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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. Rights B. Fairness C. Egoism D. 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 options B. Companies try to accelerate as much revenue as possible into early periods regardless of the effects on later periods C. To smooth net income over time D. 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 period B. Accelerating the recording of revenue into an earlier period C. Delaying needed repairs to a later period D. 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 Skinner B. Healy and Wahlen C. Schipper D. 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 Skinner B. Healy and Wahlen C. Schipper D. 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 Skinner B. Healy and Wahlen C. Schipper D. 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 Skinner B. Healy and Wahlen C. Schipper D. 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 al B. Thomas E. McKee C. Arthur Levitt D. Belverd Needles 10. In surveys of managers, which technique to manage earnings was considered most acceptable? A. Changing inventory valuation in order to influence earnings B. Accounting manipulation C. Manipulating operating decisions D. 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 versa B. The existence of statutory or regulator reporting requirements that affect materiality thresholds C. The potential effect of the misstatement on trends, especially trends in profitability D. 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 manipulations B. A large variance in an accounting estimate compared with the actual determined amount C. A misstatement that changes a loss into income or vice versa D. 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 year B. Qualitative aspects of the disclosure C. Quantitative significance of the disclosure D. 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 income B. 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 payments C. Used channel stuffing to accelerate the recording of revenue into earlier periods D. 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 reported B. A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information for the current period C. An adjustment of financial information due to an error correction D. All are part of the definition Chapter 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 investor B. Facilitate international investment C. 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-based B. principles-based C. consistent D. 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 standards B. May present enforcement problems C. Use bright-line tests D. 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 framework B. Clearly state the accounting objective of the standard C. Minimize exceptions from the standards D. 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. Transparency B. Representational faithfulness C. Uncertainty D. 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. GAAP B. Use IFRS in their financial statements C. Either reconcile their statements to U.S. GAAP or use IFRS D. 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 distance B. Lower masculinity C. Lower individualism D. Higher uncertainty avoidance 8. The SEC is now calling the movement of U.S. GAAP to IFRS: A. Comparability B. Condorsement C. Convergence D. Conversion 9. The Norwalk agreement refers to: A. The commitment of the U.S. and European Union to adopt one set of accounting standards B. The commitment of FASB and the International Accounting Standards Board (IASB) to adopt one set of accounting standards C. The commitment of FASB and IASB to the convergence of U.S. GAAP and international accounting standards D. 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 concept B. Professional judgment in applying the true and fair view override C. Professional judgment at both the transaction and financial statement levels D. 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. Integrity B. Objectivity C. True and fair view D. 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 concept B. The principles-based system might lead preparers of financial statements to try and justify specific accounting outcome based on commercial drivers C. It is more difficult to make materiality judgments D. 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 expense B. Determining lease payments at their present values to record an expense instead of an asset C. Emphasizing form over substance D. All of these

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. Rights

B. Fairness

C. Egoism

D. 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 options

B. Companies try to accelerate as much revenue as possible into early periods regardless of the effects on later periods

C. To smooth net income over time

D. 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 period

B. Accelerating the recording of revenue into an earlier period

C. Delaying needed repairs to a later period

D. 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 Skinner

B. Healy and Wahlen

C. Schipper

D. 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 Skinner

B. Healy and Wahlen

C. Schipper

D. 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 Skinner

B. Healy and Wahlen

C. Schipper

D. 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 Skinner

B. Healy and Wahlen

C. Schipper

D. 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 al

B. Thomas E. McKee

C. Arthur Levitt

D. Belverd Needles
10. In surveys of managers, which technique to manage earnings was considered most acceptable?

A. Changing inventory valuation in order to influence earnings

B. Accounting manipulation

C. Manipulating operating decisions

D. 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 versa

B. The existence of statutory or regulator reporting requirements that affect materiality thresholds

C. The potential effect of the misstatement on trends, especially trends in profitability

D. 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 manipulations

B. A large variance in an accounting estimate compared with the actual determined amount

C. A misstatement that changes a loss into income or vice versa

D. 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 year

B. Qualitative aspects of the disclosure

C. Quantitative significance of the disclosure

D. 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 income

B. 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 payments

C. Used channel stuffing to accelerate the recording of revenue into earlier periods

D. 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 reported

B. A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information for the current period

C. An adjustment of financial information due to an error correction

D. All are part of the definition

 
Chapter 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 investor

B. Facilitate international investment

C. 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-based

B. principles-based

C. consistent

D. 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 standards

B. May present enforcement problems

C. Use bright-line tests

D. 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 framework

B. Clearly state the accounting objective of the standard

C. Minimize exceptions from the standards

D. 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. Transparency

B. Representational faithfulness

C. Uncertainty

D. 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. GAAP

B. Use IFRS in their financial statements

C. Either reconcile their statements to U.S. GAAP or use IFRS

D. 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 distance

B. Lower masculinity

C. Lower individualism

D. Higher uncertainty avoidance
8. The SEC is now calling the movement of U.S. GAAP to IFRS:

A. Comparability

B. Condorsement

C. Convergence

D. Conversion
9. The Norwalk agreement refers to:

A. The commitment of the U.S. and European Union to adopt one set of accounting standards

B. The commitment of FASB and the International Accounting Standards Board (IASB) to adopt one set of accounting standards

C. The commitment of FASB and IASB to the convergence of U.S. GAAP and international accounting standards

D. 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 concept

B. Professional judgment in applying the true and fair view override

C. Professional judgment at both the transaction and financial statement levels

D. 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. Integrity

B. Objectivity

C. True and fair view

D. 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 concept

B. The principles-based system might lead preparers of financial statements to try and justify specific accounting outcome based on commercial drivers

C. It is more difficult to make materiality judgments

D. 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 expense

B. Determining lease payments at their present values to record an expense instead of an asset

C. Emphasizing form over substance

D. All of these

Interested in a PLAGIARISM-FREE paper based on these particular instructions?...with 100% confidentiality?

Order Now