Question 1

The FASB's standard-setting process includes,in the correct order:
A)Exposure draft,research,discussion paper,Accounting Standards Update.
B)Research,exposure draft,discussion paper,Accounting Standards Update.
C)Research,discussion paper,exposure draft,Accounting Standards Update.
D)Discussion paper,research,exposure draft,Accounting Standards Update.

Accepted Answer

The FASB's standard-setting process starts with research followed by a discussion paper, which is usually released to the public for comment. After considering the feedback received, the FASB will then issue an exposure draft of the proposed standard. Finally, the Board will review and analyze the feedback of the exposure draft to issue an Accounting Standards Update. Therefore, the correct order of the FASB's standard-setting process is research, discussion paper, exposure draft, Accounting Standards Update, making option C the best choice.

Question 2

CPAs are licensed by:
A)The AICPA.
B)The SEC.
C)The federal government.
D)State governments.

Accepted Answer

CPAs are licensed by state governments, as each state has its own Board of Accountancy responsible for regulating and licensing CPAs within its jurisdiction. There is no federal licensing for CPAs, although they must comply with federal regulations and ethical standards set by the AICPA. The SEC (Securities and Exchange Commission) has no licensing authority over CPAs, but they do regulate financial reporting for publicly traded companies.

Question 3

The most political issue in the FASB's most recent deliberations and amendments to GAAP on business combinations was:
A)The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the combination.
B)The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the pooling method of accounting for the combination.
C)The unrealistic balance sheet assets that would be created if firms were required to use the purchase method of accounting for the combination.
D)The unrealistic balance sheet assets that would be created if firms were required to use the pooling method of accounting for the combination.

Accepted Answer

The most political issue in the FASB's most recent deliberations and amendments to GAAP on business combinations was the negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the combination. This was a contentious issue as it was argued that the immediate recognition of goodwill under the purchase method would lead to lower reported earnings in subsequent periods due to the need to amortize goodwill. Many argued that this would make firms less attractive to investors, impacting share prices and the overall health of the economy.

Question 4

Independent auditors express an opinion on the:
A)Fairness of financial statements.
B)Accuracy of financial statements.
C)Soundness of a company's future.
D)Quality of a company's management.

Accepted Answer

Independent auditors express an opinion on the fairness of financial statements, specifically whether they are presented fairly in all material respects in conformity with the applicable financial reporting framework. The other options, accuracy of financial statements, soundness of a company's future and quality of a company's management are not the primary focus of the auditor's opinion.

Question 5

The primary historical reason for the FASB reversing its positions when political pressures occur is:
A)The cost of gathering data was prohibitive.
B)The difficulties in measurement were too great.
C)They have no authority in such situations.
D)The SEC did not support the FASB position.

Accepted Answer

The SEC has the authority to overrule the FASB, and if they do not support the FASB position, the FASB may reverse its stance to avoid conflict with the SEC. This indicates that political pressure from the SEC or other external forces can influence the FASB's decision-making process.

Question 6

When a registrant company submits its annual filing to the SEC,it uses:
A)Form 10-A.
B)Form 10-K.
C)Form 10-Q.
D)Form S-1.

Accepted Answer

Form 10-K is the annual filing submitted by registrant companies to the SEC. Form 10-A is not a recognized SEC form. Form 10-Q is a quarterly filing and Form S-1 is used for initial registration statements.

Question 7

In the Norwalk Agreement,the FASB and IASB pledged to:
A)Combine their organizations to form the BUSYB.
B)Make progress on specific MOU projects.
C)Achieve convergence by the year 2015.
D)Remove existing differences between their standards.

Accepted Answer

The answer of In the Norwalk Agreement,the FASB and IASB...

Question 8

The most recent example of the political process at work in standard-setting is the heated debate that occurred on the issue of:
A)Pension plan accounting.
B)Accounting for postretirement benefits other than pensions.
C)Accounting for business combinations.
D)Accounting for stock-based compensation.

Accepted Answer

The answer of The most recent example of the political...

Question 9

One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves,which is often articulated in:
A)Its conceptual framework.
B)Its code of ethics.
C)Federal laws.
D)State laws.

Accepted Answer

A profession's code of ethics serves as a guide for its members to uphold ethical standards and accept responsibility for the interests of those they serve. Federal and state laws do not necessarily outline a profession's responsibility in this way, and a conceptual framework may not address the issue of responsibility explicitly.

Question 10

The International Accounting Standards Board:
A)Was the predecessor to the IASC.
B)Can overrule the FASB when their policies disagree.
C)Promotes the use of high-quality,understandable global accounting standards.
D)Has its headquarters in Geneva.

Accepted Answer

The International Accounting Standards Board (IASB) promotes the use of high-quality, understandable global accounting standards. The other options are incorrect. The IASC was the predecessor to the IASB, but this does not answer the question as it asks about the IASB specifically. The IASB and FASB work together to develop accounting standards, but neither can overrule the other. The IASB is headquartered in London, not Geneva.

Question 11

Accounting standard-setting has been characterized as:
A)A political process.
B)Using the scientific method.
C)Pure deductive reasoning.
D)Pure inductive reasoning.

Accepted Answer

Accounting standard-setting involves input from various interested parties, such as companies, investors, regulators, and standard-setting bodies. The process often involves compromise and negotiation among these parties, making it a political process. While scientific and deductive reasoning may be used to support the development of standards, they are not the primary methods utilized in standard-setting.

