Accounting Governance and Standards Quiz

Questions and Answers

What is the primary role of the Financial Accounting Standards Board (FASB)?

To provide auditing services for public companies.

To enforce tax regulations for corporations.

To oversee the creation of accounting standards in the U.S. (correct)

To govern the financial markets in the U.S.

Which of the following options represents a guideline formulated by the FASB?

Securities and Exchange Commission (SEC)

International Accounting Standards Board (IASB)

Generally Accepted Accounting Principles (GAAP) (correct)

International Financial Reporting Standards (IFRS)

What does the Going Concern Assumption imply about an entity?

The entity must liquidate its assets annually.

The entity may cease operations at any time.

The entity will remain in operation for the foreseeable future. (correct)

The entity will dissolve if it experiences losses.

Which principle states that assets should be recorded at their actual cost?

Cost Principle Signup and view all the answers

Which type of business structure is characterized by a single owner?

Sole Proprietorship Signup and view all the answers

What does the Audit process involve?

An examination of a company’s financial statements and records. Signup and view all the answers

What does the Monetary Unit Assumption require regarding financial statements?

Items must be measured in terms of a monetary unit. Signup and view all the answers

What legislation requires companies to take responsibility for the accuracy of their financial reports?

Sarbanes-Oxley Act (SOX) Signup and view all the answers

Study Notes

Governing Organizations and Standards in Accounting

Financial Accounting Standards Board (FASB): Private body responsible for developing and governing accounting standards in the U.S.
Securities and Exchange Commission (SEC): U.S. government agency that oversees the financial markets and protects investors.
Generally Accepted Accounting Principles (GAAP): Comprehensive guidelines for accounting established by FASB, serving as the primary accounting framework in the U.S.
International Financial Reporting Standards (IFRS): An international set of accounting guidelines created by the International Accounting Standards Board (IASB), aimed at providing consistency across global financial reporting.
International Accounting Standards Board (IASB): A private organization responsible for the development and governance of IFRS.

Key Accounting Principles and Concepts

Economic Entity Assumption: Concept that dictates a business is treated as a separate unit from its owners or other businesses.
Cost Principle: Accounting principle stating that assets and services should be recorded at their actual cost at acquisition.
Going Concern Assumption: Presumption that an entity will continue its operations indefinitely and will not liquidate in the near future.
Monetary Unit Assumption: Requirement that all financial statement items are expressed in a stable monetary unit, facilitating measurement and comparison.

Business Structures

Sole Proprietorship: A business owned and managed by a single individual, bearing all the risks and rewards.
Partnership: A business entity owned by two or more individuals who share management and profits, not set up as a corporation.
Corporation: A legally distinct entity from its owners, created under state law, providing limited liability to its shareholders.
Limited-Liability Company (LLC): A hybrid business structure where owners have limited liability for company debts, protecting personal assets.

Regulatory Framework and Compliance

Audit: Process of reviewing a company's financial statements and records to ensure accuracy and adherence to accounting standards.
Sarbanes-Oxley Act (SOX): U.S. federal law aimed at enhancing corporate governance and accountability, requiring companies to maintain internal controls and verify the integrity of financial reports.

Description

Explore the key organizations and rules that govern accounting practices in the United States. This quiz covers important entities such as the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC), along with standardized principles like GAAP. Test your knowledge on how these components contribute to the integrity of financial reporting.