Accounting Test 2

Question 1

What are the AICPA Principles

Answer 1

1. Responsibilities Principle
2. Objectivity and Independence
3. Public Interest Principle
4. Due Care Principle
5. Integrity Principle

Question 2

Responsiblities Principle

Answer 2

In carrying out their duties as professionals, members should exercise sensitive professional and moral judgments in all their activities.

Question 3

Objectivity and Independence

Answer 3

A member should be free of conflicts of interest in discharging professional responsibilities.

Question 4

Public Interest Principle

Public Interest Principle

Answer 4

Members should accept the obligation to act in a way that will honor public trust and demonstrate a commitment to professionalism.

Question 5

Due Care Principle

Answer 5

A member should observe the profession’s technical and ethical standards and strive to continually improve competence.

Question 6

Integrity Principle

Answer 6

To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of good character.

Question 7

What are the Internal Control Objectives

Answer 7

1. Safeguard Assets
2. Encourage employees to follow company policies
3. Promote Operational efficiency
4. Ensure accurate and reliable accounting records
5. Comply with legal requirements

Question 8

Encourage employees to follow company policies

Answer 8

Everyone in an organization follows a proper systems of controls.

Question 9

Safeguard assets

Answer 9

A company must protect what brings them future economic benefits.

Question 10

Comply with legal requirements

Answer 10

Companies, like people, are subject to laws, such as those of regulatory agencies, the IRS, and governing bodies.

Question 11

Ensure accurate, reliable accounting records

Answer 11

Proper controls are in place to ensure precise, good quality records.

Question 12

Promote operational efficiency

Answer 12

Companies should have controls that minimize waste, which lowers costs and increases profits.

Question 13

Internal control procedures

Answer 13

1. Smart hiring
2. Separation of duties
3. comparison and compliance monitoring
4. limited access
5. proper approvals

Question 14

smart hiring

Answer 14

things like background checks

Question 15

separation of duties

Answer 15

not all should go in 1 persons hands

Question 16

comparison and compliance monitoring

Answer 16

cross checking from other departments

Question 17

proper approvals

Answer 17

someone else signing off to approve payments

Question 18

Operating

Answer 18

Create revenue, expenses, gains, and losses. Most companies would want the majority of their cash to flow in from operating

Question 19

Financing

Answer 19

obtain cash from investors + creditors. also issuing stock, borrowing money, buying + selling, treasury stock, paying dividends, and paying loans.

Question 20

Investing

Answer 20

increase or decrease in long term assets. A negative cash flow in investing could indicate that a company is purchasing long-term assets.

Question 21

A large increase in accounts receivable can mean what?

Answer 21

Collections are lagging or sales have grown.

Question 22

If you take on a lot of debt, your cash flow in financing activities will probably be (POSITIVE/NEGATIVE).

Answer 22

positive

Question 23

puroses of cash flow statement

Answer 23

1. Predicts future cash flow.
2. Evaluates management decisions.
3. Determines ability to pay dividends and interest.
4. Shows relationship between net income and cash flows.

Question 24

What are the three types of business activities that appear on the cash flow document?

Answer 24

Operating, Investing, and Financing

Question 25

Indirect method

Answer 25

reconciles for net income to net cash provided by operating activities

Question 26

Direct method

Answer 26

records all cash receipts and cash payments from operating activities

Question 27

An increase in accrued liablities would INCREASE/DECREASE cash provided by operations activities.

Answer 27

Increase

Question 28

GAAP (Generally accepted accounting principles)

Answer 28

Accounting guidelines developed by FASB that govern how accounting is practiced.

Question 29

IASB (International Accounting Standards Board)

Answer 29

International regulatory body that formulates guidelines for accounting.

Question 30

FASB (Financial Accounting Standards Board)

Answer 30

Regulatory body in the US that formulates guidelines for accounting.

Question 31

AICPA (American Institute of Certified Public Accountants)

Answer 31

Professional organization that has a code of conduct for accountants.

Question 32

SEC (Securities and Exchange Commission)

Answer 32

Government organization whose primary purpose is to enforce the law against market manipulation.

Question 33

The SOX Act was passed in this year.

Answer 33

2002

Question 34

All public companies must issue…

Answer 34

an internal control report

Question 35

The Public Company Accounting Oversight Board was created to…

Answer 35

oversee the audits of public companies

Question 36

An accounting firm may not both audit and …

Answer 36

provide certain consulting services for the same client

Question 37

Violators of SOX act face…

Answer 37

stiff penalties

Question 38

SOX act

Answer 38

a law the U.S. Congress passed on July 30 of that year to help protect investors from fraudulent financial reporting by corporations