REGULATION {REG} REAL EXXAM 230 QUESTIONS AND
CORRECT ANSWERS 2025 LATEST//ALREADY GRADED A+
Accounting Institutions (5) - ANSWER-1. SEC
2. FASB
3. AICPA
4. PCAOB
5. IASB
What constitutes professional literature? - ANSWER-- Standards issued by the FASB and IASB
- FASB codification research system
- Disclosures from any accounting institution
- related academic literature
SEC (Securities and Exchange Commission) - ANSWER-- Established by the federal government
- Oversees accounting and reporting for public companies
- Requires public companies to adhere to GAAP
- Has enforcement authority
-> but encouraged private standard setting body
- Committee on Accounting Procedures (CAP)
- Accounting principles board (APB)
- Financial Accounting Standards Board (FASB)
FASB (Financial Accounting Standards Board) - ANSWER-- Establishes financial accounting
standards that govern preparation of financial reports by nongovernmental entities.
- Issued standards are recognized by the SEC and AICPA as authoritative
- Major source of generally accepted accounting principles (GAAP)
User groups that influence the formation of accounting standards (FASB) [9] - ANSWER-1. Business
entities
2. CPAs and accounting firms
,3. AICPA (AcSEC)
4. Academicians
5. Investing public
6. Financial community (analysts, bankers)
7. Preparers (financial executives institute)
8. Government (SEC, IRS, other agencies)
9. Industry Associations
GAAP (Generally Accepted Accounting Principles) - ANSWER-- FASB standards, interpretations, and
staff positions
- APB opinions
- AICPA accounting research bulletins
FASB codification - ANSWER-- Fasb's goal in developing the codification is to provide in one place
all the authoritative literature related to a particular topic
- The codification creates one level of GAAP, which is considered authoritative
- All other accounting literature is considered non-authoritative
-FASB has developed the financial accounting standards board codification research system (CRS)
AICPA (American Institute of CPAs) - ANSWER-- National professional organization
- Established CAP and the APB
- No longer issues authoritative accounting or auditing guidelines for public companies
PCAOB (Public Company Accounting Oversight Board) - ANSWER-- The PCAOB is a nonprofit
corporation established by congress to oversee the audits of public companies in order to protect
investors and the public interest by promoting informative, accurate, and independent audit reports
- The PCAOB was created by the Sarbanes-Oxley Act of 2002
-The Act required that auditors of U.S. public companies be subject to external and independent
oversight
,IASB (international accounting standards board) - ANSWER--Independent standards setting body
of the IFRS
- The IASB is an independent, nonprofit private sector organization with the objective of developing a
single set of high quality, understandable, enforceable and globally accepted IFRS
- IASB is responsible for the development and publication of IFRS
International Accounting Standards - ANSWER-- The two sets of standards accepted for
international use are (1) The U.S. GAAP [FASB] & (2) IFRS [IASB]
- Both FASB and IASB recognize that global markets would be best served if only one set of generally
accepted accounting principles were used as it would make it easier to compare U.S. and foreign
companies
CHAPTER 2 - OUT OF THE DARKNESS - ANSWER-
Factors that contributed to the spread of public financial reporting - ANSWER-1. heavy reliance on
outside sources of capital
2. growing influence of public accounting profession
3. criticism from reformers
4. government prodding
What reasons did American corporate executives give for not publishing audited financial
statements? - ANSWER-- disclosure would aid competitors
- cost too high
-benefit too low- public wouldn't understand the disclosures
Other potential reasons for nondisclosure? - ANSWER-- fear of spotlight
-public scrutiny
By 1930, almost 90% of NYSE companies regularly published audited balance sheets. WHY? -
ANSWER-- heavy reliance on capital markets
- the number of companies traded on the NYSE increased by 50%
, - the number of americans owning corporate stock tripled
- British bankers (GB was wealthiest country at that time) invested in U.S. firms but required audited
balance sheets
How did companies like US Steel create pressure on other companies to publish audited financial
statements? - ANSWER-- John B. Stetson (hat maker) was first american corp to offer auditor's
certificate during IPO
-Audited financial statements made firms more marketable so other firms followed suit
how did the public's opinion of CPAs change from thinking that a public accountant is a bookkeeper
out of a job - who drinks -to considering CPAs as experts in preparing and auditing financial
statements? - ANSWER-- as corporations grew and became more complex- the demand for
outside experts increased
- as more corporations required and competed for capital, certifications of IPO and subsequent
disclosures grew in popularity
- by 1921, all 48 states had passed CPA legislation of Certified Public Accountant designation
restricted to those who passed the state entrance exam
-public accountants promoted complete financial reporting Journal of Accountancy articles
According to William Z. Ripley, what economic and social problems were caused by inadequate
financial reporting? - ANSWER-- Ripley argued that improved financial reporting would improve
corporate governance and stabilize markets
- he argued that without firm disclosures, investors might magnify price volatility through uniformed
speculation
- in addition, the information asymmetry relative to corporate insiders was detrimental to investors
- improved financial reporting would solve the labor disputes where the workers struggled with
judging their employer's ability to pay higher wages
what other criticisms arose in regards to inadequate financial reporting? - ANSWER-lack of
disclosures allowed more accounting manipulations
How did the Federal Reserve board (indirectly) encourage American corporations to prepare audited
financial statements? - ANSWER-The federal reserve board established in 1913- oversaw the
country's banking system
CORRECT ANSWERS 2025 LATEST//ALREADY GRADED A+
Accounting Institutions (5) - ANSWER-1. SEC
2. FASB
3. AICPA
4. PCAOB
5. IASB
What constitutes professional literature? - ANSWER-- Standards issued by the FASB and IASB
- FASB codification research system
- Disclosures from any accounting institution
- related academic literature
SEC (Securities and Exchange Commission) - ANSWER-- Established by the federal government
- Oversees accounting and reporting for public companies
- Requires public companies to adhere to GAAP
- Has enforcement authority
-> but encouraged private standard setting body
- Committee on Accounting Procedures (CAP)
- Accounting principles board (APB)
- Financial Accounting Standards Board (FASB)
FASB (Financial Accounting Standards Board) - ANSWER-- Establishes financial accounting
standards that govern preparation of financial reports by nongovernmental entities.
