Deck 15: Global Accounting and Taxation

Question 1

In the United States,an external auditor's opinion on a publicly traded company's financial statements is included in the annual report that the company files with the SEC.

Answer 1

True

Question 2

Neither U.S.GAAP nor IFRS permit use of the LIFO method.

Answer 2

False

Question 3

Given the fact that lenders make money in both directions,both positive and negative trends in financial performance are good news for lenders.

Answer 3

False

Question 4

Conducting business in a tax haven means that there are no taxes whatsoever.

Question 5

The highest corporate income taxes can be found in the United States and Japan.

Question 6

A typical AIS has two principal objectives: (1)to provide all the financial information internally needed by management for business decision-making,known as management accounting; and (2)to provide financial information to various external users concerned with the financial activities of the organization,known as financial accounting.

Question 7

The statement that shows the beginning balance for retained earnings,additions and reductions to retained earnings,and the ending balance of retained earnings is called the income statement.

Question 8

The primary external users of accounting information are governmental units,lenders,vendors,credit-rating agencies,stockholders,customers,and employees.

Question 9

Transfer pricing is used by most multinational corporations.

Question 10

Financial ratios are helpful in equalizing companies of different sizes for comparison of financial performance.

Question 11

Because differences in culture and business environments leads to differences in the GAAP of countires,in 1970 an international GAAP was developed and is used by all countries today.

Question 12

A main goal of the International Accounting Standards Board is to develop,in the public interest,a single set of high quality,understandable,and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements.

Question 13

Pressures for the IASB to harmonize its accounting standards is coming from cross-border mergers and acquisitions and rapid growth in international capital markets.

Question 14

Complete the following equation: ______ = Current Assets /Current Liabilities.

A) Debt Ratio
B) Net Profit
C) Total Liabilities
D) Current Ratio
E) Quick Ratio

Question 15

Types of taxes include all of the following EXCEPT:

A) payroll
B) sales
C) service
D) value-added
E) labor

Question 16

Normally a lower current ratio indicates a better financial position,for it implies that that a company has adequate liquidity to carry out business operations.

Question 17

Internal auditors review all aspects of operations in search of improvement,as well as review the internal control structure to determine if they are operating as expected.

Question 18

An evaluation of a company's financial statements in order to identify significant trends or relationships among the items is called a(n)_____ analysis.

A) relative
B) financial statement
C) domestic
D) management accounting
E) accounting

Question 19

A(n)_____ answers the question: What is the firm's financial position at a designated point in time?

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value

Question 20

Of the following,which is NOT true about international financial reporting standards?

A) Board members of the IASB come from 25 countries.
B) The IASB is committed to developing,in the public interest,a single set of high quality,understandable,and enforceable global accounting standards.
C) The IASB represents more than 100 worldwide accounting and financial organizations.
D) Most projects require a minimum of three years from formation to standard issuance.
E) Each IASB Member has one vote on technical and other matters.

Question 21

_____ provide the procedures for dealing with specific accounting matters.

A) GIIP
B) ASEAN
C) CPAP
D) SFAS
E) GAAP

Question 22

Which of the following statements is NOT true of the IASB?

A) The IASB's purpose is to create a single set of high quality,understandable,and enforceable global accounting standards.
B) The publication of a Standard,Exposure Draft,or final SIC Interpretation requires approval by nine of the Board Members.
C) The IASB is a set of international accounting standards that require transparent and comparable information in general purpose financial statements.
D) The IASB represents accounting and financial organizations from more than 100 countries
E) The IASB is independent and privately funded.

Question 23

When members of a corporate family are located in different countries,_________.

A) taxes are avoided altogether
B) taxes are handled under international law
C) transfer pricing affects taxes owed and company profits
D) transfer pricing does not affect taxes owed but does affect profits
E) transfer pricing does affect taxes owed but does not affect company profits

Question 24

_____ pricing refers to the pricing of goods and services that are bought and sold internally between members of a corporate family.

A) Mark-up
B) Subsidiary
C) Value
D) Arm's length
E) Transfer

Question 25

Which of the following statements is NOT true about corporate income tax rates and economic activity?

A) The income tax is the primary sources of revenues for national governments around the world.
B) Before the Great Depression,state and local government expenditures in the U.S.were much lower than federal expenditures.
C) When state corporate income tax rates are added to federal rates,Japan has the highest combined corporate income tax rate among OECD countries.
D) The great majority of U.S.government expenditures are on nondefense items such as health,economic support,and education.
E) From 2005-2008,the average gross savings rate of OECD countries increased.

Question 26

Accountants who work in the _____ accounting field need to be licensed by the state or states in which they work; the license is designated Certified Public Accountant (CPA).

A) public
B) non-profit
C) government
D) private
E) certified

Question 27

In the United States,an external audit must be conducted by a(n)_______.

A) certified government accountant
B) independent CPA
C) forensic accountant
D) financial advisor
E) chartered accountant

Question 28

Which would NOT typically be an objective of a financial statement audit?

