ACCT 2101: TEST 1
23 Cards in this Set
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What are the basic financial statements provided in an annual report?
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Balance sheet, income statement, statement of cash flows and statement of stockholders' equity.
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what is included in the notes on the financial statements?
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summary of accounting policies
changes in accounting policies if any
detail about particular accounts
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what does an unqualified auditors report indicate?
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the financial statements present fairly the financial position the results of operations and the changes in cash flows for the company
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ways management can manipulate earnings and possibly lower the quality of reported earnings
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changing an accounting policy to increase earnings
refusing to take a loss on inventory in an accounting period when the inventory is known to be obsolete
decreasing discretionary expenses
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accrual basis of accounting
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matching expenses with revenue in the appropriate accounting period
recognition of revenue in the accounting period when the sale is made rather than when cash is received
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Which information is hard to find or missing from the financial statements?
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Reputation of the firm with its customers.
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What information can be found in a proxy statement?
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Information on voting procedures
Information on executive compensation
Information on the breakdown of audit and non-audit fees paid to the audit firm.****
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what subjects should the management discussion and analysis section discuss?
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a breakdown of sales increase into price and volume components
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what does section 404 of the sarbanes - oxley act of 2002 require?
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auditor independence, which prohibits audit firms from offering any services other than audit services
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what is a 10-K?
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A 10-K is the annual report filed with the securities & exchange commission (SEC) by publicly-traded companies
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alternate names for the Income Statement
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statement of earnings
statement of operations
statement of profit & loss
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solvency
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ability to pay debts as they become due
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profitability
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the ability to generate income
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Private Company
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one that retains control over who can buy or sell the stock
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public company
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issues stock that can be publicly traded
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SEC
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Established Public Company Accounting Oversight Board; inspect, investigate, enforce auditing standards of firms, set audit standards, establish or supervise the establishment of accounting, auditing, and ethical standards; Oversight on the board
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10-Q
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--quarterly report
-less detailed than 10-K
-information: profit and loss statment, stockholder equity
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what is a safe harbor clause
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located in the MD&A
contains forward looking statements (managements expectations and assumptions about the company's performance)
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alternative name for net income, where is it found?
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net earnings
net profit
Statements of Income
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What are the alternative names for the balance sheet?
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Statement of financial position
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alternative names for the statement of cash flows
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"Sources and Uses of Funds Statement" or "Cash Flow Statement"
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Auditor's report
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gives the auditor's opinion about whether the statements are presented in accordance with GAAP.
aims to be fair and prevent bias
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two important accounting statements
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assets are carried on the books at cost
cost does not equal value
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ACCT 2101: TEST 1