Test Bank Inter Account 7e

Chapter 01

Environment and Theoretical Structure of Financial Accounting

True / False Questions

1. | The primary function of financial accounting is to provide relevant financial information to parties external to business enterprises. 

True    False |

2. | Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow. 

True    False |

3. | The FASB is currently the public-sector organization responsible for setting accounting standards in the United States. 

True    False |

4. | The FASB's due process invites various interested parties to indicate their opinions about whether financial accounting standards should be changed. 

True    False |

5. | Accounting for stock-based compensation is an area in which the FASB has received little political interference. 

True    False |

6. | The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States. 

True    False |

7. | A rules-based approach to standard setting stresses professional judgment as opposed to following a list of rules. 

True    False |

8. | Under federal securities laws, the SEC has the authority to set accounting standards in the United States. 

True    False |

9. | The primary responsibility for properly applying GAAP when communicating with investors and creditors through financial statements lies with a firm's auditors. 

True    False |

10. | Auditors play an important role in the resource allocation process by adding credibility to financial statements. 

True    False |

11. | The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP. 

True    False |

12. | In the United States the conceptual framework indicates GAAP when a more specific accounting standard does not apply. 

 ...