Question 1

Intangible assets are reported on the balance sheet as a noncurrent asset and include goodwill.

Accepted Answer

Intangible assets such as goodwill are reported on the balance sheet as a noncurrent asset.

Question 2

Intangible assets are reported on the balance sheet as a current asset.

Accepted Answer

Intangible assets are typically classified as non-current assets on the balance sheet because they are long-term in nature and are not expected to be converted into cash within a year.

Question 3

The audit committee of the board of directors is responsible for maintaining the integrity of a company's financial statements and financial reporting.

Accepted Answer

The audit committee is responsible for overseeing the company's financial reporting process, selecting and overseeing the external auditor, and reviewing and monitoring the auditor's independence and effectiveness. They play a crucial role in ensuring that the company's financial statements are accurate and reliable.

Question 4

External users of accounting information include decision makers such as investors, creditors, and financial analysts.

Accepted Answer

External users of accounting information are those who are outside of the organization such as investors, creditors, and financial analysts. They rely on this information to make decisions about investing or lending money to the organization.

Question 5

The form 10-Q contains an unaudited set of quarterly financial statements.

Accepted Answer

The form 10-Q is a quarterly report filed by public companies with the Securities and Exchange Commission (SEC) and contains unaudited financial statements for the quarter.

Question 6

Information on all contractual agreements is included in notes as a financial statement disclosure.

Accepted Answer

While some contractual agreements may be listed in notes as a financial statement disclosure, not all of them are required to be included. The specific requirements for disclosure of contractual agreements vary depending on the type of agreement and the accounting standards being used.

Question 7

The Public Company Accounting Oversight Board (PCAOB) sets auditing standards for independent auditors.

Accepted Answer

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies and other issuers in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports. As part of its responsibilities, the PCAOB sets auditing standards for independent auditors.

Question 8

The form 10-K is the annual report that publically traded companies must file with the Securities & Exchange Commission (SEC).

Accepted Answer

The form 10-K is indeed the annual report that publically traded companies must file with the Securities & Exchange Commission (SEC).

Question 9

Independent auditors are advisors who analyze financial statements and other economic information to formulate forecasts and stock recommendations.

Accepted Answer

Independent auditors are not advisors who formulate forecasts and stock recommendations. Their main role is to provide an objective and accurate assessment of an organization's financial statements and other economic information to ensure they are presented fairly and accurately.

Question 10

Sales by major product category is a required financial statement disclosure.

Accepted Answer

The answer of Sales by major product category is a...

Question 11

Inventories are reported on the balance sheet as a current asset.

Accepted Answer

Inventories are considered a current asset because they are expected to be converted into cash or used up within one year. Therefore, they are reported on the balance sheet under the current assets section.

Question 12

The primary responsibility for the information in a corporation's financial statements lies with the chief executive officer (CEO) and the chief financial officer (CFO).

Accepted Answer

The CEO and CFO are ultimately responsible for ensuring the accuracy and completeness of a corporation's financial statements, as well as for establishing and maintaining effective internal controls over financial reporting. This duty is reinforced by legal and regulatory requirements, including the Sarbanes-Oxley Act in the United States.

Question 13

The Securities & Exchange Commission (SEC) oversees the work of the Financial Accounting Standards Board (FASB).

Accepted Answer

The SEC has oversight authority over the FASB and approves their standards before they are officially implemented.

Question 14

The mission of the Securities & Exchange Commission (SEC) is to develop generally accepted accounting principles.

Accepted Answer

The mission of the SEC is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Developing generally accepted accounting principles falls under the jurisdiction of the Financial Accounting Standards Board (FASB).

Question 15

The fraud triangle conditions necessary for financial statement fraud to occur are the existence of a system of internal control, the ability to invade the system, and rationalization to commit the fraud.

Accepted Answer

The answer of The fraud triangle conditions necessary for financial...

Question 16

Comparative financial statements are those of a company in one industry presented with another company in the same industry.

Accepted Answer

The answer of Comparative financial statements are those of a...

Question 17

The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by their internal auditors.

Accepted Answer

The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by external independent auditors, not internal auditors.

Question 18

The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

Accepted Answer

The PCAOB was established by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies, and it operates independently from the FASB.

Question 19

Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of the board of directors who oversee management.

Accepted Answer

Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of all stakeholders, not just the board of directors. The board of directors is responsible for overseeing management, but they must also act in the best interests of shareholders, employees, customers, and the communities in which the company operates.

Question 20

Financial analysts utilize a company's financial reports to assist them in making earnings forecasts and earnings per share projections.

Accepted Answer

Financial analysts rely heavily on a company's financial reports, such as balance sheets, income statements, and cash flow statements, to help them make predictions about future earnings and earnings per share. This information is crucial for investors and decision-makers in the financial industry.

Quiz 5: Communicating and Interpreting Accounting Information