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| 1 | |
In which order does the accounting process continue in its cycle? |
| | A) | | Accounting process → Accounting information → Decision makers → Economic Activities |
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| | B) | | Accounting information → Accounting process → Decision makers → Economic Activities |
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| | C) | | Accounting process → Accounting information → Economic Activities → Decision makers |
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| | D) | | Economic Activities → Accounting process → Accounting information → Decision makers |
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| 2 | |
Which of the following provides information about the financial resources, obligations, and activities of an economic entity that is intended for use primarily by external decision makers? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
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| 3 | |
Which of the following provides information that is intended primarily for use by internal management in making decisions required to run the business? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
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| 4 | |
Which of the following involves determining the cost of certain business activities and interpreting cost information? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
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| 5 | |
The personnel, procedures, devices, and records used by an organization to develop accounting information and communicate that information to decision makers are called: |
| | A) | audits. |
| | B) | accounting systems. |
| | C) | personnel systems. |
| | D) | internal control structures. |
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| 6 | |
An accounting system is cost-effective when it: |
| | A) | produces useful information. |
| | B) | produces reports required by law. |
| | C) | uses computers to replace manual activities. |
| | D) | produces information that is more valuable than the cost of obtaining the information. |
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| 7 | |
The basic functions of an accounting system include: |
| | A) | interpreting and recording the effects of business transactions. |
| | B) | classifying the effects of similar transactions. |
| | C) | summarizing and communicating the information contained in the system. |
| | D) | all of the above. |
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| 8 | |
Which of the following components of internal control involves putting in place those procedures that address risks identified by management? |
| | A) | Risk assessment |
| | B) | Information and communication |
| | C) | Control activities |
| | D) | Monitoring |
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| 9 | |
Which of the following components of internal control is the foundation for all of the components of internal control? |
| | A) | Monitoring |
| | B) | Information and communication |
| | C) | Control activities |
| | D) | Control environment |
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| 10 | |
Which of the following affect a company's control environment? |
| | A) | Procedures for hiring and training of personnel |
| | B) | Management's assignment of authority and responsibility |
| | C) | Oversight by the board of directors |
| | D) | All of the above. |
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| 11 | |
A criticism of the Sarbanes-Oxley Act (SOX) of 2002 is that it: |
| | A) | is specifically aimed at large utilities. |
| | B) | is specially aimed at the energy industry. |
| | C) | it is not cost effective. |
| | D) | it places no responsibility on top management. |
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| 12 | |
Measures used by an organization to guard against errors, waste, and fraud are called: |
| | A) | audits. |
| | B) | the internal control structure. |
| | C) | internal auditing. |
| | D) | integrity. |
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| 13 | |
Which of the following would be considered an external user? |
| | A) | Owner |
| | B) | Store manager |
| | C) | Plant manager |
| | D) | Board of directors |
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| 14 | |
Which of the following is not considered to be an external user? |
| | A) | Owner |
| | B) | Labor union |
| | C) | Board of directors |
| | D) | Trade associations |
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| 15 | |
Which of the following makes up a company's cash flow prospects? |
| | A) | Accessibility to investment |
| | B) | Return of investment |
| | C) | Return on investment |
| | D) | Both (B) and (C) |
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| 16 | |
You made a $10,000 loan to your cousin's company. At the end of one year, the company returned to you $10,700. The $700 is called which of the following? |
| | A) | The return of investment |
| | B) | The return on investment |
| | C) | An 7.0% return on investment |
| | D) | Both (B) and (C) |
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| 17 | |
Which diagram shows the objectives of financial accounting, building from the general to the specific? |
| | A) | | Provide information useful in assessing amount, timing, and uncertainty of future cash flows. → Provide information useful in making investment and credit decisions. → Provide information useful in making investment and credit decisions. |
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| | B) | | Provide information useful in making investment and credit decisions. → Provide information about economic resources, claims to resources and changes in resources and claims. → Provide information useful in assessing amount, timing, and uncertainty of future cash flows. |
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| | C) | | Provide information about economic resources, claims to resources and changes in resources and claims. → Provide information useful in making investment and credit decisions. → Provide information useful in assessing amount, timing, and uncertainty of future cash flows. |
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| | D) | | Provide information useful in making investment and credit decisions. → Provide information useful in assessing amount, timing, and uncertainty of future cash flows. → Provide information about economic resources, claims to resources and changes in resources and claims. |
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| 18 | |
The two things that make up cash flow prospects are: |
| | A) | return of investment and return on investment. |
| | B) | return on investment and timing of investment. |
| | C) | return of investment and timing of investment. |
| | D) | periodic interest and dividends. |
