Accounting & Financial Statement
Analysis 2026 Updated Study Guide,
Practice Questions and Exam
Preparation
Download the EXAM REVIEW — Accounting & Financial Statement Analysis 2026 Updated
study guide featuring comprehensive coverage of financial statements, balance sheet
analysis, income statement interpretation, cash flow analysis, accounting principles, ratio
analysis, and practice questions designed to support exam preparation and improve
understanding of financial reporting concepts.
1. Which of the following statements is true regarding the Sarbanes-Oxley Act?
A. All private and foreign companies must issue an internal control report evaluated by an
outside auditor.
B. Individuals committing securities fraud receive a mandatory 10-year prison sentence.
C. Accounting firms may provide auditing and full consulting services to the same public
clients.
D. The Public Company Accounting Oversight Board oversees auditors of public companies.
ANS: D
Rationale: The Sarbanes-Oxley Act established the Public Company Accounting Oversight
Board (PCAOB) to oversee audits of public companies and improve accountability.
2. Which situation best illustrates separation of duties as an internal control procedure?
A. Invoices are prenumbered.
B. Cashiers do not have access to accounting records.
C. Electronic devices are installed to reduce theft.
D. External auditors monitor internal controls.
ANS: B
Rationale: Separation of duties reduces fraud risk by ensuring employees handling cash are
not responsible for maintaining accounting records.
3. Which measure discourages theft in a retail store accepting over-the-counter cash
receipts?
A. The store clerk deposits cash in the bank.
B. The sales clerk records journal entries from machine tapes.
C. A receipt is issued for every transaction.
D. The sales clerk compares drawer cash with machine records.
ANS: C
Rationale: Issuing receipts ensures each sale is recorded and reduces opportunities for
theft.
, 4. In a large company, who is typically responsible for comparing cash records with the
bank balance?
A. Treasurer
B. Cashier
C. Controller
D. Accounts payable clerk
ANS: C
Rationale: The controller oversees accounting operations and performs bank
reconciliations.
5. Before signing a check, which document should the controller or treasurer examine?
A. Sales invoice
B. Deposit slip
C. Purchase order
D. Inventory report
ANS: C
Rationale: Purchase orders verify authorization and legitimacy of expenditures before
payment.
6. Which asset is considered the most liquid?
A. Inventory
B. Equipment
C. Accounts receivable
D. Cash
ANS: D
Rationale: Cash is immediately available for use and therefore is the most liquid asset.
7. What entry is included when replenishing a petty cash fund?
A. Debit to Cash
B. Credit to Cash
C. Debit to Petty Cash
D. Credit to Supplies Expense
ANS: B
Rationale: Replenishing petty cash decreases the company’s cash account.
8. When a check is issued, the person receiving payment is called the:
A. Drawer
B. Payor
C. Payee
D. Depositor
ANS: C
Analysis 2026 Updated Study Guide,
Practice Questions and Exam
Preparation
Download the EXAM REVIEW — Accounting & Financial Statement Analysis 2026 Updated
study guide featuring comprehensive coverage of financial statements, balance sheet
analysis, income statement interpretation, cash flow analysis, accounting principles, ratio
analysis, and practice questions designed to support exam preparation and improve
understanding of financial reporting concepts.
1. Which of the following statements is true regarding the Sarbanes-Oxley Act?
A. All private and foreign companies must issue an internal control report evaluated by an
outside auditor.
B. Individuals committing securities fraud receive a mandatory 10-year prison sentence.
C. Accounting firms may provide auditing and full consulting services to the same public
clients.
D. The Public Company Accounting Oversight Board oversees auditors of public companies.
ANS: D
Rationale: The Sarbanes-Oxley Act established the Public Company Accounting Oversight
Board (PCAOB) to oversee audits of public companies and improve accountability.
2. Which situation best illustrates separation of duties as an internal control procedure?
A. Invoices are prenumbered.
B. Cashiers do not have access to accounting records.
C. Electronic devices are installed to reduce theft.
D. External auditors monitor internal controls.
ANS: B
Rationale: Separation of duties reduces fraud risk by ensuring employees handling cash are
not responsible for maintaining accounting records.
3. Which measure discourages theft in a retail store accepting over-the-counter cash
receipts?
A. The store clerk deposits cash in the bank.
B. The sales clerk records journal entries from machine tapes.
C. A receipt is issued for every transaction.
D. The sales clerk compares drawer cash with machine records.
ANS: C
Rationale: Issuing receipts ensures each sale is recorded and reduces opportunities for
theft.
, 4. In a large company, who is typically responsible for comparing cash records with the
bank balance?
A. Treasurer
B. Cashier
C. Controller
D. Accounts payable clerk
ANS: C
Rationale: The controller oversees accounting operations and performs bank
reconciliations.
5. Before signing a check, which document should the controller or treasurer examine?
A. Sales invoice
B. Deposit slip
C. Purchase order
D. Inventory report
ANS: C
Rationale: Purchase orders verify authorization and legitimacy of expenditures before
payment.
6. Which asset is considered the most liquid?
A. Inventory
B. Equipment
C. Accounts receivable
D. Cash
ANS: D
Rationale: Cash is immediately available for use and therefore is the most liquid asset.
7. What entry is included when replenishing a petty cash fund?
A. Debit to Cash
B. Credit to Cash
C. Debit to Petty Cash
D. Credit to Supplies Expense
ANS: B
Rationale: Replenishing petty cash decreases the company’s cash account.
8. When a check is issued, the person receiving payment is called the:
A. Drawer
B. Payor
C. Payee
D. Depositor
ANS: C
