A304 Module 1 Review

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Financial vs. managerial accounting differs primarily in that financial accounting:

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Serves external users and follows GAAP/SEC rules

Front

Which is NOT one of the three primary business activities measured by accounting? Options: Operating, Investing, Hedging, Financing

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Hedging

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The 1934 Securities Exchange Act most directly: Created the FASB, Created the SEC and periodic reporting, Mandated integrated audit for all private firms, Required sustainability reports

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Created the SEC and periodic reporting

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Which filing contains audited annual statements, notes, MD&A, and auditor’s report? Options: 10-Q, 8-K, 10-K, S-1

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10-K

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An unqualified audit opinion states that the financial statements are:

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In conformity with GAAP and free of material misstatement

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The Conceptual Framework’s fundamental qualitative characteristics are: Comparability and Verifiability, Relevance and Faithful Representation, Timeliness and Understandability, Materiality and Cost Constraint

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Relevance and Faithful Representation

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Which is an enhancing qualitative characteristic (not fundamental)? Options: Relevance, Faithful Representation, Comparability, Neutrality

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Comparability

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Which is a basic assumption underlying GAAP? Options: Conservatism, Periodicity (time-period), Full disclosure, Matching

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Periodicity (time-period)

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Which best describes the agency problem? Options: Bank competition raises deposit rates, Managers (agents) may not act in owners’ interests due to information asymmetry, Auditors set GAAP to control firms, Investors disagree on returns

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Managers (agents) may not act in owners’ interests due to information asymmetry

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Typical ESG/sustainability disclosures include: LIFO layers, Greenhouse gas emissions and safety metrics, EPS computations, Derivatives fair-value hierarchy only

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Greenhouse gas emissions and safety metrics