Ch 3 Review

Question 1

What is the pre-step in the research process

Answer 1

understand the business

Question 2

what are the six steps of the research process

Answer 2

1. understand the facts/ background of the transaction
2. define the problem. (identify the researchable question)
3. stop and think: what accounting treatment will likely be most appropriate
4. search potentially relevant sources of guidance copying any relevant guidance into a Word doc
5. analyze alternatives (document consideration of each)
6. justify and document your conclusion

Question 3

Things you want to understand about the business prior to the research process

Answer 3

• primary business activities
• sources of revenues, costs
• unique accounting practices
• peer group companies

Question 4

what are some sources that could be used in getting to know a business

Answer 4

• AICPA audit and accounting guides (A&A)
• review company’s 10-k
• research databases

Question 5

what parts of the company’s 10-k to look over for background

Answer 5

-business
- critical accounting policies and estimates
-significant accounting policies

Question 6

first step in research process is to fully understand the transaction and _________ its being entered into

Answer 6

why

Question 7

to get information in the first step tehse are some things you can do

Answer 7

• read transaction documents, including darft or final contracts
• talk to individuals with knowledge of the transaction
• if the comp has undertaken similar transactions in the past, preview prior memos
• review peer comp 10-k/ industry specific publications

Question 8

step 2 in research process is

Answer 8

define the problem

Question 9

in step two you identify the ______

Answer 9

researchable question

Question 10

can you change/ tweak researchable question throughout the process

Answer 10

yes

Question 11

the more _____ you can make questions, the better

Answer 11

specific

Question 12

questions may start out _________ but will become more _________ as you work

Answer 12

broad; specific

Question 13

can you add more questions as you go in the research process?

Answer 13

yes

Question 14

in step 3 you

Answer 14

stop and think

Question 15

what are you stopping and thinking about

Answer 15

what accounting treatment do you think would be most appropriate for this transaction event

Question 16

what is the importance of the stop and think step

Answer 16

thinking independently through can help you avoid anchoring to first possible solution

Question 17

what is step 4

Answer 17

search for guidance

Question 18

start the search of the codification by __________ the topic you think will be most relevant

Answer 18

browsing

Question 19

do a ___________ search if you don’t know the appropriate topic

Answer 19

key word

Question 20

can you choose to consult a non authoritative source in the search for guidance

Answer 20

yes

Question 21

what is step 5 of the process

Answer 21

analyze alternatives

Question 22

when you find the relevant guidance, you must analyze how it applies to your __________

Answer 22

fact pattern

Question 23

should alternatives and their merits be included in your memo?

Answer 23

Yes

Question 24

what is step 6

Answer 24

justify and document your conclusion

Question 25

in the conclusion of your research, you should consider. whether the selected treatment appropriately reflect the ________________ and _______________ of transaction

Answer 25

economic substance and business purpose

Question 26

what are silent prejudices called

Answer 26

baises

Question 27

what kind of bias is the following- thinking (after the fact and once the outcome is known) that you would have. made the right decision or that you knew the answer all along

Answer 27

hindsight bias

Question 28

what kind of bias is the following? Prioritizing the views of the most vocal, most respected, or most senior, member of a group. Or agreeing too readily to a path in the interest of group harmony, without independently thinking through an issue or challenging the group’s initial path.

Answer 28

group think

Question 29

What kind of bias int he following? Staying with a decision even when you suspect or have evidence that the decision is wrong. (Not “cutting your losses.”)

Answer 29

Escalation of Commitment Bias

Question 30

What kind of bias is the following? When individuals overestimate their abilities to perform tasks or make accurate decisions.

Answer 30

Overconfidence bias