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CSU San Bernardino ACCT 544 Final Exam Set

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Question;Multiple Choice Practice Questions:Chapter 7:1. If a company is managing its earnings, which of the ethical theories are they most likely following? A. RightsB. FairnessC. EgoismD. Virtue 2. Which of the following is NOT considered "earnings management"? A. "Earnings management" is done to project smoother earnings from year to year.B. Management emphasizes achieving long-term results to meet financial goals.C. A Management uses "cookie-jar reserves each year."D. The executives manipulate the earnings in order to match their predetermined target. 3. Which of the following is NOT a motivation to manage earnings? A. Companies try to meet or beat Wall Street earnings projections in order to grow market capitalization and increase the value of stock optionsB. Companies try to accelerate as much revenue as possible into early periods regardless of the effects on later periodsC. To smooth net income over timeD. To maximize compensation including bonuses 4. Which technique was used by both WorldCom and Waste Management to manage earnings? A. Manipulating asset net valuation amounts to minimize operating expenses for a periodB. Accelerating the recording of revenue into an earlier periodC. Delaying needed repairs to a later periodD. All of these were used 5. Which of the following author(s) emphasize(s) a "purposeful act by management in pursuit of its own self-interests as might be the case when earnings are manipulated to get the stock price up in advance of the exercise of stock options."? A. Dechow and SkinnerB. Healy and WahlenC. SchipperD. Thomas E. McKee 6. Which of the following author(s) focus(es) on "management's intent to deceive the stakeholders by using accounting devices to positively influence reported earnings."? A. Dechow and SkinnerB. Healy and WahlenC. SchipperD. Thomas E. McKee 7. Which of the following author(s) link earnings management to choices made in determining earnings that may comprise aggressive, but acceptable, accounting estimates and judgments, as compared to fraudulent practices that are clearly intended to deceive others? A. Dechow and SkinnerB. Healy and WahlenC. SchipperD. Thomas E. McKee 8. Which of the following author(s) define(s) earnings management as "reasonable and legal management decision making and reporting intended to achieve stable and predictable financial results."? A. Dechow and SkinnerB. Healy and WahlenC. SchipperD. Thomas E. McKee 9. Who said "the ethics issue might possibly be mitigated by clearly disclosing aggressive accounting assumptions in the financial statement disclosures?" A. Hopwood et alB. Thomas E. McKeeC. Arthur LevittD. Belverd Needles 10. In surveys of managers, which technique to manage earnings was considered most acceptable? A. Changing inventory valuation in order to influence earningsB. Accounting manipulationC. Manipulating operating decisionsD. Establishing cookie jar reserves 11. Which of the following is NOT a qualitative factor when assessing materiality? A. A misstatement that changes a loss into income or vice versaB. The existence of statutory or regulator reporting requirements that affect materiality thresholdsC. The potential effect of the misstatement on trends, especially trends in profitabilityD. The use of simplistic numerical thresholds and rules of thumb 12. Vorhies identities four perspectives to help CPAs identify key internal control exceptions under the Sarbanes Oxley Act including: A. An internal control deficiency caused by accounting manipulationsB. A large variance in an accounting estimate compared with the actual determined amountC. A misstatement that changes a loss into income or vice versaD. All were identified 13. SAS No. 107 identifies the following aspects of disclosure amounts deemed to be material except for: A. Disclosing an item in one year but not in the next yearB. Qualitative aspects of the disclosureC. Quantitative significance of the disclosureD. Professional judgment 14. Each of the following techniques was used by Gemstar TV Guide International in its accounting fraud except for: A. Created cookie jar reserves of advertising revenue to smooth net incomeB. Engaged in round trip transactions whereby Gemstar paid money to a third party to advertise its services and capitalized that cost while the third party used Gemstar's funds to buy advertising from Gemstar, and the company recorded 100% of that amount as revenue while capitalizing the cost of its advertising paymentsC. Used channel stuffing to accelerate the recording of revenue into earlier periodsD. Inflated advertising revenue from nonmonetary and barter transactions 15. The best definition of a financial restatement is: A. A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information that was previously reportedB. A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information for the current periodC. An adjustment of financial information due to an error correctionD. All are part of the definitionChapter 8 Practice Questions:1. A