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| 19 | |
Which of the following financial statements is also known as a statement of financial position? |
| | A) | Balance sheet |
| | B) | Income statement |
| | C) | Statement of cash flows |
| | D) | Bank statement |
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| 20 | |
Which of the following shows the details and results of the company's profit-related activities for a period of time? |
| | A) | Balance sheet |
| | B) | Income statement |
| | C) | Statement of cash flows |
| | D) | Statement of financial position |
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| 21 | |
Which of the following shows the details of the company's activities involving cash during a period of time? |
| | A) | Income statement |
| | B) | Statement of financial position |
| | C) | Balance sheet |
| | D) | Statement of cash flows |
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| 22 | |
A characteristic of externally reported information is that it: |
| | A) | is largely historical in nature. |
| | B) | may be inexact and contain approximations. |
| | C) | is general-purpose in nature. |
| | D) | is all of the above. |
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| 23 | |
The general-purpose assumption of externally reported information relates to which of the following? |
| | A) | The historical nature of reported information |
| | B) | The notion that 'one size fits all' |
| | C) | The notion that financial statements are the means by which the end is achieved |
| | D) | Using notes and explanations as footnotes to financial statements for clarification |
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| 24 | |
An income statement prepared at the end of the first quarter of the fiscal year is called which of the following? |
| | A) | A temporary statement of operations |
| | B) | An interim statement |
| | C) | Short statement |
| | D) | Statement of quarterly position |
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| 25 | |
The qualities and characteristics of externally reported information are that it does which of the following?: |
| | A) | Provides accurate information |
| | B) | Deals with future events and probabilities |
| | C) | Provides financial reporting that is narrower in scope than financial statements |
| | D) | Provides general-purpose information |
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| 26 | |
In a simple organization chart of internal users of financial information, who is at the top of the chart? |
| | A) | Chief executive officer (CEO) |
| | B) | Chief financial officer (CFO) |
| | C) | Board of directors |
| | D) | Plant managers |
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| 27 | |
Which of the following would be considered an internal user? |
| | A) | Owner |
| | B) | Creditor |
| | C) | Chief financial officer (CFO) |
| | D) | Labor union |
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| 28 | |
Which of the following is not a characteristic of a management accounting information? |
| | A) | Timeliness is of importance |
| | B) | Decision-making authority is identified |
| | C) | Historically oriented |
| | D) | Measures efficiency and effectiveness |
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| 29 | |
Which of the following provides the framework for determining what information is to be included in financial statements and how that information is to be presented? |
| | A) | Generally accepted auditing standards |
| | B) | Generally accepted amortization standards |
| | C) | Accounting standards and practices |
| | D) | Generally accepted accounting principles |
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| 30 | |
Which of the following enhances the integrity of accounting information? |
| | A) | Institutional features can add significantly to the integrity. |
| | B) | Professional accounting organizations play a significant role. |
| | C) | Personal competence, judgment, and ethical behavior play a role. |
| | D) | All of the above. |
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| 31 | |
International Financial Reporting Standards (IFRSs) are issued by which of the following? |
| | A) | Securities and Exchange Commission. |
| | B) | International Accounting Standards Board. |
| | C) | American Institute of Certified Public Accountants. |
| | D) | Public Company Accounting Oversight Board. |
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| 32 | |
The Public Company Accounting Oversight Board (PCAOB) has: |
| | A) | limited powers in overseeing the accounting profession. |
| | B) | no power in overseeing the accounting profession. |
| | C) | extensive powers in overseeing the accounting profession. |
| | D) | been replaced by the Institute of Internal Auditors. |
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| 33 | |
Which of the following is not true about accounting principles? |
| | A) | They do not require any means of enforcement. |
| | B) | They are sometimes arbitrary. |
| | C) | They may change over time. |
| | D) | They must be clearly understood and observed by all participants in the process. |
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| 34 | |
The conceptual framework for financial accounting sets forth the FASB's views as |
| | A) | objectives of financial reporting. |
| | B) | elements of financial statements. |
| | C) | valuation concepts related to financial statement amounts. |
| | D) | all of the above. |
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| 35 | |
The authoritative accounting pronouncements issued by the FASB are called which of the following? |
| | A) | Statements of Financial Accounting Standards. |
| | B) | Statements of Changes in the Conceptual Framework. |
| | C) | Statements of Financial Auditing Standards. |
| | D) | Statement of the AICPA. |
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| 36 | |
Accounting principles are given the force of law when they are adopted by the |
| | A) | Internal Revenue Service (IRS). |
| | B) | Securities Exchange Commission (SEC). |
| | C) | Financial Accounting Standards Board (FASB). |
| | D) | American Accounting Association (AAA). |
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| 37 | |
An investigation of financial statements designed to determine their fairness in relation to generally accepted accounting principles is called: |
| | A) | the internal control structure. |
| | B) | the external control structure. |
| | C) | an audit. |
| | D) | bookkeeping. |
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| 38 | |
The major purpose of an audit is to: |
| | A) | uncover fraud, only. |
| | B) | determine who is committing fraud. |
| | C) | place blame for failure to meet company goals. |
| | D) | determine the fairness of the financial statements. |
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| 39 | |
