1
,IntermediatevAccounting, 3ev(Gordon/Raedy/Sannella) b r
Chapter 1 The Financial Reporting Environment
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1.1 Overview of Financial Reporting br br br
1) The financial reporting process generates three basic financial statements
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. Answer: FALSE
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Diff: 1 br
Objective: 1.1 IFRS/GAA b r br b
P: GAAP/IFRS
r b r
AACSB: Application of knowledge
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2) The demand for financial information is based on market participant demand
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. Answer: TRUE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GAA b r br b
P: GAAP/IFRS
r b r
AACSB: Application of knowledge
b r b r br br
3) Managers of economic entities are best considered to be users of financial information
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. Answer: FALSE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
4) Managers of economic entities are best considered to be preparers of financial information
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. Answer: TRUE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly trad
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e d companies.
br br
Answer: TRUE b r b r
Diff: 2 br
Objective: 1.1 IFRS/GA b r br
A P: GAAPbr b r
AACSB: Application of knowledge
b r b r br br
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies
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. Answer: FALSE
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Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAPbr b r
AACSB: Application of knowledge
b r b r br br
2
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards a
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n d oversees the audits of public companiesvin the United States.
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Answer: FALSE b r b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP
br b r
AACSB: Application of knowledge
b r b r br br
8) Financial accounting standards influence the behavior of managers and other internal users
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. Answer: TRUE
br b r
Diff: 2 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
9) Theories and procedures that evolve as a result of lobbying from various groups are examples
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o f proactive factors within the legal, economic, political, and social environment.
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Answer: FALSE b r b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
10) Financial information includes information that is not governed by rules set forth by the accounti
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n g standard-setting bodies.
br br br
Answer: TRUE b r b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
11) What is the term that describes the process of identifying, measuring, and communicating financi
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a l informationvabout an economic entity to various user groups?
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A) financial reporting br
B) accounting standard setting br br
C) financial statement br
D) financial accounting br b
rAnswer: D b r
Diff: 2 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
3
, 12) Which element of financial accounting involves identifying thevindividuals who demand financi
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a l information?
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A) financial information br
B) economic entity br
C) user groups br
D) legal, economic, political, and social environment
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rAnswer: C b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
13) Which of the following is not one of the four basic financial statements?
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A) balance sheet br
B) trial balance br
C) cash flows statement br br
D) statement of comprehensive income br br br b
rAnswer: B b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
14) Which organization is responsible for promulgating U.S. GAAP?
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A) Financial Accounting Standards Board br br br
B) Public Company Accounting Oversight Board
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C) International Accounting Standards Board br br br
D) Securities and Exchange Commission br br br b
rAnswer: A b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
15) Which organization is responsible for setting auditing standards and overseeing the audits of publ
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i c companies invthe United States?
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A) Financial Accounting Standards Board br br br
B) Public Company Accounting Oversight Board
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C) American Institute of Certified Public Accountants br br br br br
D) Securities and Exchange Commission br br br b
rAnswer: B b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP
br b r
AACSB: Application of knowledge
b r b r br br
4
,IntermediatevAccounting, 3ev(Gordon/Raedy/Sannella) b r
Chapter 1 The Financial Reporting Environment
br br br br
1.1 Overview of Financial Reporting br br br
1) The financial reporting process generates three basic financial statements
br br br br br br br br
. Answer: FALSE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GAA b r br b
P: GAAP/IFRS
r b r
AACSB: Application of knowledge
b r b r br br
2) The demand for financial information is based on market participant demand
br br br br br br br br br br
. Answer: TRUE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GAA b r br b
P: GAAP/IFRS
r b r
AACSB: Application of knowledge
b r b r br br
3) Managers of economic entities are best considered to be users of financial information
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. Answer: FALSE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
4) Managers of economic entities are best considered to be preparers of financial information
br br br br br br br br br br br br
. Answer: TRUE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly trad
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e d companies.
br br
Answer: TRUE b r b r
Diff: 2 br
Objective: 1.1 IFRS/GA b r br
A P: GAAPbr b r
AACSB: Application of knowledge
b r b r br br
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies
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. Answer: FALSE
br b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAPbr b r
AACSB: Application of knowledge
b r b r br br
2
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards a
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n d oversees the audits of public companiesvin the United States.
br br br br br br br br br br
Answer: FALSE b r b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP
br b r
AACSB: Application of knowledge
b r b r br br
8) Financial accounting standards influence the behavior of managers and other internal users
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. Answer: TRUE
br b r
Diff: 2 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
9) Theories and procedures that evolve as a result of lobbying from various groups are examples
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o f proactive factors within the legal, economic, political, and social environment.
br br br br br br br br br br br
Answer: FALSE b r b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
10) Financial information includes information that is not governed by rules set forth by the accounti
br br br br br br br br br br br br br br
n g standard-setting bodies.
br br br
Answer: TRUE b r b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
11) What is the term that describes the process of identifying, measuring, and communicating financi
br br br br br br br br br br br br br
a l informationvabout an economic entity to various user groups?
br br br br br br br br br
A) financial reporting br
B) accounting standard setting br br
C) financial statement br
D) financial accounting br b
rAnswer: D b r
Diff: 2 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
3
, 12) Which element of financial accounting involves identifying thevindividuals who demand financi
br br br br br br br br br br
a l information?
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A) financial information br
B) economic entity br
C) user groups br
D) legal, economic, political, and social environment
br br br br br b
rAnswer: C b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
13) Which of the following is not one of the four basic financial statements?
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A) balance sheet br
B) trial balance br
C) cash flows statement br br
D) statement of comprehensive income br br br b
rAnswer: B b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
14) Which organization is responsible for promulgating U.S. GAAP?
br br br br br br br
A) Financial Accounting Standards Board br br br
B) Public Company Accounting Oversight Board
br br br br
C) International Accounting Standards Board br br br
D) Securities and Exchange Commission br br br b
rAnswer: A b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP/IFRS
br b r
AACSB: Application of knowledge
b r b r br br
15) Which organization is responsible for setting auditing standards and overseeing the audits of publ
br br br br br br br br br br br br br
i c companies invthe United States?
br br br br br
A) Financial Accounting Standards Board br br br
B) Public Company Accounting Oversight Board
br br br br
C) American Institute of Certified Public Accountants br br br br br
D) Securities and Exchange Commission br br br b
rAnswer: B b r
Diff: 1 br
Objective: 1.1 IFRS/GA b r br
A P: GAAP
br b r
AACSB: Application of knowledge
b r b r br br
4
