FIN 461 Grimes Questions with Verified
Correct Answers
Reporting requirements of publicly traded firms
Publically traded companies are required to file annual report by the SEC; this consists of
financial statements, notes to the financial statements, auditor's report, management's
discussion and analysis of operations, and other material.
Organizations that establish GAAP
Securities and Exchange Commission (SEC) and Financial Accounting Standards Board
(FASB).
Required financial statements in the annual report
Balance sheet, income statement, statement of stockholders' equity, and statement of cash
flows.
Balance sheet
Shows the financial position of the firm on a particular date.
Income statement
Presents the result of operations for the accounting period and includes a comprehensive
income.
Statement of Stockholders' Equity
Reconciles the beginning and ending balances of accounts that appear in equity section of
balance sheet.
Statement of cash flows
, Provides information about the cash inflows and outflows from operating, financing, and
investing activities during accounting period.
Notes to the financial statements
Summary of firm's accounting policies and details about particular accounts including
inventory, property, plant, equipment, investments, long-term debt, equity accounts, and
other accounts.
Auditor's report
Management is responsible for preparation of financial statements; auditors report attests to
fairness of representation.
Sarbanes-Oxley Act, Section 404
Requires report of internal control of financing report.
Types of opinions external auditors give
Unqualified opinion, qualified opinion, adverse opinion, disclaimer of opinion, and
unqualified opinion with explanatory language.
Unqualified opinion
Everything presented fairly, conforms with GAAP.
Qualified opinion
Fairly presented 'except for', departure from GAAP.
Adverse opinion
Auditor believes statements not presented fairly.
Disclaimer of opinion
Correct Answers
Reporting requirements of publicly traded firms
Publically traded companies are required to file annual report by the SEC; this consists of
financial statements, notes to the financial statements, auditor's report, management's
discussion and analysis of operations, and other material.
Organizations that establish GAAP
Securities and Exchange Commission (SEC) and Financial Accounting Standards Board
(FASB).
Required financial statements in the annual report
Balance sheet, income statement, statement of stockholders' equity, and statement of cash
flows.
Balance sheet
Shows the financial position of the firm on a particular date.
Income statement
Presents the result of operations for the accounting period and includes a comprehensive
income.
Statement of Stockholders' Equity
Reconciles the beginning and ending balances of accounts that appear in equity section of
balance sheet.
Statement of cash flows
, Provides information about the cash inflows and outflows from operating, financing, and
investing activities during accounting period.
Notes to the financial statements
Summary of firm's accounting policies and details about particular accounts including
inventory, property, plant, equipment, investments, long-term debt, equity accounts, and
other accounts.
Auditor's report
Management is responsible for preparation of financial statements; auditors report attests to
fairness of representation.
Sarbanes-Oxley Act, Section 404
Requires report of internal control of financing report.
Types of opinions external auditors give
Unqualified opinion, qualified opinion, adverse opinion, disclaimer of opinion, and
unqualified opinion with explanatory language.
Unqualified opinion
Everything presented fairly, conforms with GAAP.
Qualified opinion
Fairly presented 'except for', departure from GAAP.
Adverse opinion
Auditor believes statements not presented fairly.
Disclaimer of opinion