A) Ensuring the existence of assets and liabilities and occurrence of income and expenses
B) Evaluating the economy and efficiency with which scarce resources are used
C) Verifying that all financial statement items are properly presented
D) Ensuring that the auditee owns the assets and is obligated to the extent of liabilities shown
E) Verifying the proper valuation of assets,liabilities,income,and expenses

Question 29

All of the following are the highest level of the primary sources of authoritative accounting literature,EXCEPT:

A) AICPA Accounting Interpretations
B) Non-superseded sections of the Accounting Research Bullentins issued by the Committee on Accounting Procedures
C) Statements of Financial Accounting Standards issued by FASB
D) Interpretations issued by the FASB
E) Statements and Interpretations of the Governmental Accounting Standards Board

Question 30

Which of the following external users would require financial statement information,specifically information concerning ability to meet financial obligations?

A) Governmental units
B) Lenders
C) Vendors
D) Employees
E) Customers

Question 31

The first step of an audit typically is to _____.

A) communicate audit results
B) arrive at audit opinion
C) plan the audit
D) obtain and evaluate evidence
E) brainstorm ideas for the audit

Question 32

Differences between U.S.and International GAAP are influenced by all of the following EXCEPT:

A) political and legal systems
B) language
C) taxation
D) sources of capital
E) inflation

Question 33

The relationship of a number on the financial statements to another number is called a _____.

A) financial ratio
B) financial statement
C) domestic term
D) management accounting marker
E) financial deposit

Question 34

Internal audits are also called _____ audits.

A) human resource
B) management
C) transactional
D) competitive
E) federal

Question 35

Complete the following equation: Debt Ratio = __? __ / Total Assets.

A) Losses
B) Net Profit
C) Total Liabilities
D) Total Assets
E) Cash Flows

Question 36

Which financial statement answers the question: How much income did the firm earn or lose during the period?

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value

Question 37

Liabilities + Owners' Equity = _______.

A) Net Income
B) Assets
C) Retained Earnings
D) Operating Cash Flows
E) Total Profit

Question 38

_____ refers to an independent,privately funded accounting standard-setter based in London,U.K.,that issues International Financial Reporting Standards.

A) GAAP
B) SFAS
C) IASB
D) IFRS
E) PAWS

Question 39

Of the following,which is the LOWEST level of authoritative accounting literature?

A) Accounting textbooks
B) AICPA Accounting Interpretations
C) AICPA Issues Papers
D) Industry accounting practices
E) Interpretations issues by the FASB

Question 40

There are two major categories of auditing: _____ auditing and _____ auditing.

A) management; financial
B) domestic; international
C) transactional; transformational
D) descriptive; evaluative
E) external; internal

Question 41

Scenario - Brininger Enterprises
Rapid City,South Dakota has been home to Brininger Enterprises since 1984.This company is recognized around the world for its superior cutlery and currently ranks as number three within the industry.In 2011,Brininger Enterprises recorded gross sales of over sixteen million dollars.From its gross sales,the company claimed net profits of four million dollars.Brininger Enterprises is quite proud of its performance.It realizes the company's financial records truly show this organization is doing something right.
Brininger Enterprises maintains accurate and thorough accounting records.Which piece of the company's accounting records would be needed to identify what cash monies were received and what cash was paid out by the company?

A) Statement of cash flows
B) Income statement
C) Balance sheet
D) Retained earnings statement
E) Petty cash fund

Question 42

The _______ statement summarizes the revenues earned and the expenses incurred by a business over a period of time.

Question 43

On a balance sheet for a corporation,the term owners' equity is replaced by the term ________ equity.

Question 44

Scenario - Brininger Enterprises
Rapid City,South Dakota has been home to Brininger Enterprises since 1984.This company is recognized around the world for its superior cutlery and currently ranks as number three within the industry.In 2011,Brininger Enterprises recorded gross sales of over sixteen million dollars.From its gross sales,the company claimed net profits of four million dollars.Brininger Enterprises is quite proud of its performance.It realizes the company's financial records truly show this organization is doing something right.
Brininger Enterprises conducts extensive internal audits to insure the reliability and accuracy of its accounting records.Which one of the following is least likely a step in its internal auditing process?

A) Communicate the results
B) Obtain and evaluate evidence
C) Arrive at an audit opinion
D) Plan the audit
E) Publicize its results in the financial news

Question 45

Financial accounting is the component of the AIS that provides financial information needed by _______ users,such as investors and lenders.

Question 46

Scenario - Brininger Enterprises
Rapid City,South Dakota has been home to Brininger Enterprises since 1984.This company is recognized around the world for its superior cutlery and currently ranks as number three within the industry.In 2011,Brininger Enterprises recorded gross sales of over sixteen million dollars.From its gross sales,the company claimed net profits of four million dollars.Brininger Enterprises is quite proud of its performance.It realizes the company's financial records truly show this organization is doing something right.
Brininger Enterprises conducts international business.It realizes there are sometimes different accounting guidelines that need to be followed when dealing on an international level.In essence,there are differences between U.S.and international GAAP.Which one of the following is NOT a factor that would influence the development of accounting and financial reporting?

