Test Bank for For Intermediate Accounting 3rd Edition by Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella. 1. The Financial Reporting Environment 2. Financial Reporting Theory 3. Judgment and Applied Financial Accounting Research 4. Review of the Accounting Cycle 5. Statements of Net Incom...
Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
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Chapter 1 The Financial Reporting Environment
1.1 Overview of Financial Reporting
U
1) The financial reporting process generates three basic financial statements.
Answer: FALSE
E
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
S
AACSB: Application of knowledge
2) The demand for financial information is based on market participant demand.
S
Answer: TRUE
Diff: 1
Objective: 1.1
I
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge O
3) Managers of economic entities are best considered to be users of financial information.
Answer: FALSE N
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
N
4) Managers of economic entities are best considered to be preparers of financial information.
Answer: TRUE O
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge C
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly traded
companies. D
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
E
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards and
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oversees the audits of public companies in the United States.
Answer: FALSE
Diff: 1
U
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
E
8) Financial accounting standards influence the behavior of managers and other internal users.
Answer: TRUE
Diff: 2
Objective: 1.1
S
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
S
9) Theories and procedures that evolve as a result of lobbying from various groups are examples of
proactive factors within the legal, economic, political, and social environment.
Answer: FALSE
I
Diff: 1 O
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge N
10) Financial information includes information that is not governed by rules set forth by the accounting
standard-setting bodies.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
N
AACSB: Application of knowledge
O
11) What is the term that describes the process of identifying, measuring, and communicating financial
information about an economic entity to various user groups? C
A) financial reporting
B) accounting standard setting
C) financial statement D
D) financial accounting
Answer: D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
E
12) Which element of financial accounting involves identifying the individuals who demand financial
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information?
A) financial information
B) economic entity
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C) user groups
D) legal, economic, political, and social environment
Answer: C
Diff: 1
E
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
S
13) Which of the following is not one of the four basic financial statements?
A) balance sheet
B) trial balance
S
C) cash flows statement
D) statement of comprehensive income
I
Answer: B O
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge N
14) Which organization is responsible for promulgating U.S. GAAP?
A) Financial Accounting Standards Board N
B) Public Company Accounting Oversight Board
C) International Accounting Standards Board
D) Securities and Exchange Commission
Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
O
AACSB: Application of knowledge
C
15) Which organization is responsible for setting auditing standards and overseeing the audits of public
companies in the United States?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
D
C) American Institute of Certified Public Accountants
D) Securities and Exchange Commission
Answer: B
E
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
16) Which organization prepares and grades the Uniform CPA Examination?
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A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute of Certified Public Accountants
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D) International Accounting Standards Board
Answer: C
Diff: 1
Objective: 1.1
E
IFRS/GAAP: GAAP
AACSB: Application of knowledge
S
17) Which of the following user groups consists of individuals that provide guidance to others in making
investment and credit decisions?
A) financial analysts
S
B) equity investors
C) creditors
D) suppliers
I
Answer: A O
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge N
18) Which of the following user groups consists of individuals who expect to receive a return on their
investment? N
A) employees
B) equity investors
C) creditors
D) suppliers and customers
Answer: B
Diff: 1
O
Objective: 1.1 C
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
19) Which of the following user groups consist of companies that analyze financial information to identify
D
the reporting entity's objectives, assumptions, overall business strategy, and capabilities?
A) competitors
B) creditors and other debt investors
C) employees and labor unions
D) suppliers and customers
E
Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
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