Ch 1 Review Questions Flashcards
What are two key objectives of performing technical accounting research?
1) Accounting for transactions appropriately and in compliance with authoritative guidance
2) Creating documentation to support the research that was performed and any conclusions
Identify the four parties who typically perform accounting research and explain why they perform the research.
1) Corporate accountants - preparing financials as well as tax returns
2) Auditors - determine if an organization’s financial statements are in compliance with GAAP
3) Regulators - to understand why certain industries and organizations take certain positions when it comes to preparing financials
4) Investors - users of financial statements
Name three reasons for which accounting research should ideally be performed before a transaction is executed.
1) Allows management to evaluate the impact of the transaction on the financial statements
2) Allows management to adjust forecasted earnings to reflect the transaction
3) Allows the accounting department to prepare documents in a timely fashion
Name three circumstances in which it might not be possible to research the accounting for a transaction until after it has occurred.
1) Transaction was very time-sensitive
2) Transaction was unexpected and there was no time to prepare
3) Transaction lacks communication
What is the meaning of the term contemporaneous? Explain.
Certain elections are documented at the same time the transaction occurs
What research environment applies to the standards of the GASB?
State and Local Governments
What research environment applies to the standards of the FASB?
Public and Private Companies
What research environment applies to the standards of the AICPA?
Private Companies (Non-public Audits)
What research environment applies to the standards of the IASB?
International Companies
What research environment applies to the standards of the FASAB?
Federal Government Entities
What legislation gave the SEC the authority to set accounting standards? What was happening at the time that led to this need for accounting standards?
The Securities Exchange Act of 1934 created the SEC (an enforcement agency to protect public interest).
The economy was suffering from the stock market crash of 1929 and the Great Depression.
Define accounting support fees.
Accounting support fees are required by the Sarbanes Oxley Act.
Companies are required to pay these fees based on their market capitalization.
Explain why accounting support fees help FASB maintain its independence.
Helps FASB maintain its independence because the board no longer has to rely on donations that have the potential to influence their objectivity.
Why was the PCC formed, and what impact has it had on accounting standards?
PPC was formed to provide alternative reporting standards for private companies.
This has simplified the accounting standards for smaller private companies.
