CPA EXAM PREP QUESTIONS AND ANSWERS
Chapter 1
The purpose of financial reporting is to provide information primarily for which of the
following groups?
A. Internal Revenue Service
B. Financial Accounting Standards Board
C. Investors and Creditors
D. Government - Answers- C. Investors and Creditors
The FASB has maintained that:
A. The interests of the reporting firms will be a primary consideration when developing
new GAAP
B. New GAAP should be neutral and not favor any particular reporting objective
C. GAAP should have little or no cost of compliance
D. GAAP should result in the most conservative possible financial statements -
Answers- B. New GAAP should be neutral and not favor any particular reporting
objective
Which of the following statements include the most useful guidance for practicing
accountants concerning the FASB Accounting Standards Codification.
A. The Codification significantly modified the content of GAAP when it became effective
B. The Codification includes only FASB statements
C. The Codification is the sole source of U.S. GAAP, for nongovernmental entities
D. An accountant can be sure that all SEC rules are included in the Codification -
Answers- C. The Codification is the sole source of U.S GAAP, for nongovernmental
entities
The FASB is a(n)
A. Private sector body
B. Group of accounting firms
C. Governmental unit
D. International organization - Answers- A. Private sector body
U.S. GAAP includes a very large set of accounting guidance. Choose the correct
statement.
A. The FASB Accounting Standards Codification includes guidance about items that are
not under the purview of the GAAP, such as the income tax basis of accounting.
,B. International accounting standards are not included in the FASB Accounting
Standards Codification
C. Authoritative guidance from FASB Statements adopted before the FASB Accounting
Standards Codification does not appear in the Codification
D. There is an implied hierarchy within the FASB Accounting Standards Codification,
with FASB statements assuming the top level - Answers- B. International accounting
standards are not included in the FASB Accounting Standards Codification
The FASB amends the Accounting Standards Codification through the issuance of
A. Technical bulletins
B. Accounting standards updates
C. statements of financial accounting standards
D. Staff accounting bulletins - Answers- B. Accounting standards updates
Which of the following best describes the operating procedure for issuing a new
Financial Standards Board (FASB) statement?
A. A new FASB statement can be rescinded by a majority vote of the AICPA
membership
B. the emerging issues task force must approve a discussion memorandum before it is
disseminated to the public
C. The exposure draft is modified per public opinion before issuing the discussion
memorandum
D. A new statement is issued only after a majority vote by the members of the FASB -
Answers- D. A new statement is issued only after a majority vote by the members of the
FASB
What group currently writes the Generally accepted accounting principles?
A. internal revenue service
B. Financial accounting standards board
C. securities and exchange commission
D. financial accounting foundation - Answers- B. FASB
Which of the following is not a reason to prepare prospective financial information?
A. to meet the requirements of GAAP
B. to obtain external financing
C. to aid in considering a change in accounting or operations
D. to aid in preparation of the budget - Answers- A. to meet the requirements of GAAP
Which of the following documents is typically issued as part of the due-process activities
of the FASB for amending the FASB Accounting Standards Codification?
, A. A proposed staff accounting bulletin
B. a proposed accounting research bulletin
C. A proposed accounting standards update
D. A proposed statement of position - Answers- C. A proposed accounting standards
update
Choose the correct statement about GAAP
A. firms may not restate financial statements previously issued
B. GAAP are laws
C. it is a violation of SEC regulations for publicly traded companies to depart from
GAAP
D. only publicly traded companies must comply with GAAP - Answers- C. it is a
violation of SEC regulations for publicly traded companies to depart from GAAP
Which of the following will best protect investors against fraudulent financial reporting by
corporations?
A. The requirement that financial statements be audited
B. The integrity of management
C. The fact that all firms must report the same way
D. Criminal statutes - Answers- A. The requirement that financial statements be audited
Each of the following statements is correct regarding the Financial Accounting
Standards Board except
A. It develops and attributes that allow organizations to understand the necessary
elements to ensure a robust system of internal control
B. It establishes accounting concepts and standards for financial accounting and
reporting and provides guidance on implementation of standards
C. It provides a conceptual framework that helps to increase understanding of, and
confidence in, financial information on the part of users of financial reports
D. It is recognized as authoritative by the United States Securities and Exchange
Commission and the American Institute of Certified Public Accountants - Answers- A. It
develops and attributes that allow organizations to understand the necessary elements
to ensure a robust system of internal control
Which of the following accounting literature is not included in the FASB Accounting
Standards Codification?
A. AICPA Statements of Position
B. Statements of Auditing Standards
C. FASB Statements
D. Accounting Research Bulletins - Answers- B. Statements of Auditing Standards
Chapter 1
The purpose of financial reporting is to provide information primarily for which of the
following groups?
