1 2 According to the FASB s conceptual framework the objective of general purpose financial reporting is most likely based on a Generally accepted accounting principles b Reporting on how well management has discharged its responsibilities c The need for conservatism d The needs of the users of the information Which of the following is a true statement about the objective of general purpose financial reporting a Financial reporting is ordinarily focused on industries rather than individual entities b The objective applies only to information that is useful for investment professionals c The information provided relates to the entity s economic resources and claims d Financial reporting directly measures management performance 3 Which of the following is not a user of financial reports a creditors b government agencies c unions d All of these are users 4 The information provided by financial reporting pertains to a business industries rather than to individual enterprises or an economy as a whole or to members of society as consumers b individual business enterprises rather than to industries or an economy as a whole or to members of society as consumers c individual business enterprises industries and an economy as a whole rather than to members of society as consumers d an economy as a whole and to members of society as consumers rather than to individual enterprises or industries 5 Which of the following represents a form of communication through financial reporting but not through financial statements a Balance sheet b President s letter c Income statement d Notes to financial statements 6 How does accounting help the capital allocation process attract investment capital a Provides timely relevant information b Encourages innovation c Promotes productivity d a and b above 7 Financial statements in the early 2000s provide information related to a nonfinancial measurements b forward looking data c hard assets inventory and plant assets d none of these 8 When making decisions investors are interested in assessing a the company s ability to generate net cash inflows b management s ability to protect and enhance the capital providers investments c Both a and b d the company s ability to generate net income 9 Which perspective is adopted as part of the objective of general purpose financial reporting a Decision usefulness perspective b Proprietary perspective c Entity perspective d Financial reporting perspective 10 Which of the following is a general limitation of general purpose financial statements a General purpose financial statements may not be the most informative for a specific enterprise b General purpose financial statements are comparable c General purpose financial statements are assumed to present fairly the company s financial operations d None of the above 11 What is due process in the context of standard setting at the FASB a FASB operates in full view of the public b Public hearings are held on proposed accounting standards c Interested parties can make their views known d All of the above 12 Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight a Smaller membership b Due process c FASB board members are well paid d FASB board members must be CPAs 13 What is the purpose of Emerging Issues Task Force a Provide interpretation of existing standards b Provide a consensus on how to account for new and unusual financial transactions c Provide interpretive guidance d Provide timely guidance on select issues 14 The major distinction between the Financial Accounting Standards Board FASB and its predecessor the Accounting Principles Board APB is a the FASB issues exposure drafts of proposed standards b all members of the FASB possess extensive experience in financial reporting c all members of the FASB are fully remunerated serve full time and are independent of any companies or institutions d a majority of the members of the FASB are CPAs drawn from public practice 15 The purpose of the Emerging Issues Task Force is to a develop a conceptual framework as a frame of reference for the solution of future problems b lobby the FASB on issues that affect a particular industry c do research on issues that relate to long term accounting problems d issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly 16 The purpose of Statements of Financial Accounting Concepts is to a establish GAAP b modify or extend the existing FASB Standards Statement c form a conceptual framework for solving existing and emerging problems d determine the need for FASB involvement in an emerging issue Generally accepted accounting principles a include detailed practices and procedures as well as broad guidelines of general application b are influenced by pronouncements of the SEC and IRS c change over time as the nature of the business environment changes d all of these 17 18 Which of the following publications does not qualify as a statement of generally accepted accounting principles a Statements of financial standards issued by the FASB b Accounting interpretations issued by the FASB c APB Opinions d Accounting research studies issued by the AICPA 19 Rule 203 of the Code of Professional Conduct addresses a ethical requirements b financial statements should be based on generally accepted accounting principles c advertising to obtained clients d auditing financial statements 20 What is the purpose of a FASB Staff Position a Provide interpretation of existing standards b Provide a consensus on how to account for new and unusual financial transactions c Provide interpretive guidance d Provide timely guidance on select issues 21 Financial accounting standard setting in the United States a can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic b is based solely on research and empirical findings c is a legalistic process based on rules promulgated by governmental agencies d is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable 22 Which of the following is a source of pressure that may influence the accounting standard setting process a Congress b Lobbyist c CPA firms d All of these answers are correct 23 What is a possible danger if politics plays too big a role in accounting standard setting a Accounting