Exam 1: The Economic and Institutional Setting for Financial Reporting

Highly profitable but politically vulnerable firms have an incentive to make themselves appear less profitable than they really are.

Investors who follow a fundamental analysis approach determine the value the company's assets would yield if sold individually.

The network of conventions,rules,guidelines,and procedures used by the accounting profession is known as generally accepted auditing standards.

Financial information that does not favor one set of interested parties over another is

Financial reporting philosophies differ across countries.These philosophies evolve from and reflect several factors including all of the following except

Management has considerable discretion over the particular accounting procedures used in the statements and over the details contained in supplemental footnotes and related disclosures.

According to the full disclosure principle,companies create a competitive advantage when they report: • Details about the company's strategies,plans and tactics. • Information about the company's technological and managerial innovations. • Detailed information about the company's operations.

The degree to which the accounting actually represents the underlying economic events is faithful representation.

Besides assessing the general reasonableness of reported numbers in relation to the company's activities,industry conditions,and business climate,when designing audit procedures the company's auditor must also assess fraud risk factors that may be present.

Investors who compare a firm's discounted future cash flows to the current market price of a stock are using the

Stock markets are common in many countries and economies.Explain the need for and use of a stock market in an economy.

When financial statements are used to evaluate the performance of a company's top executives it is referred to as the _____________ function of financial reports.

Financial reports provide information that can reduce investors' uncertainty about the company's opportunities and risks,thereby raising the company's cost of capital.

Some capital providers possess enough bargaining power to allow them to compel companies to deliver the financial information they need for analysis.

Which one of the following has statutory authority to determine accounting rules?

A company's financial statements reflect information about

For years,two widely divergent financial reporting approaches existed in the world (the economic performance approach and the commercial and tax law approach).

Security analysts are among the most important users of financial statements.

The IASB and FASB are working together to develop a single set of high-quality,compatible accounting standards that can be used for both domestic and cross-border financial reporting.

Regulators of industries granted monopoly privileges use financial statement data in setting allowable charges for the services these industries provide.