Financial reporting final exam Questions
and Answers Graded A+
four categories of disclosure costs with examples - Correct answer-1 information
collection- paying accountants to create reports
2 competitive disadvantage- competitors using the company's strategy
3 litigation- if people sue based on poor investments
4 political cost- the info harming the company's reputation
what are the generally accepted accounting principles and why are they important -
Correct answer-GAAP are relevant with predictive and confirmatory value and
they are done in faithful representation meaning they are complete, neutral and free
from material error. They are important to investors to make good investing
decisions, creditors to gauge a company's ability to repay debts and auditors to help
design more effective audits
describe the role of the fasb, the sec and the pcaob - Correct answer-the sec
establishes what criteria must be met. they outsource the creation of the rules to
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, meet the criteria to the fasb. the pcaob monitors the auditors that make sure
company's are following the rules
measurement of the balance sheet account and why the analysts must be aware of
these different measurements - Correct answer-historical costs, current cost, net
realizable value and discounted present value. some of these methods are
subjective so the use of one over the other could lead to different ratios or
indicators
why would an analyst make adjustments to profitability numbers like ROA -
Correct answer-ROA is measure of how efficiently a company uses its assets to
generate profit since GAAP allows flexibility in the methods that can be used in
reporting. in order to make an accurate analysis or comparison, analysts will alter
the numbers
what characteristics about accounting rules necessitate that analysts question
whether the given numbers are relevant to their particular analyses and consider
making certain adjustments - Correct answer-accounting rules allow flexibility of
how numbers are reported, meaning it can be easy and tempting for managers to
manipulate numbers
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
and Answers Graded A+
four categories of disclosure costs with examples - Correct answer-1 information
collection- paying accountants to create reports
2 competitive disadvantage- competitors using the company's strategy
3 litigation- if people sue based on poor investments
4 political cost- the info harming the company's reputation
what are the generally accepted accounting principles and why are they important -
Correct answer-GAAP are relevant with predictive and confirmatory value and
they are done in faithful representation meaning they are complete, neutral and free
from material error. They are important to investors to make good investing
decisions, creditors to gauge a company's ability to repay debts and auditors to help
design more effective audits
describe the role of the fasb, the sec and the pcaob - Correct answer-the sec
establishes what criteria must be met. they outsource the creation of the rules to
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, meet the criteria to the fasb. the pcaob monitors the auditors that make sure
company's are following the rules
measurement of the balance sheet account and why the analysts must be aware of
these different measurements - Correct answer-historical costs, current cost, net
realizable value and discounted present value. some of these methods are
subjective so the use of one over the other could lead to different ratios or
indicators
why would an analyst make adjustments to profitability numbers like ROA -
Correct answer-ROA is measure of how efficiently a company uses its assets to
generate profit since GAAP allows flexibility in the methods that can be used in
reporting. in order to make an accurate analysis or comparison, analysts will alter
the numbers
what characteristics about accounting rules necessitate that analysts question
whether the given numbers are relevant to their particular analyses and consider
making certain adjustments - Correct answer-accounting rules allow flexibility of
how numbers are reported, meaning it can be easy and tempting for managers to
manipulate numbers
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
