ACCT Quiz 3 Flashcards

Terms Definitions
"trier of the fact"
9th Amendment
recognizes other, unspecified "implied" rights
Right side of an account
the unlawful taking of another person's property with intent to steal it
does a partnership have limited life?
anything of value that is owned
o Firm infrastructureo Human resourceso Technologyo Purchasing
value chain Support activities:
Closing entries

žRevenue, expense and dividend accounts are set to zero before starting next accounting period

—These accounts are transferred to Retained earnings

○Transferring revenue and expense accounts increases Retained earnings by the amount of net income

○Transferring dividends account decreases Retained earnings
Who was the magna carta written by?
The account used to summarize the owner's equity in a business.
"First In, First Out) Inventory method that assumes that the costs of the first items acquired or produced are the costs of the first items used or sold.
bill of lading
legal contract the defines responsibility for the goods in transit
b. Review report
13. When an accountant is not independent, the accountant is precluded from issuing a:a. Compilation report.b. Review report.c. Management advisory report.d. Tax planning report.
General Authorization
companywide policies for the approval of all transactions within stated limits
goal congruence
when a subsystem achieves its goals while contributing to the organization's overall goal
Flowcharting template
piece of hard, flexible plastic on which the shapes of flowcharting symbols have been die cut
Audit Committee
A subcommittee of the board of directors that is generally composed of three to six "outside" members of the organization's board of directors
document inv transfers
control procedure for inv shrinkage due to theft b employees
d. All professional services
34. A CPA should maintain objectivity and be free of conflicts of interest when performing:a. Audits, but not any other professional services.b. All attestation services, but not other professional services.c. All attestation and tax services, but not other professional services.d. All professional services
Qualified Opinion
a report issued when the auditor believes that the overall FS are fairly stated but that either the scope of the audit was limited or the financial data indicated a failure to follow GAAP
What is the most popular form of business organization?
Sole Proprietorship
Document flowchart
trace a document from its cradle to its grave; show where each document originates, its distribution, the purposes for which it is used, its ultimate disposition, and everything that happens as it flows through the system
Adjusting Entry
At the end of an accounting period, adjusting entries record the transactions which are in process or have been completed but not yet recorded. These entries are necessary in order to record revenues when they are earned and expenses when they are incurred. , and not necessarily when cash is received or paid.
st liquidity risks
__ is the near-term ability to generate cash to service working capital needs and debt service requirements
B. Form S-1
47. Which of the following is a "registration statement" that is filed with the SEC by a company planning to issue securities to the public? A. Form 8-K.B. Form S-1.C. Form 10-Q.D. Form 10-K.
FiFo First In First Out

žAssumes earliest inventory costs are assigned to items when sold

žCost flow through accounting records will closely match physical flow of goods
protect assetsensure reliable accountingpromote efficient operationsurge adherence to company policies
the 7 principles of internal control
What is an Administrative Expense?
The cost of running the company.
off remittance list/advice
How should A/R record updates in the revenue cycle?
B. Internal controls during the remaining period are effective
4. In which of the following circumstances is substantive testing of accounts receivable before the balance sheet date most appropriate?A. The client has a new sales incentive program in place.B. Internal controls during the remaining period are effective.C. There is a high turnover of senior management.D. It is a first engagement of a new client.
B. Existence of scienter
Under Section 10 of the 1934 Securities Exchange Act auditors are liable to security purchasers for: A. Lack of due diligence. B. Existence of scienter. C. Ordinary negligence. D. Auditors have no liability to security purchasers under this act.
reversing entry?
an entry that reverses an entry from a previous accounting period.
Sale on account
a sale for which cash will be received at a later date
sampling risk. how can it be controlled?
non-representative sample. risk that the decision made based on the sample differs from the decision that would have been made based on entire population. bigger sample, math to evaluate results, making sure each item in population has equal chance of being selected.
C. Eliminates personal liability for some, but not all, partners
A limited liability partnership form of organization: A. Decreases liability of all partners of a CPA firm.B. Has similar liability requirements to that of a professional corporation.C. Eliminates personal liability for some, but not all, partners.D. Eliminates personal liability for all partners.
C. Obtain an understanding of the business purpose of the transaction
72. After determining that a related party transaction has, in fact, occurred, an auditor shouldA. Add a separate paragraph to the auditor's standard report to explain the transactionB. Perform analytical procedures to verify whether similar transactions occurred, but were not recordedC. Obtain an understanding of the business purpose of the transactionD. Substantiate that the transaction was consummated on terms equivalent to an arm's-length transaction
potential misstatements with cash disbursements (3)
1. recorded payment multiple times 2. not recorded 3. record wrong amount
What are Long Term Assets?
Assets with a useful life greater than one year and they will generate revenues over their useful life.
A. Appendices to Statements on Auditing Standards
Which of the following is considered an interpretive publication in the GAAS Hierarchy? A. Appendices to Statements on Auditing Standards.B. Statements on Auditing Standards.C. Interpretations of FASB Standards.D. Auditing articles explaining Statements on Auditing Standards in the Journal of Accountancy.
The trial balance show Supplies $1,350 & SuppliesExpense $0.  If $600 of supplies are on hand at the end of the period, the adjusting entry is:
a. Supplies cr. 600, supplies expense 600
b. Supplies cr. 750, supplies expense 750
c. Supplies expense
c. Supplies expense cr. 750, supplies  750
What must be submitted for any proposed business expenditure?
A check request form, along with supporting documentation.
C. Failed to exercise due care
Starr Corp. approved a plan of merger with Silo Corp. One of the determining factors in approving the merger was the strong financial statements of Silo which were audited by Cox & Co., CPAs. Starr had engaged Cox to audit Silo's financial statements. While performing the audit, Cox failed to discover certain instances of fraud which have subsequently caused Starr to suffer substantial losses. In order for Cox to be liable under common law, Starr at a minimum must prove that Cox: A. Acted recklessly or with lack of reasonable grounds for belief.B. Knew of the instances of fraud.C. Failed to exercise due care.D. Was grossly negligent.
What is the meaning, purpose and use of: accounting cycle
Process by which companies produce their financial statements for a specific period
D. Each of the years in the two-year period
57. For a continuing audit client, when a complete set of financial statements is presented on a comparative basis for two years, the auditors' opinion would refer to: A. Only the current year under audit.B. Either one or both years at the option of the auditors.C. Each of the two years plus the preceding year.D. Each of the years in the two-year period.
starting the Y axis of the graph at zero (to accurately depict the magnitude of changes in the data)
what is the most important graph design principles for ensuring that financial data is accurately interpreted?
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