Question 1

Which of the following is a public sector accounting standard setter?

Accepted Answer

A)  FASB
B)  SEC
C)  APB
D)  CAP B

Question 2

Discuss the role of ethics in accounting.

Accepted Answer

Ethics are concerned with the types of behavior society considers right and wrong.Accounting ethics incorporate social standards of behavior as well as behavioral standards that relate specifically to the profession.The environment of public accounting has become ethically complex.The accountants' Code of Professional Ethics developed by the AICPA has evolved over time,and as business transactions have become more and more complex,ethical issues have also become more complex. The public accountant has a Ralph Nader-type overseer role in our society.This role was described by former Chief Justice of the United States Warren Burger: Corporate financial statements are one of the primary sources of information available to guide the decisions of the investing public.In an effort to control the accuracy of their financial data available to investors in the securities markets,various provisions of the federal securities laws require publicly held corporations to file their financial statements with the Securities and Exchange Commission.Commission regulations stipulate that these financial reports must be audited by an independent certified public accountant. By certifying the public reports that collectively depict a corporation's financial status,the independent accountant assumes a public responsibility transcending any employment relationship with the client.The independent public accountant performing this special function owes ultimate allegiance to the corporation's creditors and stockholders as well as the investing public.This "public watchdog" function demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust. The SEC requires the filing of audited financial statements in order to obviate the fear of loss from reliance on inaccurate information,thereby encouraging public investment in the nation's industries.It is,therefore,not enough that financial statements be accurate; the public must perceive them as being accurate.Public faith in the reliability of a corporation's financial statements depends upon the public perception of an outside auditor as an independent professional.

Question 3

Which of the following companies was involved in an accounting failure that caused the public accounting firm Arthur Andersen to gout of business?

Accepted Answer

A)  Goldman Sachs
B)  Wachovia
C)  Enron
D)  AIG C

Question 4

Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?

Accepted Answer

A)  The independence of the members of the APB.The individuals serving on the board had full-time responsibilities elsewhere that might influence their views of certain issues.
B)  The structure of the board.The largest eight public accounting firms at that time) were automatically awarded one member,and there were usually five or six other public accountants on the APB.
C)  Harmonization.The accounting standards developed were dissimilar to those developed by the International Accounting Standards Committee.
D)  Response time.The emerging accounting problems were not being investigated and solved quickly enough by the part-time members.

Question 5

Which of the following is the professional organization of university accounting professors?

Accepted Answer

A)  American Accounting Association
B)  American Institute of Certified Public Accountants
C)  American Institute of Accountants
D)  Financial Executives Institute

Question 6

Considering and understanding how business decisions affect the financial statements is

Accepted Answer

A)  The sole responsibility of the Securities and Exchange Commission.
B)  Provided in the auditor's report.
C)  Referred to as an economic consequence perspective.
D)  Interpreted strictly by the company's suppliers.

Question 7

Some accountants maintain that accounting standards are as much a product of political action as they are of careful logic or empirical findings.This belief is an example of the concept of

Accepted Answer

A)  Standard setting as apolitical process
B)  Standards overload
C)  Economic consequences
D)  The role of ethics in accounting

Question 8

Which of the following committees recommended abolishing the Accounting Principles Board and replacing it with the Financial Accounting Board?

Accepted Answer

A)  Wheat
B)  Cohen
C)  Trueblood
D)  Anderson

Question 9

Who has been given credit or developing the double-entry system of bookkeeping?

Accepted Answer

A)  Francis Wheat
B)  Fra Luca Pacioli
C)  A.C.Littleton
D)  William Paton

Question 10

What historical evidence of the business operations of the private estate of Apollonius was discovered early inthe20th century?

Accepted Answer

A)  The Iliad
B)  HYPERLINK "http://en.wikipedia.org/wiki/Plato" \o "Plato" Plato's HYPERLINK "http://en.wikipedia.org/wiki/The_Republic_(Plato) " \o "The Republic (Plato) " Republic
C)  The Zenon papyri
D)  Pacioli's work,Summa de Arithmetica Geometria Proportioni et Proportionalita,

Question 11

Why is the development of a general theory of accounting important

Accepted Answer

The answer of Why is the development of a general...

Question 12

Discuss the evolution of accounting during the 1930s.

Accepted Answer

The answer of Discuss the evolution of accounting during the...

Question 13

Discuss why standard setting may be viewed as a political process.

Accepted Answer

The answer of Discuss why standard setting may be viewed...

Question 14

Which of the following bodies has the ultimate authority to issue accounting pronouncements in the United States?

Accepted Answer

A)  Securities and Exchange Commission
B)  Financial Accounting Standards Board
C)  International Accounting Standards Committee
D)  Internal Revenue Service

Question 15

The impact of accounting reports on various segments of our economic society is the definition of the concept of

Accepted Answer

A)  Standard setting as apolitical process
B)  Standards overload
C)  Economic consequences
D)  The role of ethics in accounting

Question 16

How did the Sarbanes-Oxley Act change the way the FASB is funded?

Accepted Answer

The answer of How did the Sarbanes-Oxley Act change the...

Question 17

What is the difference between normative and positive theory?

Accepted Answer

The answer of What is the difference between normative and...

Question 18

What was the purpose of the GAAP Hierarchy?

Accepted Answer

The answer of What was the purpose of the GAAP...

Question 19

What controversy originally highlighted the need for standard setting groups to have more authority?

Accepted Answer

A)  Accounting for stock options
B)  Accounting for derivatives
C)  Accounting for marketable securities
D)  Accounting for the investment tax credit

Question 20

Which of the following types of pronouncements are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting?

Accepted Answer

A)  Statements of Concepts
B)  Statements of Financial Accounting Standards
C)  APB Opinions
D)  Accounting Standards Updates

Exam 1: The Development of Accounting Theory