The Sarbanes-Oxley Act in 2002 provided for the establishment of the __________________ which is responsible for overseeing all aspects of the public accounting profession related to audits of publicly held companies. |
| | A) | Public Company Accounting Oversight Board |
| | B) | Public Company Auditing Oversight Board |
| | C) | Public Accounting Compliance Board |
| | D) | Professional Accounting Oversight Board |
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| 40 | |
Which of the following professional accounting organizations is dedicated to the promotion and development of the practice of internal auditing? |
| | A) | Institute of Internal Auditors (IIA) |
| | B) | Institute of Management Accountants (IMA) |
| | C) | American Institute of Certified Public Accountants (AICPA) |
| | D) | Financial Accounting Standards Board (FASB) |
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| 41 | |
Which of the following is a professional accounting organization of certified public accountants that engages in a variety of professional activities, including establishing auditing standards, conducting research, and working closely with the FASB in establishing financial reporting standards? |
| | A) | Institute of Internal Auditors (IIA) |
| | B) | Institute of Management Accountants (IMA) |
| | C) | American Institute of Certified Public Accountants (AICPA) |
| | D) | Financial Accounting Standards Board (FASB) |
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| 42 | |
Which of the following is not a government agency? |
| | A) | Internal Revenue Service (IRS) |
| | B) | Security and Exchange Commission (SEC) |
| | C) | General Accounting Office (GAO) |
| | D) | American Accounting Association (AAA) |
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| 43 | |
The membership of which of the following consists primarily of accounting educators? |
| | A) | Institute of Internal Auditors (IIA) |
| | B) | Institute of Management Accountants (IMA) |
| | C) | American Accounting Association (AAA) |
| | D) | Financial Accounting Standards Board (FASB) |
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| 44 | |
Which of the following organizations issues the Certificate in Internal Auditing? |
| | A) | Institute of Internal Auditors (IIA) |
| | B) | Institute of Management Accountants (MA) |
| | C) | American Institute of Certified Public Accountants (AICPA) |
| | D) | Financial Accounting Standards Board (FASB) |
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| 45 | |
Which of the following organizations issues the Certificate in Financial Management (CFM)? |
| | A) | American Institute of Public Accounting |
| | B) | Institute of Internal Auditors |
| | C) | Institute of Management Accountants |
| | D) | American Accounting Association |
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| 46 | |
Which of the following organizations is dedicated specifically to improving the quality of financial reporting? |
| | A) | Committee of Sponsoring Organizations of the Treadway Commission (COSO) |
| | B) | American Institute of Certified Public Accountants (AICPA) |
| | C) | American Accounting Association (AAA) |
| | D) | Institute of Internal Auditors (IIA) |
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| 47 | |
Expectations of ethical conduct are important for accountants. For management accountants, the code of ethics includes which of the following requirements? |
| | A) | Competence |
| | B) | Confidentiality |
| | C) | Integrity |
| | D) | All of the above |
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| 48 | |
For management accountants, refraining from disclosing confidential information is included in the code of ethics requirement of: |
| | A) | competence. |
| | B) | confidentiality. |
| | C) | integrity. |
| | D) | credibility. |
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| 49 | |
For management accountants, avoiding conflicts of interest by refusing compromising gifts and favors is included in the code of ethics requirement of |
| | A) | competence. |
| | B) | confidentiality. |
| | C) | integrity. |
| | D) | credibility. |
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| 50 | |
For management accountants, communicating information fairly and objectively is included in the code of ethics requirement of |
| | A) | competence. |
| | B) | confidentiality. |
| | C) | integrity. |
| | D) | credibility. |
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| 51 | |
Which of the following issues licenses to practice as a Certified Public Accountant (CPA)? |
| | A) | Institute of Management Accountants |
| | B) | A state licensing board |
| | C) | Financial Accounting Standards Board (FASB) |
| | D) | American Accounting Association |
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| 52 | |
Which of the following involves the preparation of income tax returns and anticipating the tax effects of business transactions and structuring them in such a way as to minimize the income tax burden? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
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| 53 | |
Which of the following refers to recording the routine transactions and day-to-day record keeping of an enterprise? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Bookkeeping |
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| 54 | |
Internal auditors: |
| | A) | do not perform independent audits of the company's financial statements. |
| | B) | are independent of the organization. |
| | C) | are employed by an independent auditing firm. |
| | D) | do not adhere to any particular code of ethics. |
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| 55 | |
When your authors use the expression "the watchdog of professional accounting," they are referring to which of the following? |
| | A) | Internal Revenue Service (IRS). |
| | B) | Securities Exchange Commission (SEC). |
| | C) | Financial Accounting Standards Board (FASB). |
| | D) | American Institute of Public Accountants (AICPA) |
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| 56 | |
The General Accountability Office, an organization responsible for auditing the government, reports directly to which group or person? |
| | A) | Congress. |
| | B) | the President of the United States. |
| | C) | the Vice President of the United States. |
| | D) | the Securities and Exchange Commission (SEC). |
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| 57 | |
Which of the following is a false statement about professional accountants? |
| | A) | Their activities consist primarily of bookkeeping functions. |
| | B) | One of their primary functions is financial forecasting. |
| | C) | They are involved more with interpretation of accounting information than its preparation. |
| | D) | They are often highly sought after for top management positions. |
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