Deck 13: Financial Reporting Processes

Question 1

Financial reports are prepared to provide an accurate depiction of a company's financial situation to whom?

A) CFO
B) CEO
C) External stakeholders
D) Controller

Answer 1

External stakeholders

Question 2

Which of the following roles in a company is responsible for financial reporting?

A) CEO
B) CFO
C) Controller
D) All of these answer choices are correct.

Answer 2

CFO

Question 3

Which of the following roles in a company is responsible for overseeing accounting processes?

A) CEO
B) CFO
C) AIS
D) Controller

Answer 3

Controller

Question 4

Which financial statement is created immediately after the income statement and balance sheet are complete?

A) Statement of stockholder's equity
B) Statement of cash flows
C) Statement of profit and loss
D) Statement of financial position

Question 5

Which of the following statements concerning financial reporting is TRUE?

A) Financial statements present the financial position of a company at points in time.
B) Financial statements present results of operations over specific time periods.
C) Financial statements present results of cash flows over specific time periods.
D) All of these answer choices are correct.

Question 6

LeBron is asked to review the financial statements created by the company to determine priorities and frequency of creation for each report as each report utilizes man hours that could be used for other activities. LeBron must consider the quality of information produced and how well the report presents the information to the end user. What information characteristic is LeBron asked to review for in his assessment of the financial reporting?

A) Decision usefulness
B) Predictive value
C) Error free
D) Verifiability

Question 7

Which of the following characteristics of financial data is most important?

A) Timeliness
B) Understandability
C) Comparability
D) Accuracy

Question 8

Which of the following statements is an example of timeliness of data?

A) Information is useful to determine future actions.
B) Information is available prior to a decision deadline.
C) Information is understandable by the end user.
D) Information is presented in the same way over time.

Question 9

Which of the following statements is FALSE?

A) Financial accounting information only serves a purpose if it is useful for decision making.
B) Information quality is the suitability of information for a particular purpose in a specific task.
C) Understandability and timeliness of data has a higher priority than relevance.
D) Relevance of information carries more priority than consistency and verifiability.

Question 10

Which of the following statements is TRUE with respect to financial data characteristics?

A) Enhancing characteristics of data include relevance and accuracy.
B) Enhancing characteristics of data include timeliness and comparability.
C) Fundamental characteristics of data include materiality and understandability.
D) Fundamental characteristics of data include completeness and verifiability.

Question 11

Jerome audits the financial statements for a firm and discovers an error in the statement of cash flows. Which characteristic of data is NOT present for decision usefulness in the financial statements that Jerome audited?

A) Relevance
B) Materiality
C) Timeliness
D) Faithful representation

Question 12

The cost effectiveness of accounting information is determined by evaluating the cost of providing the information versus the

A) consistency of the information.
B) timeliness of the information.
C) value of the information.
D) accuracy of the information.

Question 13

Which characteristic of useful information is most clearly expressed by a company who always discloses information in the same order and style each reporting period?

A) Predictive value
B) Confirmatory value
C) Consistency
D) Understandability

Question 14

Which characteristic of useful information is most clearly expressed by a firm who prioritizes providing financial statements to employees before selecting benefit options, which include stock options, index funds, or money market funds?

A) Predictive value
B) Confirmatory value
C) Timeliness
D) Understandability

Question 15

Melody Corporation owns 51% of a subsidiary, A-Plus Realty (A+), which maintains its own legal public entity and financial information. Considering the ownership stake of Melody in A+, which of the following statement is TRUE?

A) A+ reports individually, and Melody reports both sets of financial statements.
B) Melody and A+ report separately.
C) A+ reports individually, and Melody reports a set of consolidated financial statements.
D) Melody reports a consolidated set of financial statements for both entities.

Question 16

Melody Corporation, which owns 51% of A+, uses a different AIS than A+ with different account numbers and names for many accounts. Which of the following methods could allow Melody to consolidate financial statements?

A) Consolidation software with account mapping
B) Utilizing a spreadsheet to manually consolidate data
C) Integration of XBRL
D) All of these answer choices are correct.

Question 17

External auditors for a firm found errors in the recent financial statements. After further investigation into the issue, the auditors discovered a strong control environment that should have prevented the financial statement errors. Based on the information provided by the auditors, who do you suggest would be responsible for the errors?

