Question 1

Auditors should exercise professional skepticism, which means that ________.

Accepted Answer

A)  auditors should have questioning minds and make a critical assessment of audit evidence 
B)  auditors should assume that management is dishonest until proven otherwise 
C)  auditors should assume that management has incentives to bias information in the financial statements 
D)  auditors should believe that there is biased information in the financial statements and work to extract that type of information 
A)  auditors should have questioning minds and make a critical assessment of audit evidence 
B)  auditors should assume that management is dishonest until proven otherwise 
C)  auditors should assume that management has incentives to bias information in the financial statements 
D)  auditors should believe that there is biased information in the financial statements and work to extract that type of information

Question 2

What are the first three steps, in correct sequence, of the accounting research process?

Accepted Answer

A)  Identify the issue, establish the facts, search the authoritative literature. 
B)  Search the authoritative literature, identify the issue, establish the facts. 
C)  Establish the facts, identify the issue, search the authoritative literature. 
D)  Search the authoritative literature, establish the facts, evaluate the results. 
A)  Identify the issue, establish the facts, search the authoritative literature. 
B)  Search the authoritative literature, identify the issue, establish the facts. 
C)  Establish the facts, identify the issue, search the authoritative literature. 
D)  Search the authoritative literature, establish the facts, evaluate the results.

Question 3

The Basis for Conclusions are found in the Statements of Financial Accounting Standards.

Accepted Answer

A) True 
 B)False

Question 4

Caesar Company needs to purchase a new delivery truck. Rather than taking the time to research which truck would best fit the company's needs, the manager calls his friend to ask which truck he would recommend. The manager is exhibiting ________.

Accepted Answer

A)  bad judgment 
B)  overconfidence bias 
C)  availability bias 
D)  anchoring bias 
A)  bad judgment 
B)  overconfidence bias 
C)  availability bias 
D)  anchoring bias

Question 5

What is the first step in the financial accounting research process?

Accepted Answer

A)  identify the issue 
B)  search the authoritative literature 
C)  establish and understand the facts 
D)  review the transaction reports 
A)  identify the issue 
B)  search the authoritative literature 
C)  establish and understand the facts 
D)  review the transaction reports

Question 6

Identify the level of the IFRS Literature Hierarchy that each item belongs to.
 $$\begin{array} { | l | l | } 
\hline \text { Authoritative Literature } & \text { Level } \
\hline \text { Industry practice } & \
\hline \text { The Conceptual Framework recognition criteria related to income } & \
\hline \text { Authoritative rules from IFRS for similar and related transactions } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 7

Robert and Francis Associates, Inc. had a board meeting to discuss future investment opportunities. Edward was a loud proponent of investing in Excel-o-rator Corporation, so much so that nobody else got a word in edgewise. Many board members didn't really think investing in Excel-o-rator was a good idea, but agreed to invest in Excel-o-rator in order to keep Edward happy, and get the meeting over with. The board is exhibiting ________.

Accepted Answer

A)  availability bias 
B)  anchoring bias 
C)  groupthink bias 
D)  confirmatory bias 
A)  availability bias 
B)  anchoring bias 
C)  groupthink bias 
D)  confirmatory bias

Question 8

Explain how an accountant would use assumptions and estimates when accounting for property, plant, and equipment.

Accepted Answer

Accountants use assumptions about the pa

Question 9

The Codification subtopics are generally distinguished by accounting area or scope.

Accepted Answer

A) True 
 B)False

Question 10

Accountants use judgment when ________.

Accepted Answer

A)  researching and interpreting standards 
B)  recognizing and contemplating standards 
C)  estimating and recording economic events 
D)  All of the above 
A)  researching and interpreting standards 
B)  recognizing and contemplating standards 
C)  estimating and recording economic events 
D)  All of the above

Question 11

Why is it important for accountants to understand the structure of the Codification?

Accepted Answer

Conducting financial accounting research

Question 12

________ are systematic deviations from rationality which can impact judgments on a daily basis.

Accepted Answer

A)  Cognitive biases 
B)  Relational biases 
C)  Emotional biases 
D)  Subjective biases 
A)  Cognitive biases 
B)  Relational biases 
C)  Emotional biases 
D)  Subjective biases

Question 13

During the research process, if you are unsure whether or not you've found all the relevant literature, what should you do?

