FAC1503 ASS 2 COMPREHENSIVE
QUESTIONS WITH VERIFIED PRACTICE
SOLUTIONS
●● Internal users include:
Answer: CEO, CFO, employees
●● Advantages of a corporation
Answer: easy to raise money, easy to transfer ownership, no personal
liability, continuous life
●● Disadvantages of a corporation
Answer: double taxation, tough to start, very little control, more
government regulations
●● What does SEC stand for?
Answer: Securities and Exchange Commission
●● What does the SEC do?
Answer: responsible for monitoring the U.S. financial markets and
accounting standard-setting bodies (at the top; police of financial
market)
,●● What does FASB stand for?
Answer: Financial Accounting Standards Board
●● What does the FASB do?
Answer: establish (most) of the accounting rules/guidelines
●● What does GAAP stand for?
Answer: Generally Accepted Accounting Principles
●● What does GAAP represent?
Answer: the rules/guidelines established by FASB
●● What does SOX stand for?
Answer: Sarbanes-Oxley Act
●● What is the Sarbanes-Oxley Act?
Answer: requires top management to certify financial statements, made
punishments more severe, and increased the interdependence of outside
auditors that verify the accuracy of the financial statements
●● What are the four parts of the annual report?
Answer: 1. financial statements
2. management discussion and analysis section
, 3. notes to the financial statements
4. independent auditors report
●● 1. financial statements
Answer: income statement, retained earnings statement, balance sheet,
statement of cash flows
●● 2. management discussion and analysis section
Answer: management comments on the performance of the company
based on current numbers and states its future outlook
●● 3. notes to financial statements
Answer: makes detailed explanations of anything and everything that
could be open to interpretation in the actual financial statements
●● 4. independent auditors opinion
Answer: assesses the validity/accuracy of the statements; the auditor lets
everyone know if the numbers make sense
●● passing grade from auditor is known as
Answer: an unqualified opinion
●● What is accounting information?
QUESTIONS WITH VERIFIED PRACTICE
SOLUTIONS
●● Internal users include:
Answer: CEO, CFO, employees
●● Advantages of a corporation
Answer: easy to raise money, easy to transfer ownership, no personal
liability, continuous life
●● Disadvantages of a corporation
Answer: double taxation, tough to start, very little control, more
government regulations
●● What does SEC stand for?
Answer: Securities and Exchange Commission
●● What does the SEC do?
Answer: responsible for monitoring the U.S. financial markets and
accounting standard-setting bodies (at the top; police of financial
market)
,●● What does FASB stand for?
Answer: Financial Accounting Standards Board
●● What does the FASB do?
Answer: establish (most) of the accounting rules/guidelines
●● What does GAAP stand for?
Answer: Generally Accepted Accounting Principles
●● What does GAAP represent?
Answer: the rules/guidelines established by FASB
●● What does SOX stand for?
Answer: Sarbanes-Oxley Act
●● What is the Sarbanes-Oxley Act?
Answer: requires top management to certify financial statements, made
punishments more severe, and increased the interdependence of outside
auditors that verify the accuracy of the financial statements
●● What are the four parts of the annual report?
Answer: 1. financial statements
2. management discussion and analysis section
, 3. notes to the financial statements
4. independent auditors report
●● 1. financial statements
Answer: income statement, retained earnings statement, balance sheet,
statement of cash flows
●● 2. management discussion and analysis section
Answer: management comments on the performance of the company
based on current numbers and states its future outlook
●● 3. notes to financial statements
Answer: makes detailed explanations of anything and everything that
could be open to interpretation in the actual financial statements
●● 4. independent auditors opinion
Answer: assesses the validity/accuracy of the statements; the auditor lets
everyone know if the numbers make sense
●● passing grade from auditor is known as
Answer: an unqualified opinion
●● What is accounting information?