common set of accounting standards on an international level can help to achieve each of the following except for: A. Facilitate the understandability of financial reports prepared outside the home country of a potential investorB. Facilitate international investmentC. Provide a foundation for professional judgment and support the implementation of international financial reporting standards (IFRS)D. Facilitate the enforcement of IFRS 2. IFRS tends to be more ____________ than U.S. GAAP. A. rules-basedB. principles-basedC. consistentD. accurate 3. One problem of a more principles-based system that was pointed out in an SEC study is that they: A. Tend to be rules-based more than objectives-oriented standardsB. May present enforcement problemsC. Use bright-line testsD. All of these 4. The SEC study of a principles-based system identifies each of the following characteristics that should guide standards setting except for: A. Be based on an improved and consistently applied conceptual frameworkB. Clearly state the accounting objective of the standardC. Minimize exceptions from the standardsD. Minimize the detail and structure so that the standard can be operationalized and applied on a consistent basis 5. Gray uses Hofstede's cultural values to identify four widely recognized accounting values, these values include all of the following except for: A. TransparencyB. Representational faithfulnessC. UncertaintyD. Conservatism 6. Given that IFRS is not currently required in the U.S., foreign companies that list their stock on the New York Stock Exchange must: A. Reconcile the financial statements in their home country GAAP to U.S. GAAPB. Use IFRS in their financial statementsC. Either reconcile their statements to U.S. GAAP or use IFRSD. Use their home country GAAP in their financial statements listed on the NYSE 7. Gray's study uses secrecy as the preference for confidentiality and restrictions on disclosures, this is associated with all of the following except: A. Higher power distanceB. Lower masculinityC. Lower individualismD. Higher uncertainty avoidance 8. The SEC is now calling the movement of U.S. GAAP to IFRS: A. ComparabilityB. CondorsementC. ConvergenceD. Conversion 9. The Norwalk agreement refers to: A. The commitment of the U.S. and European Union to adopt one set of accounting standardsB. The commitment of FASB and the International Accounting Standards Board (IASB) to adopt one set of accounting standardsC. The commitment of FASB and IASB to the convergence of U.S. GAAP and international accounting standardsD. The agreement that ended World War II 10. A study by the SEC notes that imperfections exist when standards are established on either a rules-based or a principles-based basis only. The SEC recommends that standards should have all of the following characteristics except: A. Enumerate exceptions from the standard.B. Provide sufficient detail and structure so that the standard can be operationalized and applied on a consistent basis.C. Avoid use of bright lines that allow structuring of financial transactions to achieve technical compliance while evading the intent of the standard.D. Be based on a consistently applied conceptual framework. 11. The relatively more principles-based IFRS standards requires each of the following except for: A. Professional judgment based on the substance over form conceptB. Professional judgment in applying the true and fair view overrideC. Professional judgment at both the transaction and financial statement levelsD. Professional judgment in applying the present fairly concept 12. The IFAC, IAESB and IESBA ethical principles are similar to those in the AICPA Code except for: A. IntegrityB. ObjectivityC. True and fair viewD. Professional competence 13. The reason some people are concerned about the possibility for earnings management under IFRS is: A. The principles-based system might lead preparers of financial statements to try and justify earnings by applying a substance over form conceptB. The principles-based system might lead preparers of financial statements to try and justify specific accounting outcome based on commercial driversC. It is more difficult to make materiality judgmentsD. It is more difficult to implement a set of generally accepted accounting and financial reporting standards 14. The U.K. Bribery Act is enforced by the Serious Fraud Office (SFO), the agency has provided a list of corruption indicators. These include all of the following except for: A. Abnormal cash payments and lavish gifts.B. Agreeing to contracts favorable to the organization.C. Private meeting with public contractors or companies hoping to tender an offer for contracts.D. Unexplained preference for certain contractors during the tendering process. 15. Lease standards in the U.S. can be manipulated to achieve the desired goal of: A. Determining lease payments at their present values to record an asset instead of an expenseB. Determining lease payments at their present values to record an expense instead of an assetC. Emphasizing form over substanceD. All of these

 

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