Fraudulent Financial Accounting: Study Guide

Chapter 1: Uses of Accounting Information and the Financial Statements

TRUE/FALSE

1. The intentional preparation of misleading financial statements is referred to as fraudulent financial reporting.

ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: ethics
LOC: Learning Type: Recall KEY: ethical reporting

2. Fraudulent financial reporting can result from the misapplication of accounting principles.

ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: ethics
LOC: Learning Type: Recall KEY: ethical reporting

3. Criminal penalties cannot be imposed on those who prepare fraudulent financial statements.

ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: ethics
LOC: Learning Type: Recall KEY: ethical reporting

4. The Sarbanes-Oxley
Objectivity means carrying out one's professional responsibilities with competence and diligence.

ANS: F PTS: 1 OBJ: LO7
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: professional ethics

81. Due care means carrying out one's professional responsibilities honestly and impartially.

ANS: F PTS: 1 OBJ: LO7
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: professional ethics

82. The Public Company Accounting Oversight Board (PCAOB) was created to determine the standards that auditors must follow.

ANS: T PTS: 1 OBJ: LO7
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: professional ethics

83. The board of directors appoints the audit committee, which in turn performs an independent audit of the company's records.

ANS: F PTS: 1 OBJ: LO7
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: professional ethics

84. Corporate governance is the oversight of a company's management performance and ethics by its board of directors.

ANS: T PTS: 1 OBJ: LO7
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: professional ethics

MULTIPLE
corporation.
b.
sole proprietorship.
c.
partnership.
d.
corporation or partnership.

ANS: A PTS: 1 OBJ: LO4
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: corporations

29. All of the following statements about partnerships are true, except
a.
partners must share profits and losses equally.
b.
a change in ownership will dissolve the partnership.
c.
any partner can enter into a binding agreement with a third party.
d.
all partners have unlimited liability.

ANS: A PTS: 1 OBJ: LO4
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: partnerships

30. All of the following statements about corporations are true, except
a.
they are chartered by the state.
b.
ownership is represented by shares of stock.
c.
the sale of stock does not dissolve the business.
d.
the stockholders have direct control of the business.

ANS: D PTS: 1 OBJ: LO4
NAT: AACSB correlation: reflective LOC: Learning Type: Recall
KEY: corporations

31. Which of the following is the correct accounting equation?
a.
Assets = Liabilities + Owner's Equity
b.
Assets + Owner's Equity = Liabilities
c.
Assets = Liabilities – Owner's Equity
d.
Assets + Liabilities = Owner's