A) Controller
B) Internal auditors
C) External auditors
D) Chief financial officer

Question 18

Financial reporting is the output of accounting professionals' work in

A) corporate accounting.
B) internal audit.
C) tax.
D) All of these answer choices are correct.

Question 19

The accounting equation, Assets = Liabilities + Owner's Equity, represents the

A) balance sheet.
B) income statement.
C) statement of stockholder's equity.
D) statement of cash flows.

Question 20

Which of the following statements is FALSE?

A) A chart of accounts must be developed before beginning the financial statement process.
B) The chart of accounts is a classification scheme to organize and summarize data.
C) A chart of accounts uses an industry-mandated coding system to classify accounts.
D) The chart of accounts makes creating financial statements possible.

Question 21

Which of the following transactions is NOT an accounting transaction for Sunshine Eats, a catering company?

A) Sunshine delivers box lunches each Monday to teachers at a local school. The delivery is set up to automatically charge a credit card for payment.
B) Sunshine signs a contract to cater a wedding three months from now at a local event center. The catering job will be paid by the event center as part of a wedding package.
C) Sunshine receives a down payment on a catered dinner for a new business grand opening coming up in two weeks.
D) Sunshine sends a monthly bill to a local coffee shop to which Sunshine delivers fresh muffins each Tuesday and Thursday.

Question 22

Which of the following would be considered an accounting transaction for ColdBrews, a local coffee and beer shop?

A) ColdBrews' beer supplier drops off fresh kegs on Thursday morning.
B) ColdBrews' coffee supplier emails an invoice for an order that arrived yesterday.
C) A ColdBrews manager uses the company credit card to purchase printer ink.
D) All of these answer choices are correct.

Question 23

The accounting system for The Assembly, a growing restaurant, requires that all transactions be entered as journal entries. When the bookkeeper for The Assembly enters the transactions, he discards the paperwork associated with the transaction. As an auditor for the accounting firm, which of the following recommendations should be shared with the bookkeeper?

A) As an auditor, I need to be able to review the source documents to verify the accuracy and validity of the accounting transactions. Therefore, source documents should be stored either physically or electronically.
B) Source documents do not provide an accurate audit trail as they can fade or be altered after entered in the system, so discarding them is an efficient operational decision.
C) As an auditor, I follow the audit trail generated by the AIS and do not consider the source documents when reviewing accounting transactions for accuracy.
D) Source documents take up too much physical storage space and are too difficult to sort through to be reviewed during an audit.

Question 24

Which type of journal would be most appropriate for recording an adjusting journal entry for depreciation?

A) Sales journal
B) Cash receipts journal
C) Special journal
D) General journal

Question 25

Which type of journal would be most appropriate for recording a sale on account to a customer?

A) Sales journal
B) Purchase journal
C) General journal
D) Cash receipts journal

Question 26

When a customer makes a payment on account, which of the following subsidiary ledgers would be affected by the transaction?

A) General ledger
B) Accounts receivable subsidiary ledger
C) Undeposited funds ledger
D) All of these answer choices are correct.

Question 27

Which of the following is best defined as a listing of all the accounts and balances in the general ledger at the end of the reporting period?

A) Balance sheet
B) Trial balance
C) Chart of accounts
D) Income statement

Question 28

Which step of the financial reporting process occurs after the preparation of an unadjusted trial balance?

A) Post journal entries to ledgers
B) Enter adjusting entries
C) Prepare financial statements
D) Prepare an adjusted trial balance

Question 29

Which of the following financial documents could be used to ensure that debits equal credits?

A) Income statement
B) Statement of cash flows
C) Statement of stockholder's equity
D) Trial balance

Question 30

Which of the following steps in the financial reporting process only occurs at the end of the fiscal year?

A) Prepare an adjusted trial balance
B) Prepare financial statements
C) Prepare closing journal entries
D) Prepare an unadjusted trial balance

Question 31

Which of the following internal controls over financial reporting could be automated in the AIS?

A) Resolution of reconciliation discrepancies in a timely manner
B) Identification of contingent liabilities and make necessary accruals
C) Assign responsibilities to ensure segregation of duties
D) Verification that journal entries are posted in the correct reporting period

Question 32

With respect to internal controls over financial reporting, what accounting role should be the control owner for general ledger reconciliation?

