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Unformatted text preview: CHAPTER 2INTRODUCTION TO FINANCIAL STATEMENTS AND OTHER FINANCIAL REPORTING TOPICS MULTIPLE CHOICE 1. At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable. This entry is an application for which accounting principle? a. full disclosure b. materiality c. matching d. going concern e. realization ANS: C PTS: 1 2. Who is responsible for the preparation and integrity of financial statements? a. a cost accountant b. management c. an auditor d. a bookkeeper e. the FASB ANS: B PTS: 1 3. Which of the following is not an objective of the SEC's integrated disclosure system? a. to coordinate the Form 10-K requirements with those of the annual report b. to lessen the impact of the FASB c. to expand the management discussion of liquidity, capital resources, and results of operations d. to improve the quality of disclosure e. to standardize information requirements ANS: B PTS: 1 4. Which of the following is not a type of audit opinion? a. unqualified opinion b. qualified opinion c. adverse opinion d. clean opinion e. disclaimer of opinion ANS: D PTS: 1 2-1 5. Which of the following statements is not true? a. A qualified opinion or an adverse opinion may bring into question the reliability of the financial statements. b. A disclaimer of opinion indicates that one should not look to the auditor's report as an indication of the reliability of the statements. c. In some cases, outside accountants are associated with financial statements when they have performed less than an audit. d. A review is substantially less in scope than an examination in accordance with generally accepted auditing statements. e. The accountant's report expresses an opinion on reviewed financial statements. ANS: E PTS: 1 6. In addition to the balance sheet, the income statement, and the statement of cash flows, a complete set of financial statements must include: a. an auditor's opinion b. a ten-year summary of operations c. a note disclosure of such items as accounting policies d. historical common-size (percentage) summaries e. a list of corporate officers ANS: C PTS: 1 7. Which of the following statements is not correct concerning summary annual reports? a. A summary annual report omits much of the financial information included in an annual report. b. When a company issues a summary annual report, the proxy materials it sends to shareholders must include a set of fully audited statements and other required financial disclosures. c. A summary annual report generally has more nonfinancial pages than financial pages. d. A summary annual report is adequate for reasonable analysis. e. The concept of a summary annual report was approved by the Securities and Exchange Commission....
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