FSA LEVEL 1 EXAM QUESTIONS AND ANSWERS/EXAM VERIFIED QUESTIONS AND
ANSWERS INCLUDING RATIONALES (100% CORRECT ANSWERS) / ALREADY
GRADED A+(REAL DEAL)
Question 1
In what year was the Financial Accounting Standards Board (FASB) created?
A) 1972
B) 1973
C) 1975
D) 2015
E) 1990
Correct Answer: B) 1973
Rationale: The FASB began operations in July 1973, replacing the Accounting Principles Board
(APB) after the AICPA adopted the Wheat Committee's recommendation.
Question 2
From 1975 to 2015, the market value of intangible assets for S&P 500 companies grew from
17% to what percentage?
A) 50%
B) 65%
C) 75%
D) 84%
E) 92%
Correct Answer: D) 84%
Rationale: The provided information states that the value of intangible assets grew from 17%
to 84% between 1975 and 2015.
Question 3
What percentage of studies show a non-negative relationship between corporate financial
performance and sustainability criteria?
A) 50%
B) 75%
C) 82%
,D) 90%
E) 95%
Correct Answer: D) 90%
Rationale: The text indicates that 90% of studies found a non-negative correlation between
sustainability criteria and corporate financial performance.
Question 4
According to a 2014 PwC survey, what percentage of institutional investors used sustainability
information in their investment decisions?
A) 25%
B) 50%
C) 60%
D) 82%
E) 90%
Correct Answer: D) 82%
Rationale: The 2014 PwC survey found that 82% of institutional investors considered
sustainability information when making decisions.
Question 5
Which body protects investors by establishing standards for audits and auditors and overseeing
the external audit profession?
A) Financial Accounting Standards Board (FASB)
B) Securities and Exchange Commission (SEC)
C) Public Company Accounting Oversight Board (PCAOB)
D) International Accounting Standards Board (IASB)
E) American Institute of Certified Public Accountants (AICPA)
Correct Answer: C) Public Company Accounting Oversight Board (PCAOB)
Rationale: The PCAOB's mission, as described in the text, is to protect investors by overseeing
the audit profession and setting auditing standards.
,Question 6
Which committee first proposed that an objective of financial statements is to report on a
company's activities affecting society?
A) The Wheat Committee
B) The Trueblood Committee
C) The PCAOB
D) The FASB
E) ASOBAT
Correct Answer: B) The Trueblood Committee
Rationale: The Trueblood Committee's report stated that one objective of financial statements
is to report on activities that affect society, pointing to externalities like pollution.
Question 7
The formation of the Financial Accounting Standards Board (FASB) was proposed by which
committee?
A) The Trueblood Committee
B) The Accounting Principles Board (APB)
C) The Securities and Exchange Commission (SEC)
D) The Wheat Committee
E) The PCAOB
Correct Answer: D) The Wheat Committee
Rationale: In 1972, the Wheat Committee was charged with improving the standard-setting
process and recommended the creation of the independent FASB.
Question 8
According to the FASB's conceptual framework, which of the following is NOT one of the four
characteristics that enhance the relevance and faithful representation of financial information?
A) Comparable
B) Verifiable
C) Profitable
D) Timely
, E) Understandable
Correct Answer: C) Profitable
Rationale: The four enhancing qualitative characteristics are Comparability, Verifiability,
Timeliness, and Understandability. Profitability is a measure of performance, not a
characteristic of the information itself.
Question 9
When management is determining if a known trend must be disclosed in the MD&A, what is the
first question they must ask?
A) Will the trend have a material effect on operations?
B) Is the trend, demand, commitment, event, or uncertainty likely to come to fruition?
C) Can the impact of the trend be quantified?
D) Have our competitors disclosed this trend?
E) Is the trend related to climate change?
Correct Answer: B) Is the trend, demand, commitment, event, or uncertainty likely to come to
fruition?
Rationale: This is the first step in the two-part test for MD&A disclosure. If management
determines the event is not reasonably likely to occur, no disclosure is required.
Question 10
Which of the following is NOT one of the four areas of focus in the SEC's 2010 guidance on
climate change-related disclosure?
A) Impact of legislation and regulation
B) International Accords
C) Physical Impacts of Climate Change
D) Reputational impacts from public perception
E) Indirect Consequences of regulation or business trends
Correct Answer: D) Reputational impacts from public perception
Rationale: The four specific areas mentioned in the SEC's guidance are the impact of
legislation, international accords, indirect consequences, and physical impacts. While
reputation may be an indirect consequence, it is not listed as one of the four main categories.