A) CFO
B) AIS
C) Controller
D) Treasurer

Question 33

For which of the following reasons are internal controls over financial reporting (ICFRs) necessary?

A) ICFRs mitigate fraud risk.
B) ICFRs guide internal review of financial data.
C) ICFRs help firms avoid losses of reputation and stock prices.
D) All of these answer choices are correct.

Question 34

What role in a company is responsible for ensuring legal compliance for reporting purposes?

A) Controller
B) Treasurer
C) CEO
D) AIS

Question 35

Which of the following statements is TRUE?

A) Step 8 in the financial reporting process, journalize and post-closing entries, occurs at the end of each reporting period.
B) Step 8 in the financial reporting process, journalize and post-closing entries, occurs at the end of the fiscal year.
C) Posting to the general ledger, step 3, occurs at the end of the reporting period.
D) Posting to the general ledger, step 3, occurs at the end of the fiscal year.

Question 36

Which of the following is an open standard markup language, specifically designed for electronic financial reporting?

A) XBRL
B) XML
C) EBRL
D) EML

Question 37

XBRL improves business' ability to

A) consolidate financial reporting information.
B) share data across departments.
C) compare performance with benchmarks.
D) All of these answer choices are correct.

Question 38

Which of the following statements is TRUE?

A) XBRL is an adaptation of XML.
B) XBRL use is mandated for SEC filings.
C) XBRL standards are available for anyone to use.
D) All of these answer choices are correct.

Question 39

For what reasons might a company decide to implement XBRL?

A) The company plans to go public next year.
B) The company would like to compare data from other public companies.
C) The company seeks greater financial consolidation efficiency.
D) All of these answer choices are correct.

Question 40

XML is the abbreviated version of which of the following?

A) Extra markup listing
B) Extra markup language
C) Extensible markup listing
D) Extensible markup language

Question 41

Which of the following is a correct definition of a tag?

A) A tag, enclosed in angle brackets, is a standardized piece of taxonomy assigned to a piece of data, or element.
B) A tag, enclosed in square brackets, is a standardized piece of taxonomy assigned to a piece of data, or element.
C) A tag, like a barcode reader's programming, provides the structure of instance documents.
D) A tag, like a barcode reader's programming, provides the data plus structure for human readability and SEC compliance.

Question 42

What is the term associated with XBRL standardized structure to produce financial statements?

A) Tag
B) Format
C) Layout document
D) Instance document

Question 43

Why would a public company decide to include XBRL interactive data tags within their financial statements?

A) The SEC requires public companies to embed iXBRL data tags.
B) The iXBRL data tags allow users to drill down into the details.
C) The company wants to improve the quality of data provided.
D) All of these answer choices are correct.

Question 44

Which of the following is a FALSE statement?

A) XBRL makes data extraction easier.
B) XBRL makes data analysis easier.
C) XBRL makes consolidations more efficient.
D) XBRL deals with numbers, not terminology.

Question 45

Why might an organization that is NOT a public company choose to integrate XBRL into their accounting information?

A) XBRL allows for easier consolidation of data from disparate systems with the organization.
B) XBRL simplifies the financial reporting process in such a way that the statements need not be reviewed by the CFO.
C) The SEC requires that all organizations utilize XBRL whether they are public or private.
D) The SEC requires that all organizations utilize XBRL to report comparative data.

Question 46

In what ways could XBRL help a young, privately held firm?

A) The firm can use XBRL to extract data efficiently for data analysis.
B) The firm will avoid fines form the SEC by implementing XBRL.
C) XBRL will remove flexibility that could cause the young firm to fail.
D) All of these answer choices are correct.

Question 47

Which of the following keywords sets the currency unit for a data element?

A) us-gaap
B) unitRef
C) contextRef
D) decimals

Question 48

Which of the following keywords sets the rounding size for a data element?

A) us-gaap
B) unitRef
C) contextRef
D) decimals

Question 49

Which of the following is the appropriate opening and closing bracket syntax for XBRL?

A) <>
B) [] [/]
C) <> [/]
D) { } {\}

Question 50

Which is the correct interpretation of the XBRL shown below?
ContextRef = "FD2022Q4YTD"

A) The data element covers the fiscal year 2022 ending September 30, 2022.
B) The data element covers the 4 quarters of the period ending December 31, 2022.
C) The data element displays the data from the 4th quarter of 2022.
D) The data element displays the data from 2022 except for the 4th quarter.

