The following questions are used in the Kaplan CPA Review Course to study the environment and theoretical structure of financial accounting while preparing for the CPA examination. Determine the response that best completes the statements or questions.
1. Which of the following is not a qualitative characteristic of accounting information according to the FASB’s conceptual framework?
a. Auditor independence.
b. Neutrality.
c. Timeliness.
d. Predictive value.
2. According to the conceptual framework, neutrality is a characteristic of?
a. Understandability.
b. Faithful representation.
c. Relevance.
d. Both relevance and faithful representation.
3. The Financial Accounting Standards Board (FASB)?
a. Is a division of the Securities and Exchange Commission (SEC).
b. Is a private body that helps set accounting standards in the United States.
c. Is responsible for setting auditing standards that all auditors must follow.
d. Consists entirely of members of the American Institute of Certified Public Accountants.
4. Confirmatory value is an ingredient of the primary quality of?
Faithful
Relevance Representation
a. Yes ........... No
b. No ............ Yes
c. Yes ........... Yes
d. No ........... No
5. Predictive value is an ingredient of?
Faithful
Representation Relevance
a. Yes ........... No
b. No ........... No
c. Yes ........... Yes
d. No ........... Yes
6. Completeness is an ingredient of the primary quality of?
a. Verifiability.
b. Faithful representation.
c. Relevance.
d. Understandability.
7. The objective of financial reporting for business enterprises is based on?
a. Generally accepted accounting principles.
b. The needs of the users of the information.
c. The need for conservatism.
d. None of above.
8. According to the FASB’s conceptual framework, comprehensive income includes which of the following?
Operating Income Investments by Owners
a. No ........... Yes
b. No ........... No
c. Yes ........... Yes
d. Yes ........... No