Question 1

The notes to financial statements, while helpful, are not an integral part of the statements.

Accepted Answer

A) True 
 B)False

Question 2

A basic understanding of financial statements is needed due to ongoing financial turmoil and major corporate failures.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following items would not be discussed in the management discussion and analysis?

Accepted Answer

A)  Commitments for capital expenditures. 
B)  The market value of all assets. 
C)  The internal and external sources of liquidity. 
D)  A breakdown of sales increases into price and volume components. 
A)  Commitments for capital expenditures. 
B)  The market value of all assets. 
C)  The internal and external sources of liquidity. 
D)  A breakdown of sales increases into price and volume components.

Question 4

Conglomerates operating in diversified lines of business are required to create separate annual reports for each line of business.

Accepted Answer

A) True 
 B)False

Question 5

What item is not included in the notes to the financial statements?

Accepted Answer

A)  Details about inventory and property, plant and equipment. 
B)  Information about major acquisitions or divestitutures. 
C)  The management discussion and analysis. 
D)  A summary of the firm's accounting policies. 
A)  Details about inventory and property, plant and equipment. 
B)  Information about major acquisitions or divestitutures. 
C)  The management discussion and analysis. 
D)  A summary of the firm's accounting policies.

Question 6

The accrual basis of accounting means that revenues are recognized when the sale is made rather than when cash is received.

Accepted Answer

A) True 
 B)False

Question 7

What type of audit report indicates that the financial statements have not been presented fairly?

Accepted Answer

A)  A disclaimer of opinion. 
B)  An unqualified report. 
C)  A qualified report. 
D)  An adverse opinion. 
A)  A disclaimer of opinion. 
B)  An unqualified report. 
C)  A qualified report. 
D)  An adverse opinion.

Question 8

Management is responsible for the preparation of the financial statements, including the notes, and the auditor's report attests to the fairness of the presentation.

Accepted Answer

A) True 
 B)False

Question 9

The Sarbanes-Oxley Act eliminated the need for internal auditors.

Accepted Answer

A) True 
 B)False

Question 10

Despite the enactment of the Sarbanes-Oxley Act of 2002, corruption and unethical behavior continued in the 2000s.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following items is NOT discretionary in nature?

Accepted Answer

A)  Union wages. 
B)  Repairs and maintenance. 
C)  Research and development. 
D)  Advertising. 
A)  Union wages. 
B)  Repairs and maintenance. 
C)  Research and development. 
D)  Advertising.

Question 12

Accounting choices and estimates rarely have a significant impact on financial statement numbers.

Accepted Answer

A) True 
 B)False

Question 13

What information can be found on an income statement?

Accepted Answer

A)  The financing and investing activities during an accounting period. 
B)  Cash inflows and cash outflows. 
C)  A reconciliation of the beginning and ending balances of all revenue accounts. 
D)  Revenues, expenditures, net profit or loss and net profit or loss per share. 
A)  The financing and investing activities during an accounting period. 
B)  Cash inflows and cash outflows. 
C)  A reconciliation of the beginning and ending balances of all revenue accounts. 
D)  Revenues, expenditures, net profit or loss and net profit or loss per share.

Question 14

In 2006, the IASB and the FASB agreed to work on all major projects jointly.

Accepted Answer

A) True 
 B)False

Question 15

An unqualified auditor's report states that the financial statements present fairly the financial position, results of operation, and the cash flows of the entity.

Accepted Answer

A) True 
 B)False

Question 16

What item is probably the least useful when analyzing financial statements?

Accepted Answer

A)  Management discussion and analysis. 
B)  The notes to the financial statements. 
C)  The statement of cash flows. 
D)  Public relations materials. 
A)  Management discussion and analysis. 
B)  The notes to the financial statements. 
C)  The statement of cash flows. 
D)  Public relations materials.

Question 17

The goal of the International Accounting Standards Board is the adoption of uniform international accounting standards.

Accepted Answer

A) True 
 B)False

Question 18

What document is required by the SEC to solicit shareholder votes?

