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| 1 | |
As it relates to financial reporting, which of the following is not required of an accounting entity? |
| | A) | A financial statement presenting the amount that the entity expects to earn next year. |
| | B) | A financial statement presenting the financial position of the entity at a point in time. |
| | C) | A financial statement presenting the results of the entity's operations for a period of time. |
| | D) | A financial statement summarizing the entity's cash flows for a period of time. |
| | E) | All of the above are required of an accounting entity. |
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| 2 | |
Examples of how investors, creditors, and others commonly use reported earnings figures and the related information about the elements of financial statements include all of the following except: |
| | A) | Estimating the number of employees the firm will hire during the next year. |
| | B) | Evaluating management's past performance. |
| | C) | Predicting future earnings. |
| | D) | Assessing the risks of future cash flows. |
| | E) | All of the above are examples of how these data are used. |
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| 3 | |
Accounting is defined as the process of: |
| | A) | Reporting assets, liabilities, stockholders' equity, revenues, expenses, and dividends to investors and creditors for their decision-making purposes. |
| | B) | Identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. |
| | C) | Accruing, adjusting and closing the financial statements to provide the most relevant and reliable financial information possible for the purpose of making decisions and informed judgments. |
| | D) | Providing financial information so that potential investors or creditors can make their own predictions of future earnings. |
| | E) | Presenting the financial position and results of operations in the most favorable light possible to enhance shareholder wealth. |
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| 4 | |
Major classifications of accounting activity would not include: |
| | A) | financial accounting, internal auditing, public accounting |
| | B) | internal auditing, governmental accounting, managerial accounting |
| | C) | financial accounting, national accounting, cost accounting |
| | D) | auditing, income tax accounting, governmental accounting |
| | E) | financial accounting, managerial accounting, governmental accounting |
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| 5 | |
Which of the following is not an example of a decision or informed judgment that a potential investor would make from accounting information? |
| | A) | Future profitability based on past profitability. |
| | B) | Probability of success of a new product development. |
| | C) | A forecast of dividends. |
| | D) | Assessment of risk that a company may have more debt than it can repay if the economy enters a recession. |
| | E) | Assessment of the risk that the company may become bankrupt in the near future. |
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| 6 | |
Which of the following are qualified to express an auditor's opinion about an entity's financial statements? |
| | A) | A Comptroller. |
| | B) | A Certified Management Accountant. |
| | C) | A Certified Internal Auditor. |
| | D) | A Certified Public Accountant. |
| | E) | None of the above. |
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| 7 | |
Which of the following statements related to the origins and traditions of auditing is most true? |
| | A) | Auditing has always followed a codified set of rules designed to detect and report fraud. |
| | B) | Little judgment has traditionally been required on the auditor's part because the numbers a firm reports are either correct or they're not. |
| | C) | Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money in the hands of managers they could not directly control. |
| | D) | In the early 1920's, auditors became unified in their efforts, and generally accepted auditing procedures were consistently followed to the point that financial statements were considered quite reliable. |
| | E) | Auditing was traditionally done only for banks. |
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| 8 | |
The ethical concept of independence means that an accountant employed: |
| | A) | by a corporation cannot prepare financial statements for use by the company's bank. |
| | B) | by one company cannot work part-time for another company. |
| | C) | by an auditing firm cannot own any stock in the company being audited. |
| | D) | by one company cannot accept a job with another company in the same industry. |
| | E) | an accountant's independence would be impaired in any of the above situations. |
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| 9 | |
Which of the following statements about the Financial Accounting Standards Board is correct? |
| | A) | The FASB is an agency of the Federal government. |
| | B) | The FASB has the authority to fine a noncompliant firm. |
| | C) | The FASB follows a due process procedure that permits input from interested parties before an Accounting Standards Update is issued. |
| | D) | The FASB is controlled by the American Institute of CPA's. |
| | E) | None of the above statements is correct. |
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| 10 | |
The authoritative financial accounting standards-setting body in the United States is presently the: |
| | A) | Securities and Exchange Commission (SEC). |
| | B) | International Accounting Standards Board (IASB). |
| | C) | Public Company Accounting Oversight Board (PCAOB). |
| | D) | Financial Accounting Standards Board (FASB). |
| | E) | Accounting Principles Board (APB). |
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