Question 12

The most likely important flaw leading to the demise of the APB was the perceived lack of:
A)Confidence.
B)Competence.
C)Independence.
D)Importance.

Accepted Answer

The APB's perceived lack of independence was the main flaw that led to its demise. It was seen as being too closely tied to the accounting industry and not truly independent in its oversight and regulation. This eroded confidence in the APB's ability to effectively regulate the industry and ultimately led to its replacement by the Financial Accounting Standards Board (FASB) in 1973.

Question 13

SFAC 8 of the conceptual framework focuses on:
A)Objective and qualitative characteristics.
B)Presentation and disclosure.
C)Recognition and measurement.
D)Elements of financial statements.

Accepted Answer

SFAC No. 8 of the conceptual framework focuses on the objective of general-purpose financial reporting and the qualitative characteristics of useful financial information.

Question 14

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?
A)Corporate executive accountability.
B)Auditor rotation.
C)Retention of work papers.
D)All of the above are provisions of the Act.

Accepted Answer

The Public Company Accounting Reform and Investor Protection Act of 2002, also known as the Sarbanes-Oxley Act, includes provisions for corporate executive accountability, auditor rotation, and retention of work papers. Therefore, all the options listed are provisions of the Act.

Question 15

The possibility that the capital markets' focus on periodic profits may tempt a company's management to bend or even break accounting rules to inflate reported net income is an example of:
A)An ethical dilemma.
B)An accounting theory issue.
C)A technical accounting issue.
D)An auditor's responsibility to inform the SEC.

Accepted Answer

The situation described presents a conflict between the pressure to meet shareholder expectations for profits and the ethical obligations to report financial information accurately. This is an ethical dilemma.

Question 16

Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?
A)Need for the U.S.to have strong influence on the standard-setting process and ensure that standards meet U.S.needs.
B)The language barriers associated with cooperation among many countries in developing IFRS.
C)The high costs to companies of converting to IFRS.
D)The fact that many laws,regulations and private contracts reference U.S.GAAP.

Accepted Answer

The SEC has expressed concerns regarding the need for the U.S. to influence the standard-setting process, the costs of converting to IFRS, and the fact that many laws, regulations, and private contracts reference U.S. GAAP. However, language barriers associated with cooperation among many countries in developing IFRS is not a concern expressed by the SEC.

Question 17

Pronouncements issued by the Committee on Accounting Procedures:
A)Dealt with specific accounting and reporting problems.
B)Were based on exposure drafts and public comment letters.
C)Originated from congressional studies and SEC directives.
D)Were the outcome of research studies and a theoretical framework.

Accepted Answer

The Committee on Accounting Procedures was established by the American Institute of Accountants (now the AICPA) in 1936 to deal with specific accounting and reporting problems. Its pronouncements provided guidance on how to account for and report certain transactions and events.

Question 18

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley)? The Act:
A)Changed the entity responsible for setting auditing standards.
B)Increased corporate executive responsibility for financial statements.
C)Limited nonaudit services that can be performed by auditors for audit clients.
D)Changed the entity responsible for setting accounting standards.

Accepted Answer

The Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) did not change the entity responsible for setting accounting standards. The Financial Accounting Standards Board (FASB) remained the entity responsible for setting accounting standards. However, the Act did establish the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing profession and set auditing standards.

Question 19

Which of the following has the statutory authority to set accounting standards in the United States?
A)FASB.
B)IRS.
C)SEC.
D)AICPA.

Accepted Answer

The SEC (Securities and Exchange Commission) has the statutory authority to set accounting standards in the United States through its oversight of the FASB (Financial Accounting Standards Board). The AICPA (American Institute of Certified Public Accountants) is a professional organization for accountants, while the IRS (Internal Revenue Service) is the federal agency responsible for collecting taxes.

Question 20

The primary professional organization for those accountants working in industry is the:
A)AAA.
B)AICPA.
C)IIA.
D)IMA.

Accepted Answer

The Institute of Management Accountants (IMA) is the primary professional organization for those accountants working in industry. The American Accounting Association (AAA) is a professional organization for accounting scholars and researchers. The American Institute of Certified Public Accountants (AICPA) is a professional organization for CPAs, which includes those in public accounting and industry. The Institute of Internal Auditors (IIA) is a professional organization for internal auditors.

Quiz 1: Environment and Theoretical Structure of Financial Accounting

The FASB's standard-setting process includes,in the correct order:

CPAs are licensed by:

The most political issue in the FASB's most recent deliberations and amendments to GAAP on business combinations was:

Independent auditors express an opinion on the:

The primary historical reason for the FASB reversing its positions when political pressures occur is:

When a registrant company submits its annual filing to the SEC,it uses:

In the Norwalk Agreement,the FASB and IASB pledged to:

The most recent example of the political process at work in standard-setting is the heated debate that occurred on the issue of:

One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves,which is often articulated in:

The International Accounting Standards Board:

Accounting standard-setting has been characterized as:

The most likely important flaw leading to the demise of the APB was the perceived lack of:

SFAC 8 of the conceptual framework focuses on:

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

The possibility that the capital markets' focus on periodic profits may tempt a company's management to bend or even break accounting rules to inflate reported net income is an example of:

Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?

Pronouncements issued by the Committee on Accounting Procedures:

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) ? The Act:

Which of the following has the statutory authority to set accounting standards in the United States?

The primary professional organization for those accountants working in industry is the: