Question 1

Which of the following is true of a balance sheet?

Accepted Answer

A)  It summarizes the performance of the organization over a specific period of time. 
B)  It supplements information provided by the income statement. 
C)  It shows the financial position of an organization on a specific date. 
D)  It explains some changes in the assets and liabilities of a company between two consecutive periods. 
A)  It summarizes the performance of the organization over a specific period of time. 
B)  It supplements information provided by the income statement. 
C)  It shows the financial position of an organization on a specific date. 
D)  It explains some changes in the assets and liabilities of a company between two consecutive periods.

Question 2

Internal and external comparisons, made during financial statement analysis, can reveal unexpected relationships or the absence of expected relationships.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a profitability ratio?

Accepted Answer

A)  return on assets 
B)  earnings per share 
C)  price to earnings 
D)  dividend yield 
A)  return on assets 
B)  earnings per share 
C)  price to earnings 
D)  dividend yield

Question 4

The journal entry testing prescribed by SAS No. 99 identifies several common characteristics of fraudulent entries. Which of the following is one such characteristic?

Accepted Answer

A)  an entry for credit sales to a buyer who does not pay his dues on time 
B)  an entry for repairs and maintenance of plant made every period 
C)  an entry for creating provisions for bad debts 
D)  an entry for asset made by the managing director of the company 
A)  an entry for credit sales to a buyer who does not pay his dues on time 
B)  an entry for repairs and maintenance of plant made every period 
C)  an entry for creating provisions for bad debts 
D)  an entry for asset made by the managing director of the company

Question 5

Which of the following is a difference between a forensic accountant and an accountant or auditor?

Accepted Answer

A)  A forensic accountant works with complete information, whereas an accountant or auditor works with incomplete information. 
B)  A forensic accountant commonly works backward, whereas an accountant or auditor typically works forward. 
C)  A forensic accountant works with financial ratios, whereas an accountant or auditor works with internal reports. 
D)  A forensic accountant uses professional skepticism while conducting the analysis, whereas an accountant or auditor has a more open mindset. 
A)  A forensic accountant works with complete information, whereas an accountant or auditor works with incomplete information. 
B)  A forensic accountant commonly works backward, whereas an accountant or auditor typically works forward. 
C)  A forensic accountant works with financial ratios, whereas an accountant or auditor works with internal reports. 
D)  A forensic accountant uses professional skepticism while conducting the analysis, whereas an accountant or auditor has a more open mindset.

Question 6

Which of the following is true of reviewed financial statements?

Accepted Answer

A)  These represent the most basic level of financial statements. 
B)  These have a broader scope as compared to audited financial statements. 
C)  These provide assurance to the user of the financial statements. 
D)  These have a limited implication of assurance. 
A)  These represent the most basic level of financial statements. 
B)  These have a broader scope as compared to audited financial statements. 
C)  These provide assurance to the user of the financial statements. 
D)  These have a limited implication of assurance.

Question 7

Which of the following is true of the cost principle?

Accepted Answer

A)  It highlights the proposition that value is not the focus of accounting and is not represented in financial statements. 
B)  Using this principle results in the subjectivity of value assessments. 
C)  Under this, costs are measured subjectively on actual basis. 
D)  It results in reflecting the current values of assets, liabilities, equity, revenues, and expenses shown on the financial statements. 
A)  It highlights the proposition that value is not the focus of accounting and is not represented in financial statements. 
B)  Using this principle results in the subjectivity of value assessments. 
C)  Under this, costs are measured subjectively on actual basis. 
D)  It results in reflecting the current values of assets, liabilities, equity, revenues, and expenses shown on the financial statements.

Question 8

Which of the following is one of Michael Porter's five competitive forces?

Accepted Answer

A)  the bargaining power of suppliers 
B)  the bargaining power of the government 
C)  the threat of industrial slowdown 
D)  the threat of technological obsolescence 
A)  the bargaining power of suppliers 
B)  the bargaining power of the government 
C)  the threat of industrial slowdown 
D)  the threat of technological obsolescence

Question 9

Which of the following is a fundamental accounting principle?

Accepted Answer

A)  price principle 
B)  objectivity principle 
C)  subjectivity principle 
D)  conformity principle 
A)  price principle 
B)  objectivity principle 
C)  subjectivity principle 
D)  conformity principle

Question 10

Explain the matching principle.

Accepted Answer

A major objective of accounting is the d

Question 11

In which of the following aspects does audit differ from compilation or review?