Accepted Answer

A)  Call your manager to verify that you've found it all. 
B)  Complain that it's too much work and call it a day. 
C)  Google it to see if there is anything else you've missed. 
D)  Use the search engine included in the Codification. 
A)  Call your manager to verify that you've found it all. 
B)  Complain that it's too much work and call it a day. 
C)  Google it to see if there is anything else you've missed. 
D)  Use the search engine included in the Codification.

Question 14

IFRS and U.S. GAAP have the same disclosure requirements regarding the estimates made at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 15

The final step in the accounting research process is to communicate the results.

Accepted Answer

A) True 
 B)False

Question 16

The first three steps of the accounting research process are establishing the facts, identify the issue and search the authoritative literature. What are the last 3 steps, in correct sequence, of the accounting research process?

Accepted Answer

A)  Evaluate the results of the search, develop conclusions, communicate the results. 
B)  Communicate the results of the search, develop conclusions, communicate the results of the research. 
C)  Evaluate the results, communicate the results of the research, develop conclusions. 
D)  Develop conclusions, evaluate the results, communicate the results of the research. 
A)  Evaluate the results of the search, develop conclusions, communicate the results. 
B)  Communicate the results of the search, develop conclusions, communicate the results of the research. 
C)  Evaluate the results, communicate the results of the research, develop conclusions. 
D)  Develop conclusions, evaluate the results, communicate the results of the research.

Question 17

The footnote outlining the portfolio of accounting choices is one of the first footnotes in the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a required attribute for information to be considered reliable under IFRS?

Accepted Answer

A)  complete in all material respects 
B)  prudent 
C)  neutral 
D)  faithful to past standards 
A)  complete in all material respects 
B)  prudent 
C)  neutral 
D)  faithful to past standards

Question 19

Documenting the rationale for decisions made can help mitigate cognitive biases.

Accepted Answer

A) True 
 B)False

Question 20

Identify the level of the U.S. GAAP Literature Hierarchy that each item belongs to.
 $$\begin{array} { | l | l | } 
\hline \text { Authoritative Literature } & \text { Level } \
\hline \text { Authoritative rules and principles from U.S. GAAP for similar } & \
\text { transactions } & \
\hline \text { FASB Concept Statements } & \
\hline \text { International Financial Reporting Standards } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Exam 3: Judgment and Applied Financial Accounting Research

Auditors should exercise professional skepticism, which means that ________.

What are the first three steps, in correct sequence, of the accounting research process?

The Basis for Conclusions are found in the Statements of Financial Accounting Standards.

Caesar Company needs to purchase a new delivery truck. Rather than taking the time to research which truck would best fit the company's needs, the manager calls his friend to ask which truck he would recommend. The manager is exhibiting ________.

What is the first step in the financial accounting research process?

Identify the level of the IFRS Literature Hierarchy that each item belongs to. Authoritative Literature Level Industry practice The Conceptual Framework recognition criteria related to income Authoritative rules from IFRS for similar and related transactions

Explain how an accountant would use assumptions and estimates when accounting for property, plant, and equipment.

The Codification subtopics are generally distinguished by accounting area or scope.

Accountants use judgment when ________.

Why is it important for accountants to understand the structure of the Codification?

________ are systematic deviations from rationality which can impact judgments on a daily basis.

During the research process, if you are unsure whether or not you've found all the relevant literature, what should you do?

IFRS and U.S. GAAP have the same disclosure requirements regarding the estimates made at the end of the accounting period.

The final step in the accounting research process is to communicate the results.

The first three steps of the accounting research process are establishing the facts, identify the issue and search the authoritative literature. What are the last 3 steps, in correct sequence, of the accounting research process?

The footnote outlining the portfolio of accounting choices is one of the first footnotes in the financial statements.

Which of the following is not a required attribute for information to be considered reliable under IFRS?

Documenting the rationale for decisions made can help mitigate cognitive biases.

Identify the level of the U.S. GAAP Literature Hierarchy that each item belongs to. Authoritative Literature Level Authoritative rules and principles from U.S. GAAP for similar transactions FASB Concept Statements International Financial Reporting Standards

The Financial Reporting Environment

Financial Reporting Theory

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

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