A) Numbering system
B) Sources of capital
C) Inflation
D) Culture
E) Legal systems

Question 47

Of the following statements about financial ratios,which is NOT true?

A) Financial ratios are designed to assess different aspects of the firm's financial situation.
B) Financial ratios enable meaningful comparisons among companies of different sizes to assess which companies are performing better and which are performing worse.
C) A low current ratio implies that a company has adequate liquidity to carry out business operations.
D) A rule of thumb is that companies should have a current ratio between 1 and 2.
E) The current ratio is often important in debt covenants.

Question 48

In this GAAP inventory costing method,a company keeps track of the cost of individual inventory items.

A) Specific identification
B) FIFO
C) LIFO
D) Weighted average
E) MACRS

Question 49

What are retained earnings?

A) The part of earnings generated from operations that is paid to employees
B) The sum total of all assets,liabilities,and owners' equity accounts
C) The sum total of all inflows and outflows of cash for an organization
D) The part of stockholder equity generated from operations and kept for use in future operations
E) The combined net worth of a company as of a certain date

Question 50

Scenario - The Williams Company
Based in South Dakota,USA,the Williams Company has been in operation since 1967.It has five branches located in China,Europe,South America,Mexico,and Canada.Its exquisite product line of fine custom-made jewelry is highly desired throughout the world.This company has maintained a very healthy balance sheet.
The Williams Company is known within the industry for integrity and fair business practices.This company maintains an accounting system that is open for any stakeholder to view.It prides itself on being honest and trustworthy.The company feels it is this honesty in business practice that has led it to be a billion dollar organization.
The Williams Company places a high value on maintaining integrity in its operations.Part of ensuring this integrity is maintained involves having frequent audits of the company's accounting records performed.Which one of the following would not be considered an objective of a financial statement audit?

A) Ensure dividends are allocated for stakeholders
B) Ensure all items are properly presented on the financial statements
C) Ensure there is proper valuation of assets
D) Ensure expenses are not overstated
E) Ensure financial statements are complete

Question 51

Of the following statements about tax rates in selected countries,which is NOT true?

A) Only developed nations impose a corporate income tax.
B) Tax rates and other business-related information can be obtained from the OECD.
C) Most OECD countries are high-income economies.
D) Corporate income taxes range from high levels,for example,35 percent in the U.S.to low levels,for example,12.5 percent in Ireland.
E) Countries that have little or no corporate income tax are known as tax havens.

Question 52

The current ratio is calculated as current assets divided by current ________.

Question 53

The _______ Accounting Standards Board is an independent,privately funded accounting standard-setter based in London.

Question 54

Scenario - The Williams Company
Based in South Dakota,USA,the Williams Company has been in operation since 1967.It has five branches located in China,Europe,South America,Mexico,and Canada.Its exquisite product line of fine custom-made jewelry is highly desired throughout the world.This company has maintained a very healthy balance sheet.
The Williams Company is known within the industry for integrity and fair business practices.This company maintains an accounting system that is open for any stakeholder to view.It prides itself on being honest and trustworthy.The company feels it is this honesty in business practice that has led it to be a billion dollar organization.
If the company's stakeholders requested to be shown a financial statement that summarized the revenues earned and the expenses incurred by the Williams Company for a given period of time,which one of the following statements would they most likely be requesting?

A) Income statement
B) Cash flow statement
C) Retained earnings statement
D) Balance sheet
E) Trial balance sheet

Question 55

______ is the recording,summarizing,and reporting of the economic activities and events of an organization.

Question 56

The ______ is a financial statement that answers the question: What is the firm's financial position at a designated point in time.

Question 57

_______ is an evaluation of a company's financial statements in order to identify significant trends or relationships among the items.

Question 58

_______ accounting refers to the component of the accounting information system that provides the financial information needed internally by business managers for efficient and effective decision-making.

Question 59

A statement that lists the balances of the asset,liability,and owners' equity accounts of a business on a specific date is known as a(n)_____.

A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
E) statement of net value
Enter the appropriate word(s)to complete the statement.

Question 60

According to the ________ inventory costing method,the cost of the first inventory unit purchased is assumed to be the first cost transferred out to cost of goods sold.

Question 61

Scenario - The Williams Company
Based in South Dakota,USA,the Williams Company has been in operation since 1967.It has five branches located in China,Europe,South America,Mexico,and Canada.Its exquisite product line of fine custom-made jewelry is highly desired throughout the world.This company has maintained a very healthy balance sheet.
The Williams Company is known within the industry for integrity and fair business practices.This company maintains an accounting system that is open for any stakeholder to view.It prides itself on being honest and trustworthy.The company feels it is this honesty in business practice that has led it to be a billion dollar organization.
Which one of the following would the Williams Company expect to establish a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements?

A) GAAP
B) AIS
C) SFAS
D) IFRS
E) NAACP