A. Internal Revenue Service
B. Financial Accounting Standards Board
C. Investors and Creditors
D. Government - Answers- C. Investors and Creditors
The FASB has maintained that:
A. The interests of the reporting firms will be a primary consideration when developing
new GAAP
B. New GAAP should be neutral and not favor any particular reporting objective
C. GAAP should have little or no cost of compliance
D. GAAP should result in the most conservative possible financial statements -
Answers- B. New GAAP should be neutral and not favor any particular reporting
objective
Which of the following statements include the most useful guidance for practicing
accountants concerning the FASB Accounting Standards Codification.
A. The Codification significantly modified the content of GAAP when it became effective
B. The Codification includes only FASB statements
C. The Codification is the sole source of U.S. GAAP, for nongovernmental entities
D. An accountant can be sure that all SEC rules are included in the Codification -
Answers- C. The Codification is the sole source of U.S GAAP, for nongovernmental
entities
The FASB is a(n)
A. Private sector body
B. Group of accounting firms
C. Governmental unit
D. International organization - Answers- A. Private sector body
U.S. GAAP includes a very large set of accounting guidance. Choose the correct
statement.
A. The FASB Accounting Standards Codification includes guidance about items that are
not under the purview of the GAAP, such as the income tax basis of accounting.
,B. International accounting standards are not included in the FASB Accounting
Standards Codification
C. Authoritative guidance from FASB Statements adopted before the FASB Accounting
Standards Codification does not appear in the Codification
D. There is an implied hierarchy within the FASB Accounting Standards Codification,
with FASB statements assuming the top level - Answers- B. International accounting
standards are not included in the FASB Accounting Standards Codification
The FASB amends the Accounting Standards Codification through the issuance of
A. Technical bulletins
B. Accounting standards updates
C. statements of financial accounting standards
D. Staff accounting bulletins - Answers- B. Accounting standards updates
Which of the following best describes the operating procedure for issuing a new
Financial Standards Board (FASB) statement?
A. A new FASB statement can be rescinded by a majority vote of the AICPA
membership
B. the emerging issues task force must approve a discussion memorandum before it is
disseminated to the public
C. The exposure draft is modified per public opinion before issuing the discussion
memorandum
D. A new statement is issued only after a majority vote by the members of the FASB -
Answers- D. A new statement is issued only after a majority vote by the members of the
FASB
What group currently writes the Generally accepted accounting principles?
A. internal revenue service
B. Financial accounting standards board
C. securities and exchange commission
D. financial accounting foundation - Answers- B. FASB
Which of the following is not a reason to prepare prospective financial information?
A. to meet the requirements of GAAP
B. to obtain external financing
C. to aid in considering a change in accounting or operations
D. to aid in preparation of the budget - Answers- A. to meet the requirements of GAAP
Which of the following documents is typically issued as part of the due-process activities
of the FASB for amending the FASB Accounting Standards Codification?
, A. A proposed staff accounting bulletin
B. a proposed accounting research bulletin
C. A proposed accounting standards update
D. A proposed statement of position - Answers- C. A proposed accounting standards
update
Choose the correct statement about GAAP
A. firms may not restate financial statements previously issued
B. GAAP are laws
C. it is a violation of SEC regulations for publicly traded companies to depart from
GAAP
D. only publicly traded companies must comply with GAAP - Answers- C. it is a
violation of SEC regulations for publicly traded companies to depart from GAAP
Which of the following will best protect investors against fraudulent financial reporting by
corporations?
A. The requirement that financial statements be audited
B. The integrity of management
C. The fact that all firms must report the same way
D. Criminal statutes - Answers- A. The requirement that financial statements be audited
Each of the following statements is correct regarding the Financial Accounting
Standards Board except
A. It develops and attributes that allow organizations to understand the necessary
elements to ensure a robust system of internal control
B. It establishes accounting concepts and standards for financial accounting and
reporting and provides guidance on implementation of standards
C. It provides a conceptual framework that helps to increase understanding of, and
confidence in, financial information on the part of users of financial reports
D. It is recognized as authoritative by the United States Securities and Exchange
Commission and the American Institute of Certified Public Accountants - Answers- A. It
develops and attributes that allow organizations to understand the necessary elements
to ensure a robust system of internal control
Which of the following accounting literature is not included in the FASB Accounting
Standards Codification?
A. AICPA Statements of Position
B. Statements of Auditing Standards
C. FASB Statements
D. Accounting Research Bulletins - Answers- B. Statements of Auditing Standards
