Ch 1 - Acct, Lang of Business GEN 2

Question 1

When does SEC grant and exception to following GAAP for a publicly traded company?

Answer 1

when a company can show that following GAAP would produce information which is misleading

Question 2

What is the purpose of GAAP?

Answer 2

to ensure that financial info fairly represents a firm’s operating results and financial position

Question 3

What are the 5 main steps of creating a GAAP?

Answer 3

1. discussion memorandum 2. public hearings
2. exposure draft
3. public hearings
4. statement of financial accounting standards vote and put into effect

Question 4

Who is the American Accounting Association (AAA)? (2)

Answer 4

1. group of accounting educators

2. research possible effects of proposed FASB statements and offer their opinions

Question 5

How many votes are required by the FASB to pass a statement of financial accounting standard?

Answer 5

4

Question 6

Who creates GAAP?

Answer 6

FASB

Financial Accounting Standards Board

Question 7

Who is the IASB?

Answer 7

International Accounting Standards Board

Question 8

What are the two primary functions of the IASB?

Answer 8

1. deal with issues caused by lack of uniform accounting principles
2. makes recommendations to enhance comparability of reporting practices

Question 9

What does an auditor’s report include? (2)

Answer 9

1. auditor’s opinion about fair presentation of operating results and financial position of business
2. confirms financial info is prepared in line with GAAP

Question 10

What do manager’s of a business need to ensure about their financial info? (3)

Answer 10

1. timely
2. accurate
3. fair

Question 11

What standards should financial statements be based upon?

Answer 11

GAAP

Question 12

What are the three general things financial info can help a mgr do?

Answer 12

1. control present operations
2. make decisions
3. plan for the future