Exam 2: Financial Reporting and Analysis

The management of Finner Company believes that "the statement of cash flows is not a very useful statement" and does not include it with the company's financial statements. As a result the auditor's opinion should be:

The two secondary qualities of accounting information to make it useful for decision making are:

The "big bath" strategy is often used in conjunction with an income-increasing strategy for other years.

Accrual accounting overcomes both the timing and the matching problems that are inherent in cash accounting.

Accounting information is "material" if its omission would cause a reasonable person to make a different decision if the information was included.

SFAS 157 defines fair value as the:

Which of the following is incorrect? When using the 10-Q, the analyst should be aware that the usefulness of the quarterly financial statements might be affected by:

Income shifting is not one of the earnings management mechanics.

SFAS prescribes that information about the level of inputs used for determining fair values must be reported in the:

Which of the following is not considered part of GAAP?

The development of the financial statements is management's responsibility and the auditor is not concerned with the process of development.

Which of the following is not considered a monitoring mechanism?

Accounting Standards are best described as:

Which one of the following is not an example of a red flag, used to evaluate earnings quality?

The Securities and Exchange Commission (SEC) has the power to issue accounting standards, but generally defers this responsibility to the Financial Accounting Standards Board (FASB).

Under accrual accounting, a company will recognize expenses as they are paid.

Operating earnings includes all revenue and expense components that pertain to the company's operating business, regardless of whether they are recurring or nonrecurring.

Which of the following statements about directors of a company is true?

Which of the following statements about accruals and cash flows is true?

Accounting standards are set by the American Institute of Certified Public Accountants (AICPA).