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Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
Chapter 1 The Financial Reporting Environment
1.1 Overview of Financial Reporting
1) The financial reporting process generates three basic financial statements.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
2) The demand for financial information is based on market participant demand.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
3) Managers of economic entities are best considered to be users of financial information.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
4) Managers of economic entities are best considered to be preparers of financial information.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly traded
companies.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
1
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7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards and
oversees the audits of public companies in the United States.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
8) Financial accounting standards influence the behavior of managers and other internal users.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are examples of
proactive factors within the legal, economic, political, and social environment.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
10) Financial information includes information that is not governed by rules set forth by the accounting
standard-setting bodies.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
11) What is the term that describes the process of identifying, measuring, and communicating financial
information about an economic entity to various user groups?
A) financial reporting
B) accounting standard setting
C) financial statement
D) financial accounting
Answer: D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
2
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12) Which element of financial accounting involves identifying the individuals who demand financial
information?
A) financial information
B) economic entity
C) user groups
D) legal, economic, political, and social environment
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
13) Which of the following is not one of the four basic financial statements?
A) balance sheet
B) trial balance
C) cash flows statement
D) statement of comprehensive income
Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
14) Which organization is responsible for promulgating U.S. GAAP?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) International Accounting Standards Board
D) Securities and Exchange Commission
Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of public
companies in the United States?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute of Certified Public Accountants
D) Securities and Exchange Commission
Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
3
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Page 1 of 1272
,? Verified correct answers and rationales for efficient study Page 2
Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
Chapter 1 The Financial Reporting Environment
1.1 Overview of Financial Reporting
1) The financial reporting process generates three basic financial statements.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
2) The demand for financial information is based on market participant demand.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
3) Managers of economic entities are best considered to be users of financial information.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
4) Managers of economic entities are best considered to be preparers of financial information.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly traded
companies.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
1
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,? Verified correct answers and rationales for efficient study Page 3
7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards and
oversees the audits of public companies in the United States.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
8) Financial accounting standards influence the behavior of managers and other internal users.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are examples of
proactive factors within the legal, economic, political, and social environment.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
10) Financial information includes information that is not governed by rules set forth by the accounting
standard-setting bodies.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
11) What is the term that describes the process of identifying, measuring, and communicating financial
information about an economic entity to various user groups?
A) financial reporting
B) accounting standard setting
C) financial statement
D) financial accounting
Answer: D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
2
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12) Which element of financial accounting involves identifying the individuals who demand financial
information?
A) financial information
B) economic entity
C) user groups
D) legal, economic, political, and social environment
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
13) Which of the following is not one of the four basic financial statements?
A) balance sheet
B) trial balance
C) cash flows statement
D) statement of comprehensive income
Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
14) Which organization is responsible for promulgating U.S. GAAP?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) International Accounting Standards Board
D) Securities and Exchange Commission
Answer: A
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of public
companies in the United States?
A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute of Certified Public Accountants
D) Securities and Exchange Commission
Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
3
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