A304 Module 1 Review

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

• Is for internal use and unconstrained by GAAP
• Is future-oriented and product-specific
• Serves external users and follows GAAP/SEC rules
• Focuses on day-to-day operations

Which is NOT one of the three primary business activities measured by accounting?

• Operating
• Investing
• Hedging
• Financing

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

Which filing contains audited annual statements, notes, MD&A, and auditor’s report?

• 10-Q
• 8-K
• 10-K
• S-1

An unqualified audit opinion states that the financial statements are:

• In conformity with GAAP and free of material misstatement
• Misstated overall
• Mostly correct but with pervasive scope limitation
• Correct but auditor declines to opine

The Conceptual Framework’s fundamental qualitative characteristics are:

• Comparability and Verifiability
• Relevance and Faithful Representation
• Timeliness and Understandability
• Materiality and Cost Constraint

Which is an enhancing qualitative characteristic (not fundamental)?

• Relevance
• Faithful Representation
• Comparability
• Neutrality

Which is a basic assumption underlying GAAP?

• Conservatism
• Periodicity (time-period)
• Full disclosure
• Matching

Which best describes the agency problem?

• 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

Typical ESG/sustainability disclosures include:

• LIFO layers
• Greenhouse gas emissions and safety metrics
• EPS computations
• Derivatives fair-value hierarchy only