MBA 510 COMPREHENSIVE ANSWERS AND
QUESTIONS SET A+
✔✔External Users examples - ✔✔lenders, shareholders, governments, consumer
groups, external auditors, customers
✔✔Internal Users - ✔✔directly manage and operate the organization
✔✔Internal Users examples - ✔✔Purchasing managers, production manager,
distribution manager,
marketing managers,
service managers,'
research and development managers.
✔✔Ethics - ✔✔Beliefs that separate right from wrong
✔✔Three key steps to ethical decision - ✔✔1. Identify ethical concerns
2. Analyze options
3. Make ethical decision
✔✔What three factors push a person to commit fraud - ✔✔Opportunity, Pressure,
Rationalization
✔✔Sarbanes-Oxley Act or SOX - ✔✔Requires documentation and verification of
internal controls and emphasizes effective internal controls.
✔✔Auditors - ✔✔verify the effectiveness of internal controls
✔✔Dodd-Frank Act - ✔✔1. Clawback Mandates recovery of excessive pay.
2. Whistleblower SEC pays whistleblowers 10% to 30% of sanctions exceeding 1 million
✔✔Generally accepted accounting principles (GAAP) - ✔✔a set of accounting
standards that is used in the preparation of financial statements
, ✔✔Financial Accounting Standards Board (FASB) - ✔✔The primary accounting
standard-setting body in the United States.
✔✔International Accounting Standards Board (IASB) - ✔✔Issues International Financial
Reporting Standards (IFRS) that identify preferred accounting practices.
✔✔The FASB conceptual framework consists of the following: - ✔✔Objectives
Qualitative Characteristics
Elements
Recognition and measurement
✔✔Measurement principle (cost principle) - ✔✔accounting information is based on
actual cost
✔✔Revenue Recognition Principle - ✔✔The principle that companies recognize
revenue in the accounting period in which the performance obligation is satisfied.
✔✔Expense Recognition Principle - ✔✔States that A company records the expense it
incurred to generate the revenue reported. An example is rent costs of office space.
✔✔Full Disclosure Principle - ✔✔Accounting principle that dictates that companies
disclose circumstances and events that make a difference to financial statement users.
Often in footnotes
✔✔Going Concern Assumption - ✔✔The assumption that the company will continue in
operation for the foreseeable future.
✔✔4 accounting assumptions - ✔✔going concern, monetary unit, time period, business
entity
✔✔cost-benefit constraint - ✔✔prescribes that only information with benefits of
disclosure greater than the costs of providing it need be disclosed
✔✔Assets - ✔✔resources owned by a business. Expected to yield future benefits
✔✔Liabilities - ✔✔Amounts owed to creditors. obligations to provide assets, products,
or services to others.
✔✔Equity - ✔✔The owners claim on assets and is equal to assets minus liabilities.
✔✔Accounting Equation - ✔✔Assets = Liabilities + Equity
QUESTIONS SET A+
✔✔External Users examples - ✔✔lenders, shareholders, governments, consumer
groups, external auditors, customers
✔✔Internal Users - ✔✔directly manage and operate the organization
✔✔Internal Users examples - ✔✔Purchasing managers, production manager,
distribution manager,
marketing managers,
service managers,'
research and development managers.
✔✔Ethics - ✔✔Beliefs that separate right from wrong
✔✔Three key steps to ethical decision - ✔✔1. Identify ethical concerns
2. Analyze options
3. Make ethical decision
✔✔What three factors push a person to commit fraud - ✔✔Opportunity, Pressure,
Rationalization
✔✔Sarbanes-Oxley Act or SOX - ✔✔Requires documentation and verification of
internal controls and emphasizes effective internal controls.
✔✔Auditors - ✔✔verify the effectiveness of internal controls
✔✔Dodd-Frank Act - ✔✔1. Clawback Mandates recovery of excessive pay.
2. Whistleblower SEC pays whistleblowers 10% to 30% of sanctions exceeding 1 million
✔✔Generally accepted accounting principles (GAAP) - ✔✔a set of accounting
standards that is used in the preparation of financial statements
, ✔✔Financial Accounting Standards Board (FASB) - ✔✔The primary accounting
standard-setting body in the United States.
✔✔International Accounting Standards Board (IASB) - ✔✔Issues International Financial
Reporting Standards (IFRS) that identify preferred accounting practices.
✔✔The FASB conceptual framework consists of the following: - ✔✔Objectives
Qualitative Characteristics
Elements
Recognition and measurement
✔✔Measurement principle (cost principle) - ✔✔accounting information is based on
actual cost
✔✔Revenue Recognition Principle - ✔✔The principle that companies recognize
revenue in the accounting period in which the performance obligation is satisfied.
✔✔Expense Recognition Principle - ✔✔States that A company records the expense it
incurred to generate the revenue reported. An example is rent costs of office space.
✔✔Full Disclosure Principle - ✔✔Accounting principle that dictates that companies
disclose circumstances and events that make a difference to financial statement users.
Often in footnotes
✔✔Going Concern Assumption - ✔✔The assumption that the company will continue in
operation for the foreseeable future.
✔✔4 accounting assumptions - ✔✔going concern, monetary unit, time period, business
entity
✔✔cost-benefit constraint - ✔✔prescribes that only information with benefits of
disclosure greater than the costs of providing it need be disclosed
✔✔Assets - ✔✔resources owned by a business. Expected to yield future benefits
✔✔Liabilities - ✔✔Amounts owed to creditors. obligations to provide assets, products,
or services to others.
✔✔Equity - ✔✔The owners claim on assets and is equal to assets minus liabilities.
✔✔Accounting Equation - ✔✔Assets = Liabilities + Equity
