1.Cooper Company purchased land for $90,000 in 2010.In 2013, the land is valued at $155,000.The land would appear on the company's December 31, 2013 balance sheet at

a.$90,000.

b.$122,500 [($90,000 + $155,000)/2].

c.$155,000.

d.$90,000 or $155,000, it's the company's choice.

2.The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a year, is called a(n)

a.Statement of Cash Flows.

b.Statement of Retained Earnings

c.Income Statement.

d.Balance Sheet.

3.Which of the following statements is TRUE regarding the Statement of Cash Flows prepared using the Direct Method?

a.The amount of the cash inflow or cash outflow from operating activities will be different than the amount calculated using the Indirect Method.

b.A Statement of Cash Flows prepared under the Direct Method is typically easier for users to understand than a Statement of Cash Flows prepared under the Indirect Method.

c.The operating activities section starts with Net Income and is adjusted (reconciled) to cash from (used for) operating activities.

d.The format of the investing activities and financing activities sections is different from the format of these sections prepared using the Indirect Method.

4.Which of the following is NOT a reason for problems occurring in the financial statements?

a.Fraud

b.Disagreement

c.Errors

d.Internal controls

5.All of the following are likely to be methods that could be used to conduct fraud EXCEPT

a.Creating fictitious invoices.

b.Overstating liabilities.

c.Not recording various expenses.

d.Overstating accounts receivables.

6. Which of the following is NOT an objective of the accounting system?

a.Make sure a company values transactions properly.

b.Make sure a company only records valid transactions.

c.Make sure a company only records profitable transactions.

d.Make sure a company records transactions in the proper time period.

7.Which of the following is an example of a physical control over assets and records?

a.Greg is in charge of recording receipt of payments made to accounts receivable, while Susan is in charge of making deposits to the bank.

b.John, a clerk, is authorized to perform transactions as large as $5,000 but must obtain authorization from Andrea to perform larger transactions.

c.Every year, Doug is required to take one full week of vacation time.

d.Every evening, Shellie makes a back-up file of all transactions recorded on the computer that day, burns the back-up file onto a CD, and then locks the CD into a fire-proof vault.

8.Internal controls are designed to help and protect all of the following groups of people, EXCEPT

a.Creditors.

b.Management.

c.Investors.

d.Tax collectors.

9.As William is preparing the end of year financial statements, he notices that the numbers required for his personal bonus have not been met.He reviews the estimates that he has made and adjusts some accounting numbers to meet the requirements for his bonus. This is an example of

a.Meeting internal targets.

b.Income smoothing.

c.Meeting external expectations.

d.Window dressing.

9.As William is preparing the end of year financial statements, he realizes that the earnings are not quite up to par for the large loan application that is being currently processed. He decides to stretch the assumptions just enough to be able to meet the requirements for the loan application.This is an example of

a.Meeting internal targets.

b.Meeting expectations of internal auditors.

c.Meeting external expectations.

d.Meeting requirements of Sarbanes-Oxley Act.

10. William's actions in #49 and #50 above are examples of a(n)

a.Disagreement.

b.Error.

c.Fraud.

d.None of the above.

11. According to Sarbanes-Oxley, which of the following services are external auditors permitted to provide to its audit client?

a.Legal services and expert services unrelated to the audit.

b.Internal audit outsourcing services.

c.Bookkeeping or other services related to the accounting records or financial statements.

d.Opinions about the reliability of internal controls.

12. According to Sarbanes-Oxley, who are the external auditors required to report to and be retained by?

a.Chief Executive Officer.

b.Audit Committee.

c.Internal Auditors.

d.Chief Financial Officer.