Exam 1: The Economic and Institutional Setting for Financial Reporting

The growth of global investing has spurred development of worldwide accounting standards that are written by the

Under certain circumstances,it is permissible to issue financial statements that contain a material departure from GAAP.

The Financial Accounting Standards Board has the sole responsibility for setting generally accepted auditing standards.

Financial information that is provided to decision makers before it loses its capacity to influence their decisions is

The Securities and Exchange Act of 1934 required all publicly traded firms to

The organization responsible for establishing auditing standards and inspecting and investigating auditing practices of public accounting firms is

Investors are uncertain about the quality of each company's debt or equity offerings because the ultimate return from the security depends on the company's past performance which is difficult to accurately measure.

Firms weigh the benefits they may gain from financial disclosures against the costs they incur in making those disclosures.

A company's financial statements can be used for all of the following purposes except

Companies that have projected operating cash flows that are more than sufficient to meet debt payments are

Financial statements are crucial in investment decisions that use fundamental analysis to identify mispriced securities (i.e.,securities selling for more or less than they seem to be worth).

Being verifiable and neutral is part of what makes financial information

Managers are the stewards of the company's resources and thus responsible for their efficient use and for protecting them from adversity.

Companies can smooth reported income by strategically timing the recognition of revenue and expenses to dampen the normal ups and downs of business activity.

Financial reporting is arguably one of the most heavily regulated areas of business activity.Provide the main reasons why accounting information is so heavily regulated.In your answer try to address the intended consequences of such regulation.

Contracts often contain language that refers to financial statement numbers.

While until recently accounting standards were developed by home-country organizations for use by domestic companies,countries in (at least)the European Union based their standards on a common philosophy and shared financial reporting objectives.

Companies needing to access new and ever larger sources of capital in response to increased international competitiveness face a severe disadvantage if their financial reporting

Financial reporting regulatory requirements are designed to ensure that companies meet certain minimum levels of financial disclosure.

Because the supply of financial information is guided by the costs of producing and disseminating it and the benefits it will provide to the company,regulatory groups have little influence over the amount and type of financial information that companies disclose.