Question 51

Which of the following benefits of XBRL would be most beneficial for a company that just acquired an organization that utilized different accounting software?

A) XBRL improves data extraction capabilities.
B) XBRL can integrate nonfinancial data.
C) XBRL data is software agnostic.
D) All of these answer choices are correct.

Question 52

How will an element be displayed if the XBRL tag includes decimals="-3"?

A) The amount will be displayed without the 3 characters at the end of the number, the period and 2 decimal places.
B) The amount will be displayed rounded to the nearest thousand.
C) The amount will be displayed rounded to the nearest million.
D) The amount will be displayed without the commas separating the groups of 3 numbers.

Question 53

What type of accounting provides managers with accounting information that helps them make decisions within the organization?

A) Financial
B) Managerial
C) Prescriptive
D) Descriptive

Question 54

Which of the following statements is FALSE?

A) Management accounting provides managers with accounting information for decisions.
B) Management accounting reports follow GAAP protocols.
C) Management accounting reports are customizable by companies.
D) Management accounting includes cost accounting and balance scorecards.

Question 55

Which part of the AIS measures and helps managers control costs?

A) Financial accounting
B) Prescriptive accounting
C) Cost accounting
D) Price accounting

Question 56

Which of the following statements is TRUE?

A) Businesses must follow GAAP for managerial accounting reports.
B) Measuring and controlling costs is only necessary for businesses who focus on low cost.
C) Businesses who choose a product differentiation strategy to achieve competitive advantage focus on research, and development not managerial accounting.
D) Businesses create value by combining and converting resources into goods or services that customers want at either a lower cost or better quality than competitors.

Question 57

Farm Fresh Bites offers dine-in, carry-out, frozen meals, and bakery items using locally-sourced meat, produce, and grains. Farm Fresh Bites appeals to many groups of customers and has pricing based on their quality products that is competitive in the restaurant market. Which type of strategy is Farm Fresh Bites utilizing?

A) Low cost, broad market
B) Low cost, narrow market
C) Differentiation, broad market
D) Differentiation, narrow market

Question 58

Overtime Fitness recently opened in a large northern city. Overtime gears its workout facility to athletes who are serious about cross-fit training with applicable equipment and trainers. Overtime's owners build much of the training equipment, leased and renovated the facility in a lower-rent part of town, and seeks to keeps membership fees lower than comparable facilities. What type of strategy has Overtime Fitness chosen to employ?

A) Cost leadership
B) Cost focus
C) Differentiation
D) Differentiation focus

Question 59

Which type of business strategy involves the goal of being the low-cost provider in an industry?

A) Cost leadership
B) Cost focus
C) Differentiation
D) Differentiation focus

Question 60

Which type of business strategy involves a business seeking to provide a unique, high-quality product or service in a narrow target market?

A) Cost leadership
B) Cost focus
C) Differentiation
D) Differentiation focus

Question 61

Which of the following statements is FALSE?

A) Management accounting includes creating reports for management decision making purposes, such as the balanced scorecard.
B) Financial accounting includes creating reports for external stakeholders, such as the income statement and balance sheet.
C) Cost accounting includes creating reports associated with the conversion process, such as purchasing reports.
D) Responsibility accounting includes creating reports for responsible parties, such as XBRL instance documents.

Question 62

What type of accounting is used to trace performance and hold accountable the managers of those departments?

A) Financial accounting
B) Cost accounting
C) Responsibility accounting
D) All of these answer choices are correct.

Question 63

Which of the following statements is TRUE of responsibility accounting reports?

A) Responsibility accounting reports are used to trace performance to the responsible department.
B) Responsibility accounting reports follow GAAP guidelines.
C) The SEC mandates the public release of responsibility reports.
D) All of these answer choices are correct.

Question 64

Which of the following statements concerning responsibility accounting reports is FALSE?

A) Responsibility accounting reports are used to trace performance to the responsible department or manager to improve accountability.
B) Responsibility accounting reports go beyond the scope of financial accounting reports and cannot be generated by the AIS.
C) Responsibility accounting reports are customized for managers based on their areas of responsibility.
D) Responsibility accounting reports break-down financial data by controllable costs in a department.

