MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 1 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Accounting can be defined as:1) _______

• the process of identifying, measuring, and communicating economic information

about an organization for the purpose of making decisions and informed judgments.

• the process of planning, controlling, and evaluating financial performance, and

supporting the management decision-making process.

• the process of preparing and auditing an entity's financial statements.
• the process of communicating the financial results of corporate activities to

investors and regulatory bodies.2) Cost accounting is a subset of which of the following?2) _______

• Managerial accounting.B) Public auditing.
• Cost analysis.D) Internal auditing.

3) Which of the following was not one of the reasons for the FASB's decision to undertake the Conceptual Framework project?

3) _______

• To facilitate the FASB's efforts in developing accounting and reporting guidance by

providing a common foundation and basic reasoning on which to consider merits of alternatives.

• To provide a structure or framework of financial accounting concepts.
• To describe concepts that will underlie guidance on future accounting practices and

in due course serve as a basis for evaluating existing guidance and practices.

• To provide detailed, industry-specific authoritative guidance for the accounting and

financial reporting of complex business transactions.4) An unqualified auditors' opinion about an entity's financial statements:4) _______

• guarantees that the entity was not involved in or the victim of any fraudulent

activities during the audited period.

• means that all of the entity's transactions during the audited period were checked

out.

• is a clean bill of health.
• states that they are presented in conformity with accounting principles generally

accepted in the United States.5) The officer of a corporation responsible for the firm's published financial statements

would be most concerned about pronouncements of the:

5) _______

A) AICPA. B) IRS. C) SEC. D) FASB. E) GASB.

6) Which of the following are qualified to express an auditor's opinion about an entity's financial statements?

6) _______

• A Comptroller.
• A Certified Public Accountant.
• A Certified Management Accountant.
• A Certified Internal Auditor.

7) Which of the following statements about the Financial Accounting Standards Board is correct?

7) _______

• The FASB is controlled by the American Institute of CPAs.
• The FASB follows a due process procedure that permits input from interested

Accounting What the Numbers Mean 12e David Marshall, Wayne McManus, Daniel Viele (Test Bank All Chapters, 100% Original Verified, A+ Grade) Answers At The End Of Each Chapter 1 / 4

parties before an Accounting Standards Update (ASU) is issued.

• The FASB is an agency of the Federal government.
• The FASB has the authority to fine a noncompliant firm.

8) The objectives of financial reporting for nonbusiness enterprises: 8) _______

• have more of an internal utilization rather than external reporting focus.
• do not give consideration to the cost of providing information.
• focus on providing information for resource providers, rather than investors.
• are exactly the same as those for business enterprises.

9) The authoritative financial accounting standards-setting body in the United States is

presently the:

9) _______

• Public Company Accounting Oversights Board (PCAOB)
• Accounting Principles Board (APB)
• International Accounting Standards Board (IASB)
• Financial Accounting Standards Board (FASB)
• Securities and Exchange Commission (SEC)

10) Which of the following is not an example of a decision or informed judgment that a potential employee could make from accounting information?

10) ______

• Assessment of the risk that the company may become bankrupt in the near future.
• The extent of the company's commitment to a research program.
• Probability of the company's ability to make profit sharing plan contributions in the

future.

• Personnel turnover statistics (i.e., hiring and terminations).

11) Which of the following is not an example of a decision or informed judgment that a potential investor would make from accounting information?

11) ______

• Probability of success of a new product development.
• Future profitability based on past profitability.
• A forecast of dividends.
• Assessment of risk that a company may have more debt than it can repay if the

economy enters a recession.12) Which of the following is an objective of financial reporting by business enterprises?12) ______

• The primary focus of financial reporting is information about the assets of the

entity.

• Financial reporting should provide information about the economic resources of an

enterprise, the claims to those resources, and changes in those resources and claims to them.

• Financial reporting should provide assurance that all liabilities of business

enterprises will be paid.

• Financial reporting should show the timing and amount of future cash dividends to

potential investors.

13) Major classifications of accounting activity would not include:13) ______

• auditing, income tax accounting, governmental accounting.
• financial accounting, national accounting, cost accounting.
• financial accounting, internal auditing, public accounting.
• internal auditing, governmental accounting, managerial accounting. 2 / 4

14) The ethical concept of independence means that an accountant employed: 14) ______

• by one company cannot work part-time for another company.
• by a corporation cannot prepare financial statements for use by the company's bank.
• by an auditing firm cannot own any stock in the company being audited.
• by one company cannot accept a job with another company in the same industry.

15) Which of the following entities would not require accounting information pertaining to their economic activities?

15) ______

• Not-for-profit entities.
• Social clubs.
• State governments.
• All of these entities require accounting information.

16) Over the years, the Securities and Exchange Commission (SEC) has delegated its statutory authority to establish accounting principles for publicly traded companies in the United States. This delegated authority impacts which organization(s)?

16) ______

• The Financial Accounting Standards Board (FASB).
• The Committee on Accounting Procedures of the American Institute of

Accountants.

• The Accounting Principles Board (APB).
• None of these organizations were ever delegated authority by the SEC to establish

accounting principles in the U.S.

• Each of these organizations were at one time or another delegated authority by the

SEC to establish accounting principles in the U.S.

17) Which classification of accounting is most concerned with the use of economic and financial information to plan and control many of the activities of the entity?

17) ______

• Financial accounting. B) Managerial accounting.
• Auditing / Public accounting. D) Income tax accounting.

18) Which of the following is not a characteristic or limitation of the kind of information that financial reporting by business enterprises can provide?

18) ______

• The information largely reflects the financial effects of transactions that have

already taken place.

• The information is provided and used at a cost.
• The information results in approximate, rather than exact, measures.
• All of the answers are characteristics or limitations of the kind of information that

financial reporting by business enterprises can provide.

19) The provisions of the Sarbanes-Oxley Act of 2002 had the following components: 19) ______

• Enforce auditing. B) Quality control.
• Attestation. D) All of the answers are correct.

20) Which of the following is true about the International Accounting Standards Board

(IASB)?

20) ______

• The goal of the IASB is to develop a single set of high quality, understandable,

enforceable, and globally accepted financial reporting standards based upon clearly articulated principles.

• The IASB has been working with the FASB in recent years to attempt to achieve

convergence of International Financial Reporting Standards (IFRS) and U.S.

GAAP. 3 / 4

• The IASB's approach to accounting standard setting leans more toward defining

broad principles that companies must follow, as opposed to the FASB's approach which tends to define detailed rules that companies must follow.

• All of the answers are correct.

21) The ethical concept of integrity means that an individual must: 21) ______

• read, understand, and agree to follow all provisions of her employer's code of

conduct.

• sign a pledge to abide by all laws and regulations.
• report to a supervisor any violation of the code of conduct of her company that is

observed.

• attempt to be honest and forthright in dealings and communications with others.
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