PART6

Question 1

The primary recipients of financial statement information are external users, such as stockholders, creditors, and government agencies. Generally speaking, outside users of information are interested in the performance of the organization as a whole. Given the nature of these needs, financial reporting information must be prepared and presented by all organizations in a manner that is generally accepted and understood by external users.

Answer 1

Financial Reporting System

Question 2

FINANCIAL REPORTING PROCEDURES

Answer 2

1. Capture the transaction
2. Post to GL
3. Prepare Unadjusted TB
4. Make adjusting entries
5. Journalize and post adj. entries
6. Prepare adj. TB
7. Prepare the FS
8. Closing entries
9. Post-closing TB.

Question 3

Is the Internet standard specifically designed for business reporting and information exchange

Answer 3

XBRL(Extensible Business Reporting Language)

Question 4

Is a freely available and global standard for exchanging business information.

Answer 4

XBRL(Extensible Business Reporting Language)

Question 5

______ is the financial and operational business reporting offshoot of Extensible Markup Language (XML)

Answer 5

Extensible business reporting language (XBRL)

Question 6

Benefits of XBRL

Answer 6

Investors will have more time for analysis and insight.

The influence of XBRL in the financial reporting chain is such that regulatory reporting agencies like the Security Exchange Commission (SEC) are able to receive financial information faster, and hopefully detect and prevent fraud.

Question 7

Controlling the FRSv

Answer 7

1. Transaction Authorization
2. Segregation of Duties
3. Access Controls
4. Accounting Records

Question 8

The entity should be available to classify the important activities, particularly for economic operations. For each activity and significant event, the entity should ensure that documentation is adequate with respect to operations. Documentation should be complete, accurate and in accordance with the structures and policies of the management.

Answer 8

Transaction Authorization

Question 9

The task of updating the general ledger must be separate from all accounting and asset custody responsibility within the organization.

Answer 9

Segregation of Duties

Question 10

The task of updating the general ledger must be separate from all accounting and asset custody responsibility within the organization. Therefore, individuals with access authority to GL accounts should not:

Answer 10

1. Have record-keeping responsibility for special journals or subsidiary ledgers.
   
   2. Prepare journal vouchers.
   3. Have custody of physical assets.

Question 11

Unauthorized access to the GL accounts can result in errors, fraud, and misrepresentations in financial statements.

Answer 11

Access Controls

Question 12

______ must undergo an audit trail because it facilitates error prevention and correction when the data files are conveniently and logically organized.

Answer 12

Accounting Records

Question 13

Provides a formal means for monitoring the function of internal controls.

Answer 13

Management Reporting System

Question 14

Applications are discretionary

Answer 14

Management Reporting System

Question 15

Produces the financial and nonfinancial information needed by management to plan and control its business.

Answer 15

Management Reporting System

Question 16

Factors That Influence the MRS (Management Reporting System)

Answer 16

• Management principles
• Management function, level, and decision type
• Problem structure
• Types of management reports
• Responsibility accounting
• Behavioral considerations

Question 17

Management Principles

Answer 17

1. Formalization of tasks
2. Responsibility and authority
3. Span of control
4. Management by exception

Question 18

• Management structures the firm around the tasks it performs rather than around individuals with unique skills.
• It allows specification of the information needed to support the tasks.

Answer 18

Formalization of tasks:

Question 19

• ________ is an individual’s obligation to achieve desired results.
• _______ is an individual’s power to make decisions within the limits of that responsibility.
• Managers delegate _____ and _____ downward to subordinates

Answer 19

Responsibility and authority

Question 20

• The number of subordinates directly under the manager’s control.
• Detailed reports for managers with narrow ____.
• Summarized information for managers with broad _____.

Answer 20

Span of control

Question 21

• Managers should limit their attention to potential problem areas.
• Reports should focus on changes in key factors that are asymptomatic of potential problems

Answer 21

Management by exception

Question 22

Management Function, Level, and Decision Type

Answer 22

• Top Management- Strategic Planning
• Middle Management- Tactical Planning
• Operations Management- Operational Control
• Operations

Question 23

____ reflects how well the decision maker understands the problem.

Answer 23

Problem Structure

Question 24

Elements of problem structure

Answer 24

• -data
• -procedures
• -objectives

Question 25

reports must have value or information content

Answer 25

Report objectives

Question 26

Management Reports They should…

Answer 26

* Reduce the level of uncertainty associated with a problem facing the decision maker * Influence the behavior of the decision maker in a positive way

Question 27

Types of Management Reports

Answer 27

1. Programmed reports 2. Ad hoc reports

Question 28

Provide information to solve problems that users have anticipated.

Answer 28

Programmed reports

Question 29

2 subclasses of Programmed Reports:

Answer 29

a. Scheduled b. On demand

Question 30

subclasses of Programmed Reports: -according to established time frame

Answer 30

Scheduled

Question 31

subclasses of Programmed Reports: -triggered by events not by passage of times

Answer 31

On demand

Question 32

reports designed and created on an “as needed” basis as situations arise that require new information needs.

Answer 32

Ad hoc reports

Question 33

Implies that every economic event that affects the organization is the responsibility of and can be traced to an individual manager.

Answer 33

Responsibility Accounting

Question 34

Incorporates the fundamental principle that responsibility-area managers are accountable for items that they control.

Answer 34

Responsibility Accounting

Question 35

BEHAVIORAL CONSIDERATIONS

Answer 35

* Goal Congruence * A carefully structured management reporting system and compensation schemes help to appropriately assign authority and responsibility. * If compensation measures are not carefully designed, managers may be tempted to engage in actions not optimal for the organization in the long-run. * Occurs when a manager receives more information than he or she can assimilate. * Can cause managers to disregard their formal information and rely on informal--probably inferior--cues to help them make decisions. * Appropriate performance measures * Stimulate behavior consistent with the objectives of the firm * Consider all relevant aspects, not just one * Inappropriate performance measures—examples of adverse effects * The use of price variance to evaluate a purchasing agent can affect the quality of the items purchased. * The use of quotas (such as units produced) to evaluate a supervisor can affect quality control, material usage efficiency, labor relations, and plant maintenance. * The use of profit measures such as ROI, net income, and contribution margin can affect plant investment, employee training, inventory reserve levels, customer satisfaction, and labor relations.

Question 36

________ is an individual’s obligation to achieve desired results.

Answer 36

Responsibility

Question 37

________ is an individual’s obligation to achieve desired results.

Answer 37

Responsibility

Question 38

* _______ is an individual’s power to make decisions within the limits of that responsibility.

Answer 38

Authority