Question 65

As the report creator for your company's AIS, you recently received a request for some custom reports to show detail about outstanding accounts receivables for the accounts receivable manager. What category of accounting is the report is the accounts receivable manager asking you to create?

A) Financial accounting
B) Cost accounting
C) Responsibility accounting
D) All of these answer choices are correct.

Question 66

Which of the following best describes a balanced scorecard?

A) Internal assessment tool
B) Provides key performance indicators
C) Turns strategy into action
D) All of these answer choices are correct.

Question 67

What type of accounting tool combines financial and nonfinancial measures for managerial reporting?

A) Responsibility report
B) Corporate scorecard
C) Balanced scorecard
D) Cost report

Question 68

The success of using a balanced scorecard is the

A) link to the organization's strategic plan.
B) accuracy of the data reflected.
C) ability to update the scorecard frequently.
D) use of multiple types of key performance indicators.

Question 69

Which of the following most accurately reflects the four traditional dimensions of a balanced scorecard?

A) Financial, managerial, customer relationships, and vendor relationships
B) Financial, customer relationships, internal business processes, and learning and growth
C) Innovation, financial, managerial, and customer relationships
D) Innovation, managerial, customer relationships, and learning and growth

Question 70

Job satisfaction and employee turnover are examples of what type of metric on a balanced scorecard dashboard?

A) Internal processes
B) Customer relationships
C) Financial
D) Learning and growth

Question 71

Which of the following features in an ERP system contribute to financial reporting?

A) Shipment of product
B) Payroll
C) Stock control
D) All of these answer choices are correct.

Question 72

What is the record-keeping system that captures all journal entries and validates them using the trial balance?

A) Financial reporting
B) General ledger
C) Budget
D) Chart of accounts

Question 73

What feature in an ERP system summarizes detailed transactions that occur in sub-ledger accounts?

A) Chart of accounts
B) Consolidated ledger
C) General ledger
D) Income statement

Question 74

What type of audit technique involves using a calculation to verify the completeness of the journal entry by adding a journal entry to the beginning balance and comparing it to the ending balance?

A) Trial balance roll forward
B) Trial balance roll backward
C) General ledger roll forward
D) General ledger roll backward

Question 75

In which module of the ERP system do the raw material management and product costing features reside?

A) Supply chain management
B) Sales management
C) Production
D) Financial

Question 76

Company A acquires Company Z. Company Z uses an ERP system that is incompatible to the one used by Company A. As a corporate manager, you must carefully consider the cost of switching Company Z to Company A's ERP system versus the

A) decision usefulness of the financial data.
B) corporate leadership appetite for adopting a new system.
C) time investment to make the switch.
D) All of these answer choices are correct.

Question 77

Jessica works as an accountant for a local manufacturing company. At the company, Jessica is responsible for validating all journal entries. What report should Jessica use to accomplish the journal entry validation?

A) Income statement
B) Balance sheet
C) Trial balance
D) Ledger statement

Question 78

Ava works in the human resources (HR) department for the firm. Currently, the HR department is not integrated with the ERP system for the firm. Ava sees the opportunity to improve the department through employee development. What modules should Ava recommend be added to the ERP system for the firm to boost the efficiency of the HR department?

A) Talent management
B) Recruiting and onboarding
C) Training and development
D) All of these answer choices are correct.

Question 79

When developing the entity relationship diagram for the general ledger, which of the following fields is the most likely primary key, or unique identifier, for the chart of accounts?

A) Account number
B) Account name
C) Account description
D) All of these answer choices are correct.

Question 80

In an entity relationship diagram for the general ledger, each journal entry includes a foreign key field for the Employee_ID of the employee who both posted and approved the transaction. Which of the following statements concerning the Employee_ID field used in this context is TRUE?

A) The Employee_ID field is not enough information. The transaction should also include the employees' names and departments to allow auditors to complete their review.
B) The Employee_ID would be a good candidate key for the primary key of the JournalEntry table listing each entry in the general ledger.
C) Additional employee information required can be pulled from the Employee table as the Employee_ID field is a foreign key related to the Employee table inserted into the JournalEntry table.
D) All of these answer choices are correct.