MGA 624 Quiz 2 Questions and Answers Latest Update 2025/2026
The Research Process - Answers understand the business
understand background/facts
define problem
think about appropriate treatment
search guidance
analyze alternatives and documents considerations
justify and document conclusion
Pre-Step: Understand the Business - Answers •Before you begin work in a new industry, get to
know the business.
•Understand:
-Primary business activities
-Sources of revenues, costs
-Unique accounting practices
-Peer group companies
Sources for getting to know an industry - Answers •AICPA Audit and Accounting Guides (A&A
Guides)
Review the company's 10-K
obtain information (Understand the Facts ) - Answers -Read transaction documents, including
draft or final contracts.
-Talk to individuals with knowledge of the transaction.
-If the company has undertaken similar transactions in the past, review any prior memos.
-If necessary, review peer company 10-Ks or industry-specific publications (e.g., whitepapers) to
see how others in the industry account for similar transactions.
certain transactions are so complex that specialists may be warranted, for example - Answers -
Business combinations, securitizations, "hybrid" debt offerings, and stock compensation or
pension-related transactions.
Step 2: Define the problem - Answers -identify the researchable question
, -The more specific you can make your questions, the more effective they will be in guiding your
research.
Step 3: Stop and Think - Answers -What accounting treatment do you think would be most
appropriate for this transaction or event?
•Thinking through the issue independently can help you avoid anchoring to the first possible
solution you find.
Search for Guidance - Answers start your search of the Codification by browsing to the topic
that you expect will be most relevant.
Analyze Alternatives - Answers you've found relevant guidance, you must analyze how it applies
to your fact pattern
-Document all factors considered in your analysis of the alternatives
When alternatives are present - Answers researchers must clearly identify and weigh the relative
merits of each alternative
Justify and Document Your Conclusion - Answers -Point to key factors from your analysis as
support.
-Also consider whether the selected treatment appropriately reflects the economic substance
and business purpose of the transaction. (This is an SEC staff suggestion).
objectives of accounting research - Answers -To account for transactions or items in a manner
that is appropriate and supportable based on authoritative guidance, and
To create documentation describing the research performed and supporting the conclusion
reached
Written documentation of a company's accounting positions: - Answers -Creates an audit trail
-Serves as a historical reference
-Provides support for the company's position, in the event it is ever questioned
Auditors must also - Answers maintain documentation evidencing their own research and
consideration of client accounting positions
Standard Memo Format - Answers Facts, issues, analysis, conclusion, financial statement and
disclosure impacts
Issues Memos: Facts - Answers •The Facts (or "Background") section of an issues memo
should include all relevant information necessary for understanding the transaction and its
accounting.
The Research Process - Answers understand the business
understand background/facts
define problem
think about appropriate treatment
search guidance
analyze alternatives and documents considerations
justify and document conclusion
Pre-Step: Understand the Business - Answers •Before you begin work in a new industry, get to
know the business.
•Understand:
-Primary business activities
-Sources of revenues, costs
-Unique accounting practices
-Peer group companies
Sources for getting to know an industry - Answers •AICPA Audit and Accounting Guides (A&A
Guides)
Review the company's 10-K
obtain information (Understand the Facts ) - Answers -Read transaction documents, including
draft or final contracts.
-Talk to individuals with knowledge of the transaction.
-If the company has undertaken similar transactions in the past, review any prior memos.
-If necessary, review peer company 10-Ks or industry-specific publications (e.g., whitepapers) to
see how others in the industry account for similar transactions.
certain transactions are so complex that specialists may be warranted, for example - Answers -
Business combinations, securitizations, "hybrid" debt offerings, and stock compensation or
pension-related transactions.
Step 2: Define the problem - Answers -identify the researchable question
, -The more specific you can make your questions, the more effective they will be in guiding your
research.
Step 3: Stop and Think - Answers -What accounting treatment do you think would be most
appropriate for this transaction or event?
•Thinking through the issue independently can help you avoid anchoring to the first possible
solution you find.
Search for Guidance - Answers start your search of the Codification by browsing to the topic
that you expect will be most relevant.
Analyze Alternatives - Answers you've found relevant guidance, you must analyze how it applies
to your fact pattern
-Document all factors considered in your analysis of the alternatives
When alternatives are present - Answers researchers must clearly identify and weigh the relative
merits of each alternative
Justify and Document Your Conclusion - Answers -Point to key factors from your analysis as
support.
-Also consider whether the selected treatment appropriately reflects the economic substance
and business purpose of the transaction. (This is an SEC staff suggestion).
objectives of accounting research - Answers -To account for transactions or items in a manner
that is appropriate and supportable based on authoritative guidance, and
To create documentation describing the research performed and supporting the conclusion
reached
Written documentation of a company's accounting positions: - Answers -Creates an audit trail
-Serves as a historical reference
-Provides support for the company's position, in the event it is ever questioned
Auditors must also - Answers maintain documentation evidencing their own research and
consideration of client accounting positions
Standard Memo Format - Answers Facts, issues, analysis, conclusion, financial statement and
disclosure impacts
Issues Memos: Facts - Answers •The Facts (or "Background") section of an issues memo
should include all relevant information necessary for understanding the transaction and its
accounting.