Accepted Answer

A)  An audit gives reasonable level of assurance to the users, whereas a compilation or review does not give any level of assurance to the users. 
B)  An audit requires an understanding of the entity's internal controls and assessment of fraud risk, whereas a compilation or review does not require such understanding or assessment. 
C)  An audit requires an auditor or accountant to perform inquiry and analytical procedures, whereas a compilation or review does not require such procedures. 
D)  An audit is performed to obtain limited assurance that there are no material modifications that should be made to the financial statements, whereas a compilation or review is performed without obtaining any level of assurance. 
A)  An audit gives reasonable level of assurance to the users, whereas a compilation or review does not give any level of assurance to the users. 
B)  An audit requires an understanding of the entity's internal controls and assessment of fraud risk, whereas a compilation or review does not require such understanding or assessment. 
C)  An audit requires an auditor or accountant to perform inquiry and analytical procedures, whereas a compilation or review does not require such procedures. 
D)  An audit is performed to obtain limited assurance that there are no material modifications that should be made to the financial statements, whereas a compilation or review is performed without obtaining any level of assurance.

Question 12

List the common disclosures that are to accompany a personal financial statement.

Accepted Answer

Like business financial statements, pers

Question 13

Which of the following is the correct formula for calculating dividend yield?

Accepted Answer

A)  Dividend yield = Book value per share / Dividends per share 
B)  Dividend yield = Dividends per share / Book value per share 
C)  Dividend yield = Dividends per share / Market value per share 
D)  Dividend yield = Market value per share / Dividends per share 
A)  Dividend yield = Book value per share / Dividends per share 
B)  Dividend yield = Dividends per share / Book value per share 
C)  Dividend yield = Dividends per share / Market value per share 
D)  Dividend yield = Market value per share / Dividends per share

Question 14

Which of the following is a difference between audits and compilations?

Accepted Answer

A)  The auditor's objective is to obtain reasonable assurance that the financial statements are free of material misstatements, whereas the objective of a compilation is to assist management in presenting financial information without obtaining any level of assurance. 
B)  Audits do not require an understanding of the entity's internal controls and an assessment of fraud risk, whereas compilations require an understanding of the entity's internal controls and an assessment of fraud risk. 
C)  Audits have a narrower scope as compared to reviews, whereas compilations have a broader scope as compared to reviews. 
D)  Audits provide a reasonable level of assurance to the users of the financial statements, whereas compilations provide a limited level of assurance to the users of the financial statements. 
A)  The auditor's objective is to obtain reasonable assurance that the financial statements are free of material misstatements, whereas the objective of a compilation is to assist management in presenting financial information without obtaining any level of assurance. 
B)  Audits do not require an understanding of the entity's internal controls and an assessment of fraud risk, whereas compilations require an understanding of the entity's internal controls and an assessment of fraud risk. 
C)  Audits have a narrower scope as compared to reviews, whereas compilations have a broader scope as compared to reviews. 
D)  Audits provide a reasonable level of assurance to the users of the financial statements, whereas compilations provide a limited level of assurance to the users of the financial statements.

Question 15

Which of the following is a difference between personal financial statements and business financial statements?

Accepted Answer

A)  Personal financial statements follow the cost principle, whereas business financial statements do not follow the cost principle. 
B)  Personal financial statements should present assets at estimated current values, whereas business financial statements should present assets at historical cost. 
C)  Personal financial statements are not governed by GAAP, whereas business financial statements are governed by GAAP. 
D)  Personal financial statements are prepared for a specific period of time, whereas business financial statements are prepared for a general period. 
A)  Personal financial statements follow the cost principle, whereas business financial statements do not follow the cost principle. 
B)  Personal financial statements should present assets at estimated current values, whereas business financial statements should present assets at historical cost. 
C)  Personal financial statements are not governed by GAAP, whereas business financial statements are governed by GAAP. 
D)  Personal financial statements are prepared for a specific period of time, whereas business financial statements are prepared for a general period.

Question 16

Financial ratios represent effects, not causes.

Accepted Answer

A) True 
 B)False

Question 17

Methods of financial statements analysis are most effectively applied together in a reiterative (rather than sequential) process.

Accepted Answer

A) True 
 B)False

Question 18

Give examples and explain techniques of cash flow manipulations which may not constitute GAAP violations.

Accepted Answer

Examples of cash flow manipulations, whi

Question 19

Content analysis is a quantitative method of determining characteristics of interest.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is a difference between conservatism principle and materiality principle?

