M1

Question 1

Which of the following is the most authoritative source of U.S. GAAP?

Answer 1

• FASB Accounting Standards of Codification

Question 2

Primary users of financial reports include all of the following, except:

Answer 2

• Regulators

Question 3

How are amendments incorporated into the FASB Accounting Standards Codification?

Answer 3

• By releasing an Accounting Standards Update

Question 4

According to the FASB conceptual framework, the quality of information that helps users forecast future outcomes is:

Answer 4

• Predictive value – forecasting is predicting

Question 5

According to FASB conceptual framework, which of the following correctly pairs a fundamental qualitative characteristic of useful information with one of its components?

Answer 5

• Relevance and materiality – Relevance is a fundamental qualitative characteristic and materiality is a component of relevance

Question 6

According to the FASB conceptual framework, to be relevant, information should have which of the following?

Answer 6

• Predictive value – To be relevant, information should have predictive value and/or confirming value, and must be material

Question 7

According to the FASB conceptual framework, predictive value is a characteristic of:

Answer 7

• Relevance – Not a characteristic of faithful representation

Question 8

Conceptually, interim financial statements can be described as emphasizing which of the following enhancing qualitative characteristics?

Answer 8

• Timeliness – Interim financial statements emphasize timeliness by providing financial information based on actual performance to date and estimates prior to year end

Question 9

Which of the following is a qualitative characteristic that enhances the useful of financial information?

Answer 9

• Verifiability – There are four enhancing qualitative characteristics: compatibility, verifiability, timeliness, and understandability. These characteristics enable relevant, faithfully represented information to be more useful

Question 10

When a CPA is applying the enhancing qualitative characteristics of useful financial information, it is important for the CPA to remember that:

Answer 10

• Applying the enhancing qualitative characteristics is an iterative process that does not follow a prescribed order