| What organization has the power and responsibility for setting accounting and reporting standards (principles) in the United States? | The Securities and Exchange Commission has the power and responsibility for setting accounting and reporting standards (principles) in the United States for companies whose securities are publicly traded, but always has delegated the responsibility, not the power, to the private sector (currently the Financial Accounting Standards Board).
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| What are the four key broad accounting principles that guide accounting practice? | The following four key broad accounting principles that guide accounting practice are: 1) Historical Cost Principle; 2) Realization Principle; 3) Matching Principle 4) Full-Disclosure Principle.
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| What is the primary focus of financial accounting? | The primary focus of financial accounting is on the information needs of investors and creditors.
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| What are the two primary decision-specific qualities that make accounting information useful? | The primary decision-specific qualities that make accounting information useful are relevance and reliability.
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| What are the four basic assumptions underlying GAAP? | The four basic assumptions underlying GAAP are: 1) Economic Entity Assumption; 2) Going Concern Assumption; 3) Periodicity Assumption; 4) Monetary Unit Assumption.
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| How do auditors contribute to the decision usefulness of financial statements? | Auditors provide credibility to financial statements and disclosure notes by verifying that they are presented fairly in conformity with generally accepted accounting principles. The auditor's opinion as to the fairness of the financial statements is expressed in the audit report.
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| What are Generally Accepted Accounting Principles? | Generally Accepted Accounting Principles often abbreviated as GAAP (and pronounced "gap") are a dynamic set of both broad and specific guidelines that companies should follow when measuring and reporting financial information.
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| What are the ingredients of relevance? | The ingredients of relevance are: 1) Predictive value and/or feedback value - information helps predict future events and confirms prior expectations; 2) Timeliness - the information must be available before the decision is made.
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| How do auditors contribute to the decision usefulness of financial statements? | Auditors provide credibility to financial statements and disclosure notes by verifying that they are presented fairly in conformity with generally accepted accounting principles. The auditor's opinion as to the fairness of the financial statements is expressed in the audit report.
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| What are the four key broad accounting principles that guide accounting practice? | The following four key broad accounting principles that guide accounting practice are: 1) Historical Cost Principle; 2) Realization Principle; 3) Matching Principle 4) Full-Disclosure Principle.
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| What are the ingredients of reliability? | The ingredients of reliability are: 1) Verifiability - implies a consensus among different measurers; 2) Representational faithfulness - exists when there is agreement between measure and a real-world phenomenon that the measure is supposed to represent; 3) Neutrality - assumes the information being relied on does not favor any particular group of companies nor influence behavior in any specific way.
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2001 McGraw-Hill Higher Education