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Unformatted text preview: Chapter 1 1-1 The solution to this and the first exercise of Chapters 2 through 9 will differ from student to student assuming each has a different CAFR. 1-2. 1. B. 6. C. 2. A. 7. A. 3. C 8. D. 4. D. 9. D. 5. D. 10. D. 1-3. 1. B. 6. B. 2. D. 7. D. 3. C. 8. D. 4. A. 9. D. 5. C. 10. C. 1-4. A. The three standards setting bodies in question are the Governmental Accounting Standards Board (GASB), the Federal Accounting Standards Accounting Advisory Board (FASAB), and the Financial Accounting Standards Board (FASB). The GASB sets accounting and financial reporting standards for state and local governmental organizations, including those not-for-profit organizations that are determined to be state and local governments. The FASAB establishes accounting standards for the federal government and its agencies unless objected to by one of the "principals" (the director of the office of management and budget, the comptroller general of the united states, and the secretary of the treasury). When the "principals" approve, the FASAB standards become GAAP. The FASB sets accounting and financial reporting standards for all nongovernmental entities, including business entities and nongovernmental, not-for-profit entities. B. The definition of a government, as agreed to by the FASB and the GASB is as follows: “Public corporations and bodies corporate and politic are governmental organizations. Other organizations are governmental organizations if they have one or more of the following characteristics: 1. Popular election of officers or appointment (or approval) of a controlling majority of the members of the organization’s governing body by officials of one or more state or local governments; 2. The potential for unilateral dissolution by a government with the net assets reverting to a government, or 1-1 1-4 (B) (Continued). 3. The power to enact and enforce a tax levy. Furthermore, organizations are presumed to be governmental if they have the ability to issue directly (rather than through a state or municipal authority) debt that pays interest exempt from federal taxation. However, organizations possessing only that ability (to issue tax-exempt debt) and none of the other governmental characteristics may rebut the presumption that they are governmental if their determination is supported by compelling, relevant evidence. C. The “hierarchy of GAAP” refers to the preferential ordering of sources that define accounting and reporting principles for governmental and nongovernmental units. A separate hierarchy exists for each in the Statement of Auditing Standards. For state and local governmental units: 1. GASB Statements and Interpretations, plus AICPA and FASB pronouncements if made applicable to state and local governments by a GASB Statement or Interpretation....
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- Spring '12
- Accounting, Generally Accepted Accounting Principles, International Financial Reporting Standards, Financial Accounting Standards Board, AICPA Industry Audit