ACCT 229 TAMU 2026 EXAM SCRIPT QUESTIONS AND
ANSWERS RATED A+
✔✔Monetary Unity Assumption - ✔✔Only transactions that can be expressed in terms
of money can be included in the accounting records
✔✔Economic Entity Assumption - ✔✔Activities of the business are separate from
activities of the owners
✔✔Time Period Assumption - ✔✔The long life of a company can be reported over a
series of shorter time periods. Makes it possible to prepare the Income Statements for a
specific time period.
✔✔Going Concern Assumption - ✔✔The company will not go out of business in the
near future. Not liquidating.
✔✔Historical Cost Principle - ✔✔record assets at the cost paid to acquire them
✔✔Full Discloser Principle - ✔✔Provide all information sufficiently important to influence
decision
✔✔GAAP - ✔✔Generally Accepted Accounting Principles. Rules and assumptions
under which financial statements must be prepared. (USA).
✔✔SEC - ✔✔Securities and Exchange Commission.
-ultimate authority -THE ENFORCER
✔✔FASB - ✔✔Financial Accounting Standards Board.
-sets accounting standards in the US
✔✔AICPA - ✔✔American Institute of Certified Public Accountants.
-advises FASB. Professional organization for CPAs
✔✔PCAOB - ✔✔Public Company Accounting Oversight Board.
-set audit standards
✔✔IASB - ✔✔International Accounting Standards Board.
-created in 2001. Developed world wide accounting standards
✔✔IFRS - ✔✔International Financial Reporting Standards. (principle based)
-US adoption
-many countries currently using
, ✔✔Sarbanes-Oxley (SOX) Act (2002) - ✔✔-address the problems with financial
reporting after 2001-2002. ALL publicly traded companies and any international
companies that trade in the US stock exchange must comply with this law.
✔✔Key provisions of SOX (management) - ✔✔1. asses and report the effectiveness of
the company's internal control structure and procedures.
2. code of ethics established and reported.
3. if the financial statements are inaccurate or incomplete SOX requires the CEO and
CFO to certify annual financial statements.
4. Firms must provide a mechanism for anonymous reporting of fraudulent activities
(whistle-blower protection).
✔✔Key provisions of SOX (board of directors) - ✔✔1. Composition of the Board of
Directors requires some directors to be independent of management
2. Audit committee members be independent of management
✔✔Key provisions of SOX (the external auditors) - ✔✔1. stronger rules regarding
auditor independence. audit firms can no longer provide management consulting
services to its audit clients
2. Auditors report to the clients audit committee rather than to the clients management
team
✔✔Key provisions of SOX (enforcement) - ✔✔1. PCAOB (public company accounting
oversight board) has the power to regulate auditing firms
2. all accounting firms that audit publicly traded companies must register with the
PCAOB and follow its rules
✔✔Business - ✔✔all activities necessary to provide the members of an economic
system with goods and services
✔✔Understandability - ✔✔information should be comprehensible to those who are
willing to spend time to understand it.
✔✔Relevance - ✔✔capacity of information to make a difference in a decision
✔✔Faithful Representation - ✔✔is complete, neutral, and free from error
✔✔Comparability - ✔✔allows user to analyze two or more companies and look for
similarities or differences.
ANSWERS RATED A+
✔✔Monetary Unity Assumption - ✔✔Only transactions that can be expressed in terms
of money can be included in the accounting records
✔✔Economic Entity Assumption - ✔✔Activities of the business are separate from
activities of the owners
✔✔Time Period Assumption - ✔✔The long life of a company can be reported over a
series of shorter time periods. Makes it possible to prepare the Income Statements for a
specific time period.
✔✔Going Concern Assumption - ✔✔The company will not go out of business in the
near future. Not liquidating.
✔✔Historical Cost Principle - ✔✔record assets at the cost paid to acquire them
✔✔Full Discloser Principle - ✔✔Provide all information sufficiently important to influence
decision
✔✔GAAP - ✔✔Generally Accepted Accounting Principles. Rules and assumptions
under which financial statements must be prepared. (USA).
✔✔SEC - ✔✔Securities and Exchange Commission.
-ultimate authority -THE ENFORCER
✔✔FASB - ✔✔Financial Accounting Standards Board.
-sets accounting standards in the US
✔✔AICPA - ✔✔American Institute of Certified Public Accountants.
-advises FASB. Professional organization for CPAs
✔✔PCAOB - ✔✔Public Company Accounting Oversight Board.
-set audit standards
✔✔IASB - ✔✔International Accounting Standards Board.
-created in 2001. Developed world wide accounting standards
✔✔IFRS - ✔✔International Financial Reporting Standards. (principle based)
-US adoption
-many countries currently using
, ✔✔Sarbanes-Oxley (SOX) Act (2002) - ✔✔-address the problems with financial
reporting after 2001-2002. ALL publicly traded companies and any international
companies that trade in the US stock exchange must comply with this law.
✔✔Key provisions of SOX (management) - ✔✔1. asses and report the effectiveness of
the company's internal control structure and procedures.
2. code of ethics established and reported.
3. if the financial statements are inaccurate or incomplete SOX requires the CEO and
CFO to certify annual financial statements.
4. Firms must provide a mechanism for anonymous reporting of fraudulent activities
(whistle-blower protection).
✔✔Key provisions of SOX (board of directors) - ✔✔1. Composition of the Board of
Directors requires some directors to be independent of management
2. Audit committee members be independent of management
✔✔Key provisions of SOX (the external auditors) - ✔✔1. stronger rules regarding
auditor independence. audit firms can no longer provide management consulting
services to its audit clients
2. Auditors report to the clients audit committee rather than to the clients management
team
✔✔Key provisions of SOX (enforcement) - ✔✔1. PCAOB (public company accounting
oversight board) has the power to regulate auditing firms
2. all accounting firms that audit publicly traded companies must register with the
PCAOB and follow its rules
✔✔Business - ✔✔all activities necessary to provide the members of an economic
system with goods and services
✔✔Understandability - ✔✔information should be comprehensible to those who are
willing to spend time to understand it.
✔✔Relevance - ✔✔capacity of information to make a difference in a decision
✔✔Faithful Representation - ✔✔is complete, neutral, and free from error
✔✔Comparability - ✔✔allows user to analyze two or more companies and look for
similarities or differences.
