1. What is the objective of financial reporting? A) Provide information that is useful to management in making decisions. B) Provide information that clearly portrays nonfinancial transactions. C) Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors. D) Provide information that excludes claims to the resources. 2. Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight than standards previously issued? A) The FASB board had a smaller membership. B) The FASB board members were well-paid. C) The FASB board members were CPAs. D) The FASB follows due process. 3. Which of the following is a requirement for an accounting principle to be called "generally accepted"? A) An authoritative accounting rule-making body has established it in an official pronouncement. B) The principle has been accepted as appropriate because of its universal application. C) An authoritative accounting rule-making body has established it and it has been accepted because of its universal application. D) Each company develops its own standards. 4. The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is A) the FASB issues exposure drafts of proposed standards. B) all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions. C) all members of the FASB possess extensive experience in financial reporting. D) a majority of the members of the FASB are CPAs who are drawn from public practice. 5. What is a purpose of having a conceptual framework? A) To make sure that economic activity can be identified with a particular legal entity. B) To segregate activities among different companies. C) To provide comparable information for different companies. D) To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards. 6. Which of the following is a characteristic describing the fundamental quality of relevance? A) Predictive value. B) Neutrality. C) Verifiability. D) Understandability. Page 1