ANSWERS INCLUDING RATIONALES (100% CORRECT ANSWERS) / ALREADY
GRADED A+(REAL DEAL)
Question 1
In what year was the Financial Accounting Standards Board (FASB) created?
A) 1972
B) 1973
C) 1975
D) 2015
E) 1990
Correct Answer: B) 1973
Rationale: The FASB began operations in July 1973, replacing the Accounting Principles Board
(APB) after the AICPA adopted the Wheat Committee's recommendation.
Question 2
From 1975 to 2015, the market value of intangible assets for S&P 500 companies grew from
17% to what percentage?
A) 50%
B) 65%
C) 75%
D) 84%
E) 92%
Correct Answer: D) 84%
Rationale: The provided information states that the value of intangible assets grew from 17%
to 84% between 1975 and 2015.
Question 3
What percentage of studies show a non-negative relationship between corporate financial
performance and sustainability criteria?
A) 50%
B) 75%
C) 82%
,D) 90%
E) 95%
Correct Answer: D) 90%
Rationale: The text indicates that 90% of studies found a non-negative correlation between
sustainability criteria and corporate financial performance.
Question 4
According to a 2014 PwC survey, what percentage of institutional investors used sustainability
information in their investment decisions?
A) 25%
B) 50%
C) 60%
D) 82%
E) 90%
Correct Answer: D) 82%
Rationale: The 2014 PwC survey found that 82% of institutional investors considered
sustainability information when making decisions.
Question 5
Which body protects investors by establishing standards for audits and auditors and overseeing
the external audit profession?
A) Financial Accounting Standards Board (FASB)
B) Securities and Exchange Commission (SEC)
C) Public Company Accounting Oversight Board (PCAOB)
D) International Accounting Standards Board (IASB)
E) American Institute of Certified Public Accountants (AICPA)
Correct Answer: C) Public Company Accounting Oversight Board (PCAOB)
Rationale: The PCAOB's mission, as described in the text, is to protect investors by overseeing
the audit profession and setting auditing standards.
,Question 6
Which committee first proposed that an objective of financial statements is to report on a
company's activities affecting society?
A) The Wheat Committee
B) The Trueblood Committee
C) The PCAOB
D) The FASB
E) ASOBAT
Correct Answer: B) The Trueblood Committee
Rationale: The Trueblood Committee's report stated that one objective of financial statements
is to report on activities that affect society, pointing to externalities like pollution.
Question 7
The formation of the Financial Accounting Standards Board (FASB) was proposed by which
committee?
A) The Trueblood Committee
B) The Accounting Principles Board (APB)
C) The Securities and Exchange Commission (SEC)
D) The Wheat Committee
E) The PCAOB
Correct Answer: D) The Wheat Committee
Rationale: In 1972, the Wheat Committee was charged with improving the standard-setting
process and recommended the creation of the independent FASB.
Question 8
According to the FASB's conceptual framework, which of the following is NOT one of the four
characteristics that enhance the relevance and faithful representation of financial information?
A) Comparable
B) Verifiable
C) Profitable
D) Timely
, E) Understandable
Correct Answer: C) Profitable
Rationale: The four enhancing qualitative characteristics are Comparability, Verifiability,
Timeliness, and Understandability. Profitability is a measure of performance, not a
characteristic of the information itself.
Question 9
When management is determining if a known trend must be disclosed in the MD&A, what is the
first question they must ask?
A) Will the trend have a material effect on operations?
B) Is the trend, demand, commitment, event, or uncertainty likely to come to fruition?
C) Can the impact of the trend be quantified?
D) Have our competitors disclosed this trend?
E) Is the trend related to climate change?
Correct Answer: B) Is the trend, demand, commitment, event, or uncertainty likely to come to
fruition?
Rationale: This is the first step in the two-part test for MD&A disclosure. If management
determines the event is not reasonably likely to occur, no disclosure is required.
Question 10
Which of the following is NOT one of the four areas of focus in the SEC's 2010 guidance on
climate change-related disclosure?
A) Impact of legislation and regulation
B) International Accords
C) Physical Impacts of Climate Change
D) Reputational impacts from public perception
E) Indirect Consequences of regulation or business trends
Correct Answer: D) Reputational impacts from public perception
Rationale: The four specific areas mentioned in the SEC's guidance are the impact of
legislation, international accords, indirect consequences, and physical impacts. While
reputation may be an indirect consequence, it is not listed as one of the four main categories.
