26. Which one of the following types of accounting pronouncements is not included in Level
A of the GAAP hierarchy?
a. FASB Statements
b. FASB Interpretations
c. FASB Technical Bulletins
d. Accounting Research Bulletins
27. SFAC No. 6, "Elements of Financial Statements of Business Enterprises" lists ten elements of financial statements, which of the following is not one of those elements?
b. Comprehensive Income
28. Accounting principles and practices most closely mirror which type of research methodology.
a. Deductive approach
b. Pragmatic approach
c. Ethical approach
d. Scientific method of inquiry
29. Using the decision process called fundamental analysis, what are the three primary decisions made by investors.
a. Lend, borrow and repay
b. Buy, sell and trade
c. Beg, borrow and steal
d. Buy, hold and sell
30. Managerial accounting applies to each of the following types of businesses, except
a. service firms.
b. merchandising firms.
c. manufacturing firms.
d. Managerial accounting applies to all types of firms.
31. The major reporting standard for presenting managerial accounting information is
b. generally accepted accounting principles.
c. the cost principle.
d. the current tax law.
32. Which of the following statements about internal reports is not true?
a. The content of internal reports may extend beyond the double-entry accounting system.
b. Internal reports may show all amounts at market values.
c. Internal reports may discuss prospective events.
d. Most internal reports are summarized rather than detailed.
33. Which one of the following is an example of a period cost?
a. A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer
b. Workers' compensation insurance on factory workers' wages allocated to the factory
c. A box cost associated with computers
d. A manager's salary for work that is done in the corporate head office
34. The IASC's "Framework for the Preparation and Presentation of Financial Statements" describes qualitative characteristics as the attributes that make the information provided in financial statements useful, and are as follows:
a. Understandability, timeliness, accuracy and comparability
b. Readability, relevance, accuracy and comparability
c. Understandability, relevance, reliability and comparability
d. Understandability, timeliness, reliability and comparability
35. Sarah contributes $20,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. Sarah's after-tax cost of the contribution is
36. Investigation of a tax problem that involves a closed-fact situation means that
a. future events may be planned and controlled.
b. the statute of limitations on the client's tax return is still open.
c. the client's transactions have already occurred and the tax questions must now be resolved.
d. research is primarily concerned with applying the law to the facts as they exist.
37. The highest source of primary tax law is a (the)
a. Revenue Rulings.
b. Revenue Procedures.
c. Treasury Regulations.
d. Internal Revenue Code.
38. Arthur pays tax of $3,000 on taxable income of $30,000 while taxpayer Barbara pays tax of $6,000 on $60,000. The tax is a
a. progressive tax.
b. proportional tax.
c. regressive tax.
d. None of the above.
39. Helen, who is single, is considering purchasing a residence that will provide a $20,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 15% and her effective tax rate is 10%, what is the amount of Helen's tax savings from purchasing the residence?
40. Anne, who is single, has taxable income for the current year of $28,000 while total economic income is $33,000 resulting in a total tax of $3,822. Anne's average tax rate and effective tax rate are, respectively,
a. 13.65% and 11.58%
b. 15% and 11.58%
c. 11.58% and 13.65%.
d. 15% and 13.65%.
41. Anyone identified to the auditor by name prior to the audit who is to be the principal recipient of the auditor's report is a
a. third party.
b. foreseen beneficiary.
c. primary beneficiary.
d. foreseeable party.
e. secondary beneficiary.
42. In order for a plaintiff to recover against an auditor under the 1933 Securities Act, he or she must normally prove:
a. reliance on the financial statements.
b. gross negligence on the part of the auditor.
c. the financial statements were materially false or misleading.
d. ordinary negligence on the part of the auditor.
e. reliance, misleading statements and ordinary negligence.
43. When financial statements are determined to be false or misleading, the auditor's best defense against a plaintiff bringing suit under the 1933 Securities Act would be:
a. lack of intent.
b. lack of privity.
c. contributory negligence.
d. no contest.
e. due diligence.
44. If a CPA recklessly abandons standards of due care and diligence while performing an audit, he or she may be held liable to unknown third parties for:
a. fraudulent misconduct.
b. gross misconduct.
c. ordinary negligence.
d. contributory negligence.
e. gross negligence.
45. Which one of the following assertions is not made by management in placing an item in the financial statements?
a. existence or occurrence
b. direct controls
c. rights and obligations
d. presentation and disclosure
46. The concept of materiality is defined by the Financial Accounting Standards Board in terms of the judgment of the:
c. FASB members.
e. AICPA members.
47. Which one of the following is among the three components of audit risk?
a. incurrence risk
b. occurrence risk
c. rejection risk
d. acceptance risk
e. control risk
48. Inherent risk is defined in terms of:
a. a total absence of controls.
b. an ideal set of controls.
c. the existing controls.
d. the standard controls for the client's industry.
e. a full set of controls.
49. Which of the following FASB standards addresses the preparation of financial statements for not-for-profit entities?
a. SFAS 157
b. SFAS 13
c. SFAS 117
d. SFAS 144
50. Which of the following organizations is responsible establishing and monitoring GAAP for state and local governmental entities?
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