Accepted Answer

A)  Conservatism requires that financial reporting should neither disproportionately overstate nor understate a situation, whereas materiality holds that strict adherence to accounting principles is not required for items of little significance. 
B)  Conservatism is listed as a constraint in the conceptual framework determined by the American financial community, whereas materiality is no longer listed as a constraint in the conceptual framework. 
C)  Conservatism holds that strict adherence to accounting principles is not required for items of little significance, whereas materiality requires that financial reporting should neither disproportionately overstate nor understate a situation. 
D)  Conservatism requires that revenues be measured within the specific reporting period, whereas materiality requires that costs be deducted from the reported revenues to determine the period's net income. 
A)  Conservatism requires that financial reporting should neither disproportionately overstate nor understate a situation, whereas materiality holds that strict adherence to accounting principles is not required for items of little significance. 
B)  Conservatism is listed as a constraint in the conceptual framework determined by the American financial community, whereas materiality is no longer listed as a constraint in the conceptual framework. 
C)  Conservatism holds that strict adherence to accounting principles is not required for items of little significance, whereas materiality requires that financial reporting should neither disproportionately overstate nor understate a situation. 
D)  Conservatism requires that revenues be measured within the specific reporting period, whereas materiality requires that costs be deducted from the reported revenues to determine the period's net income.

Which of the following is true of a balance sheet?

Internal and external comparisons, made during financial statement analysis, can reveal unexpected relationships or the absence of expected relationships.

Which of the following is a profitability ratio?

The journal entry testing prescribed by SAS No. 99 identifies several common characteristics of fraudulent entries. Which of the following is one such characteristic?

Which of the following is a difference between a forensic accountant and an accountant or auditor?

Which of the following is true of reviewed financial statements?

Which of the following is true of the cost principle?

Which of the following is one of Michael Porter's five competitive forces?

Which of the following is a fundamental accounting principle?

Explain the matching principle.

In which of the following aspects does audit differ from compilation or review?

List the common disclosures that are to accompany a personal financial statement.

Which of the following is the correct formula for calculating dividend yield?

Which of the following is a difference between audits and compilations?

Which of the following is a difference between personal financial statements and business financial statements?

Financial ratios represent effects, not causes.

Methods of financial statements analysis are most effectively applied together in a reiterative (rather than sequential) process.

Give examples and explain techniques of cash flow manipulations which may not constitute GAAP violations.

Content analysis is a quantitative method of determining characteristics of interest.

Which of the following is a difference between conservatism principle and materiality principle?

Introduction to the World of Forensic Accounting

The Legal Environment of Forensic Accounting

Screening and Staging Engagements

Gathering Evidence Interviews and Observations

Fraud and White-Collar Crime

Conducting a Fraud Investigation

Transforming Data Into Evidence Part 1

Transforming Data Into Evidence Part 2

Professional Responsibilities

Fundamentals of Business Valuation

Special Topics

Filters

Exam 5: Financial Statements Analysis Reading Between the Lines

Which of the following is true of a balance sheet?

Internal and external comparisons, made during financial statement analysis, can reveal unexpected relationships or the absence of expected relationships.

Which of the following is a profitability ratio?

The journal entry testing prescribed by SAS No. 99 identifies several common characteristics of fraudulent entries. Which of the following is one such characteristic?

Which of the following is a difference between a forensic accountant and an accountant or auditor?

Which of the following is true of reviewed financial statements?

Which of the following is true of the cost principle?

Which of the following is one of Michael Porter's five competitive forces?

Which of the following is a fundamental accounting principle?

Explain the matching principle.

In which of the following aspects does audit differ from compilation or review?

List the common disclosures that are to accompany a personal financial statement.

Which of the following is the correct formula for calculating dividend yield?

Which of the following is a difference between audits and compilations?

Which of the following is a difference between personal financial statements and business financial statements?

Financial ratios represent effects, not causes.

Methods of financial statements analysis are most effectively applied together in a reiterative (rather than sequential) process.

Give examples and explain techniques of cash flow manipulations which may not constitute GAAP violations.

Content analysis is a quantitative method of determining characteristics of interest.

Which of the following is a difference between conservatism principle and materiality principle?

Introduction to the World of Forensic Accounting

The Legal Environment of Forensic Accounting

Screening and Staging Engagements

Gathering Evidence Interviews and Observations

Fraud and White-Collar Crime

Conducting a Fraud Investigation

Transforming Data Into Evidence Part 1

Transforming Data Into Evidence Part 2

Professional Responsibilities

Fundamentals of Business Valuation

Special Topics

Filters