AICPA is focused on certified public accountants, the AIA is a former name of the AICPA, and the Financial Executives Institute is an organization for financial executives in various fields.

Question 20

The mission of the International Accounting Standards Board (IASB) is to
A) Develop a uniform currency in which the financial transactions of companies throughout the world would be measured.
B) Issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.
C) Develop a single set of high-quality and understandable IFRS for general-purpose financial statements.
D) Arbitrate accounting disputes between auditors and international companies.

Accepted Answer

The mission of the International Accounting Standards Board is to develop a single set of high-quality and understandable International Financial Reporting Standards (IFRS) for general-purpose financial statements. This is done in order to provide investors and other users of financial statements with reliable and relevant information to make informed decisions. The IASB does not create a uniform currency or arbitrate accounting disputes. Enforcement of IFRS is typically done at the national level.

Quiz 1: The Development of Accounting Theory

Which of the following is a public sector accounting standard setter?

Considering and understanding how business decisions affect the financial statements is

Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?

What is the purpose of Emerging Issues Task Force?

Which of the following types of pronouncements are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting?

Some accountants maintain that accounting standards are as much a product of political action as they are of careful logic or empirical findings. This belief is an example of the concept of

Which of the following committees recommended abolishing the Accounting Principles Board and replacing it with the Financial Accounting Board?

Which of the following bodies has the ultimate authority to issue accounting pronouncements in the United States?

Which of the following is not a consequence of the standards overload problem to small businesses?

Financial accounting standard-setting in the United States can be described as:

The impact of accounting reports on various segments of our economic society is the definition of the concept of

Which of the following types of pronouncements now establishes generally accepted accounting principles?

Which of the following companies was involved in an accounting failure that caused the public accounting firm Arthur Andersen to gout of business?

Economic consequences of accounting standard-setting means:

What historical evidence of the business operations of the private estate of Apollonius was discovered early in the 20th century?

Which organization was responsible for issuing Accounting Research Bulletins?

What controversy originally highlighted the need for standard setting groups to have more authority?

Which of the following pronouncements were issued by the Accounting Principles Board?

Which of the following is the professional organization of university accounting professors?

The mission of the International Accounting Standards Board (IASB) is to