FP11 3.05 Explain legal considerations for accounting.

Which three reports are mandatory for every public company to file?

• income statement, balance sheet, and statement of cash flows

• income statement, balance sheet, and owner's equity statement

• income statement, cost of goods sold, and statement of cash flows

• balance sheet, owner's equity statement, and statement of cash flows

What independent federal government agency is responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital information?

• FASB

• GAAP

• PCAOB

• SEC

Which must be registered with the SEC before being eligible to be sold to investors?

• a position on the board of directors

• issues of securities offered in local offices

• the distribution of dividends to stockholders

• issues of securities offered in interstate commerce, through the mail, or on the InternetInter

The FASB is a private company that makes accounting rules, while the SEC is a governmental agency that regulates businesses listed on the stock market. The FASB and SEC work together as a:

• cooperative agency.

• public-private partnership.

• semi-governmental agency.

• government-public partnership.

A commonly recognized set of accounting guidelines for financial reporting in the United States that is responsible for investor confidence in the American markets is the:

• Certified Accounting Practitioner (CAP).

• Securities and Exchange Commission (SEC).

• Financial Accounting Standards Board (FASB).

• Generally Accepted Accounting Principles (GAAP).

The Sarbanes-Oxley Act of 2002 was created in response to:

• the Martha Stewart and Barclays scandals.

• the Enron, WorldCom, and Arthur Andersen scandals.

• the Madoff Ponzi scheme and the Bear Stearns Companies scandals.

• the Swissair, Adelphia Comminications, and Global Crossing scandals.

The main principle of GAAP is:

• competitiveness.

• consistency.

• ethics.

• unbiased.

A nonprofit organization responsible for setting the accounting standards in the United States is the:

• AICPA.

• FASB.

• GAAP.

• SEC.

The Sarbanes-Oxley Act of 2002 mandates that:

• CPA's take responsibility for the accuracy and completeness of corporate financial reports.

• senior executives take individual responsibility for the accuracy and completeness of corporate financial reports.

• each business will determine who should take responsibility for the accuracy and completeness of corporate financial reports.

• boards of directors take responsibility for the accuracy and completeness of corporate financial reports.