- Issued standards are recognized by the SEC and AICPA as authoritative
- Major source of generally accepted accounting principles (GAAP)
User groups that influence the formation of accounting standards (FASB) [9] - ANSWER-1. Business
entities
2. CPAs and accounting firms
,3. AICPA (AcSEC)
4. Academicians
5. Investing public
6. Financial community (analysts, bankers)
7. Preparers (financial executives institute)
8. Government (SEC, IRS, other agencies)
9. Industry Associations
GAAP (Generally Accepted Accounting Principles) - ANSWER-- FASB standards, interpretations, and
staff positions
- APB opinions
- AICPA accounting research bulletins
FASB codification - ANSWER-- Fasb's goal in developing the codification is to provide in one place
all the authoritative literature related to a particular topic
- The codification creates one level of GAAP, which is considered authoritative
- All other accounting literature is considered non-authoritative
-FASB has developed the financial accounting standards board codification research system (CRS)
AICPA (American Institute of CPAs) - ANSWER-- National professional organization
- Established CAP and the APB
- No longer issues authoritative accounting or auditing guidelines for public companies
PCAOB (Public Company Accounting Oversight Board) - ANSWER-- The PCAOB is a nonprofit
corporation established by congress to oversee the audits of public companies in order to protect
investors and the public interest by promoting informative, accurate, and independent audit reports
- The PCAOB was created by the Sarbanes-Oxley Act of 2002
-The Act required that auditors of U.S. public companies be subject to external and independent
oversight
,IASB (international accounting standards board) - ANSWER--Independent standards setting body
of the IFRS
- The IASB is an independent, nonprofit private sector organization with the objective of developing a
single set of high quality, understandable, enforceable and globally accepted IFRS
- IASB is responsible for the development and publication of IFRS
International Accounting Standards - ANSWER-- The two sets of standards accepted for
international use are (1) The U.S. GAAP [FASB] & (2) IFRS [IASB]
- Both FASB and IASB recognize that global markets would be best served if only one set of generally
accepted accounting principles were used as it would make it easier to compare U.S. and foreign
companies
CHAPTER 2 - OUT OF THE DARKNESS - ANSWER-
Factors that contributed to the spread of public financial reporting - ANSWER-1. heavy reliance on
outside sources of capital
2. growing influence of public accounting profession
3. criticism from reformers
4. government prodding
What reasons did American corporate executives give for not publishing audited financial
statements? - ANSWER-- disclosure would aid competitors
- cost too high
-benefit too low- public wouldn't understand the disclosures
Other potential reasons for nondisclosure? - ANSWER-- fear of spotlight
-public scrutiny
By 1930, almost 90% of NYSE companies regularly published audited balance sheets. WHY? -
ANSWER-- heavy reliance on capital markets
- the number of companies traded on the NYSE increased by 50%
, - the number of americans owning corporate stock tripled
- British bankers (GB was wealthiest country at that time) invested in U.S. firms but required audited
balance sheets
How did companies like US Steel create pressure on other companies to publish audited financial
statements? - ANSWER-- John B. Stetson (hat maker) was first american corp to offer auditor's
certificate during IPO
-Audited financial statements made firms more marketable so other firms followed suit
how did the public's opinion of CPAs change from thinking that a public accountant is a bookkeeper
out of a job - who drinks -to considering CPAs as experts in preparing and auditing financial
statements? - ANSWER-- as corporations grew and became more complex- the demand for
outside experts increased
- as more corporations required and competed for capital, certifications of IPO and subsequent
disclosures grew in popularity
- by 1921, all 48 states had passed CPA legislation of Certified Public Accountant designation
restricted to those who passed the state entrance exam
-public accountants promoted complete financial reporting Journal of Accountancy articles
According to William Z. Ripley, what economic and social problems were caused by inadequate
financial reporting? - ANSWER-- Ripley argued that improved financial reporting would improve
corporate governance and stabilize markets
- he argued that without firm disclosures, investors might magnify price volatility through uniformed
speculation
- in addition, the information asymmetry relative to corporate insiders was detrimental to investors
- improved financial reporting would solve the labor disputes where the workers struggled with
judging their employer's ability to pay higher wages
what other criticisms arose in regards to inadequate financial reporting? - ANSWER-lack of
disclosures allowed more accounting manipulations
How did the Federal Reserve board (indirectly) encourage American corporations to prepare audited
financial statements? - ANSWER-The federal reserve board established in 1913- oversaw the
country's banking system