Accepted Answer

A)  Proxy statement. 
B)  Five-year summary. 
C)  Shareholders' letter. 
D)  Prospectus. 
A)  Proxy statement. 
B)  Five-year summary. 
C)  Shareholders' letter. 
D)  Prospectus.

Question 19

The globalization of business activity has resulted in which of the following?

Accepted Answer

A)  Increased corruption and unethical behavior. 
B)  A uniform set of accounting rules in all countries. 
C)  The FASB and IASB working jointly on a project to converge accounting standards. 
D)  The requirement that U.S. firms use international accounting rules as of 2006. 
A)  Increased corruption and unethical behavior. 
B)  A uniform set of accounting rules in all countries. 
C)  The FASB and IASB working jointly on a project to converge accounting standards. 
D)  The requirement that U.S. firms use international accounting rules as of 2006.

Question 20

The FASB was given Congressional authority to write accounting rules.

Accepted Answer

A) True 
 B)False

The notes to financial statements, while helpful, are not an integral part of the statements.

A basic understanding of financial statements is needed due to ongoing financial turmoil and major corporate failures.

Which of the following items would not be discussed in the management discussion and analysis?

Conglomerates operating in diversified lines of business are required to create separate annual reports for each line of business.

What item is not included in the notes to the financial statements?

The accrual basis of accounting means that revenues are recognized when the sale is made rather than when cash is received.

What type of audit report indicates that the financial statements have not been presented fairly?

Management is responsible for the preparation of the financial statements, including the notes, and the auditor's report attests to the fairness of the presentation.

The Sarbanes-Oxley Act eliminated the need for internal auditors.

Despite the enactment of the Sarbanes-Oxley Act of 2002, corruption and unethical behavior continued in the 2000s.

Which of the following items is NOT discretionary in nature?

Accounting choices and estimates rarely have a significant impact on financial statement numbers.

What information can be found on an income statement?

In 2006, the IASB and the FASB agreed to work on all major projects jointly.

An unqualified auditor's report states that the financial statements present fairly the financial position, results of operation, and the cash flows of the entity.

What item is probably the least useful when analyzing financial statements?

The goal of the International Accounting Standards Board is the adoption of uniform international accounting standards.

What document is required by the SEC to solicit shareholder votes?

The globalization of business activity has resulted in which of the following?

The FASB was given Congressional authority to write accounting rules.

The Balance Sheet

Income Statement and Statement of Stockholders Equity

Statement of Cash Flows

The Analysis of Financial Statements

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Exam 1: Financial Statements: an Overview

The notes to financial statements, while helpful, are not an integral part of the statements.

A basic understanding of financial statements is needed due to ongoing financial turmoil and major corporate failures.

Which of the following items would not be discussed in the management discussion and analysis?

Conglomerates operating in diversified lines of business are required to create separate annual reports for each line of business.

What item is not included in the notes to the financial statements?

The accrual basis of accounting means that revenues are recognized when the sale is made rather than when cash is received.

What type of audit report indicates that the financial statements have not been presented fairly?

Management is responsible for the preparation of the financial statements, including the notes, and the auditor's report attests to the fairness of the presentation.

The Sarbanes-Oxley Act eliminated the need for internal auditors.

Despite the enactment of the Sarbanes-Oxley Act of 2002, corruption and unethical behavior continued in the 2000s.

Which of the following items is NOT discretionary in nature?

Accounting choices and estimates rarely have a significant impact on financial statement numbers.

What information can be found on an income statement?

In 2006, the IASB and the FASB agreed to work on all major projects jointly.

An unqualified auditor's report states that the financial statements present fairly the financial position, results of operation, and the cash flows of the entity.

What item is probably the least useful when analyzing financial statements?

The goal of the International Accounting Standards Board is the adoption of uniform international accounting standards.

What document is required by the SEC to solicit shareholder votes?

The globalization of business activity has resulted in which of the following?

The FASB was given Congressional authority to write accounting rules.

The Balance Sheet

Income Statement and Statement of Stockholders Equity

Statement of Cash Flows

The Analysis of Financial Statements

Filters