Question 1

As a potential equity investor, what would you least be interested in a company prior to making and investment decision?

Accepted Answer

As a potential equity investor, employee benefits and compensation packages would likely be of less importance than factors that directly affect the financial health and profitability of the company.

Question 2

The FASB Emerging Issues Task Force issues which of the following?

Accepted Answer

The FASB Emerging Issues Task Force issues Consensus Positions on the implementation of standards related to new and emerging accounting and reporting issues. This is the only listed option that accurately describes the output of the EITF.

Question 3

Which pronouncements are not issued by the FASB?

Accepted Answer

Opinions were issued by the American Institute of Certified Public Accountants (AICPA) Accounting Principles Board, not by the Financial Accounting Standards Board (FASB).

Question 4

Concerning FASB membership, which statement is not true?

Accepted Answer

Members of the FASB are not required to be members of the Financial Accounting Foundation. The Financial Accounting Foundation is responsible for selecting members of the FASB and overseeing its activities, but being a member of one does not necessitate membership in the other.

Question 5

Which organization has the most legal authority?

Accepted Answer

The Securities and Exchange Commission (SEC) has the most legal authority in the accounting industry. It is a federal agency with the power to create and enforce rules and regulations for public companies, accounting firms, and other market participants. The other organizations listed do not have the same level of legal authority as the SEC.

Question 6

Which of the following pronouncements issued by the FASB provides the lowest level of authoritative support?

Accepted Answer

Technical bulletins provide the lowest level of authoritative support because they are issued to provide guidance on narrow and specific accounting issues and are not part of the FASB’s accounting standards hierarchy.

Question 7

Which of the following statements is true?

Accepted Answer

Accounting standards are indeed reflective of social decisions and often result from compromise among various stakeholders, including businesses, regulators, and users of financial statements. This is because the development of these standards involves considering the diverse interests and perspectives of different parties, leading to outcomes that may not fully satisfy any single group but are acceptable to all involved.

Question 8

Which of the following is NOT a major standard-setting body responsible for the establishment of U.S. and international GAAP (Generally Accepted Accounting Principles)?

Accepted Answer

While the PCAOB (Public Company Accounting Oversight Board) is a significant regulatory body for auditors of public companies, it is not a major standard-setting body responsible for establishing U.S. and international GAAP. The other options, SEC (Securities Exchange Commission), FASB (Financial Accounting Standards Board), and IASB (International Accounting Standards Board), are all major organizations responsible for establishing accounting standards.

Question 9

Going from 1938 to the present, which is the correct sequence of accounting rule-making bodies?

Accepted Answer

The correct sequence of accounting rule-making bodies is CAP (Committee on Accounting Procedure, 1938-1959) followed by APB (Accounting Principles Board, 1959-1973) and then FASB (Financial Accounting Standards Board, 1973 to present). Therefore, the correct sequence is CAP-APB-FASB.

Question 10

The primary reason that financial accounting and managerial accounting have somewhat different objectives is because they

Accepted Answer

Financial accounting provides information for external users, such as investors and creditors, to make decisions about investing or lending money to a company. Managerial accounting provides information for internal users, such as management, to make decisions about running the day-to-day operations of a company. Therefore, the objectives of the two types of accounting are different.

Question 11

While formally the SEC is charged with the responsibility for establishing accounting principles to be followed in the preparation of SEC filings, the impact of the SEC generally has been

Accepted Answer

The SEC's impact on accounting principles has primarily been through its informal review and approval of standards developed in the private sector prior to their release. While the SEC does have the authority to establish accounting principles, it has generally relied on the private sector to develop these standards. However, the SEC does have the power to review and approve these standards before they are released to the public. This gives the SEC significant influence over accounting principles without having to take direct responsibility for their development.

Question 12

The Financial Accounting Foundation (FAF) is the parent organization of the which?

Accepted Answer

The Financial Accounting Standards Board (FASB) is a standard-setting organization responsible for developing and issuing GAAP (Generally Accepted Accounting Principles) in the United States. The FAF is the parent organization that oversees and appoints members to the FASB. AICPA, AAA, and SIFMA are not directly affiliated with FAF.

Question 13

The Securities and Exchange Commission has the legal authority to prescribe accounting principles and reporting practices for

Accepted Answer

The Securities and Exchange Commission has the authority to prescribe accounting principles and reporting practices for all companies that issue publicly traded securities. This is because the SEC is responsible for regulating and overseeing securities markets and ensuring that investors are given accurate and complete information to make informed investment decisions.

Question 14

Information asymmetry problems arise because management's behavior

Accepted Answer

Information asymmetry problems arise because management, as agents, may not always act in the best interests of the owners (stockholders). This may be due to conflicts of interest or a lack of alignment of incentives between the management and the owners. It is important for the owners to monitor management and establish effective governance mechanisms to mitigate these problems.

Question 15

Which of the following statements is true?

Accepted Answer

The Committee on Accounting Procedure (CAP) was formed by the American Institute of Certified Public Accountants (AICPA) in 1939, marking the beginning of formal accounting standard setting in the United States.

Question 16

What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

Accepted Answer

The answer of What is the relationship between the Securities...

Question 17

The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is not a commonly required report?

Accepted Answer

While registration statements (such as Form S-2) are required for companies offering securities, they are not regularly filed reports like Forms 10-Q, 10-K, and 8-K.

Question 18

Three major organizations in the private and public sector develop U.S. and international GAAP. They include all of the following except the

Accepted Answer

The EU (European Union) is not one of the major organizations that develop U.S. and international GAAP. The other three options listed (SEC, FASB, and IASB) are all major organizations involved in the development of accounting standards.

Question 19

The organization that has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets is?

Accepted Answer

The Securities and Exchange Commission (SEC) is the organization that has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets. The other options mentioned are accounting standard-setting bodies, but do not have the same legal authority as the SEC.

Question 20

How many FASB members are there?

Accepted Answer

There are currently 7 members of the Financial Accounting Standards Board (FASB), which is the organization responsible for establishing and interpreting accounting standards in the United States.

Quiz 1: The Demand for and Supply of Financial Accounting Information

As a potential equity investor, what would you least be interested in a company prior to making and investment decision?

The FASB Emerging Issues Task Force issues which of the following?

Which pronouncements are not issued by the FASB?

Concerning FASB membership, which statement is not true?

Which organization has the most legal authority?

Which of the following pronouncements issued by the FASB provides the lowest level of authoritative support?

Which of the following statements is true?

Which of the following is NOT a major standard-setting body responsible for the establishment of U.S. and international GAAP (Generally Accepted Accounting Principles) ?

Going from 1938 to the present, which is the correct sequence of accounting rule-making bodies?

The primary reason that financial accounting and managerial accounting have somewhat different objectives is because they

While formally the SEC is charged with the responsibility for establishing accounting principles to be followed in the preparation of SEC filings, the impact of the SEC generally has been

The Financial Accounting Foundation (FAF) is the parent organization of the which?

The Securities and Exchange Commission has the legal authority to prescribe accounting principles and reporting practices for

Information asymmetry problems arise because management's behavior

Which of the following statements is true?

What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is not a commonly required report?

Three major organizations in the private and public sector develop U.S. and international GAAP. They include all of the following except the

The organization that has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets is?

How many FASB members are there?