Accounting Quiz

Accounting: The Measurement, Processing, and Communication of Financial and Non-Financial Information

• Accounting measures, processes, and communicates financial and non-financial information about economic entities such as businesses and corporations.

• The purpose of accounting is to convey information to stakeholders such as investors, creditors, management, and regulators.

• Accounting can be divided into financial accounting, management accounting, tax accounting, and cost accounting.

• Financial accounting prepares financial statements for external users, while management accounting provides information for internal use by management.

• The double-entry bookkeeping system was developed in medieval Europe and is attributed to Luca Pacioli.

• Accounting organizations such as standard-setters, accounting firms, and professional bodies facilitate accounting today.

• Financial statements are usually audited by accounting firms and prepared in accordance with generally accepted accounting principles (GAAP).

• GAAP is set by standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States and the Financial Reporting Council in the United Kingdom.

• All major economies have plans to converge towards or adopt the International Financial Reporting Standards (IFRS).

• Accounting information systems are designed to support accounting functions and related activities, and many corporations use artificial intelligence-based information systems.

• Professional accounting bodies include the American Institute of Certified Public Accountants (AICPA) and the International Federation of Accountants (IFAC).

• Accounting research is carried out by academic researchers and practicing accountants, and encompasses a broad range of research areas including financial accounting, management accounting, auditing, and taxation.The Role of Power and Conflict in Accounting Practice: Summary

• Accounting journals publish fewer research articles than comparable journals in economics and other business disciplines, making accounting scholars relatively less successful in academic publishing.

• A recent study based on academic author rankings shows that the competitive value of a single publication in a top-ranked journal is highest in accounting and lowest in marketing.

• In 2001, a series of financial information frauds involving Enron, Arthur Andersen, WorldCom, Qwest, and Sunbeam among other well-known corporations highlighted the need to review the effectiveness of accounting standards, auditing regulations, and corporate governance principles.

• The Enron scandal led to the development of new regulations to improve the reliability of financial reporting and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms.

• The Enron scandal was the biggest audit failure, causing the dissolution of Arthur Andersen, one of the five largest accounting firms in the world at the time.

• The Sarbanes-Oxley Act, passed in the United States in 2002, significantly raises criminal penalties for securities fraud, for destroying, altering, or fabricating records in federal investigations or any scheme or attempt to defraud shareholders.

• Accounting fraud is an intentional misstatement or omission in the accounting records by management or employees, involving the use of deception, which is a criminal act and a breach of civil tort.

• An accounting error is an unintentional misstatement or omission in the accounting records, for example, misinterpretation of facts, mistakes in processing data, or oversights leading to incorrect estimates.

• The primary responsibility for the prevention and detection of fraud and errors rests with the entity's management.

• The role of power and conflict in accounting practice is emphasized through case studies, computer simulation, and field research.

• Accounting scandals highlight the need for effective accounting standards, auditing regulations, and corporate governance principles.

• The Enron scandal led to the development of new regulations to improve the reliability of financial reporting, and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms.