Intermediate Accounting Volume 1, 13th Canadian Edition by Donald E. Kieso Test bank

CPA: Strategy & Governance
Bloomcode: Knowledge
AACSB: Analytic
 
 
7. Which of the following statements regarding the importance of information provided by accounting to  investors and creditors is NOT correct?
a) It allows investors and creditors to compare income and assets of companies.
b) It helps investors and creditors assesses the relative risks and returns of investment opportunities.
c) It helps investors and creditors channel their resources more effectively.
d) It determines the share prices and lending portfolios for investors and creditors.
 
Answer: d
 
Difficulty: Medium
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
CPA: Strategy & Governance
Bloomcode: Analysis
AACSB: Analytic
 
 
8. In Canada, which of the following is part of the primary exchange mechanism for allocating resources.
a) shareholders
b) financial Institutions such as banks
c) government authorities such as the Canada Revenue Agency (CRA)
d)management
 
Answer: b
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
9. Stakeholders who help in the efficient allocation of resources include
a) investors and creditors.
b) financial analysts and regulators.
c) creditors and auditors.
d) management and auditors.
 
Answer: b
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
10. Audited financial statements are prepared by
a) auditors.
b) financial analysts.
c) Canada Revenue Agency.
d) management.
 
Answer: d
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
11. The auditor’s primary responsibility is to
a) review financial statements and discuss them with management.
b) prepare financial statements.
c) report to Canada Revenue Agency.
d) report to standard setters.
 
Answer: a
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Audit & Assurance
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
 
 
12. The widely publicized subprime lending crisis was NOT caused by
a) capital market participants who acted in their own self-interest.
b) a lack of transparency.
c) the practice of securitizing assets.
d) a lack of investor understanding of the investment's true risk.
 
Answer: c
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Finance
CPA: Professional & Ethical Behaviour
CPA: Strategy & Governance
Bloomcode: Knowledge
AACSB: Analytic
 
 
13. Management’s primary responsibility with respect to financial statements is to
a) prepare them, as they have the best insight and know what should be included.
b) audit them, as they are distant enough from daily operations.
c) rely on them to make decisions.
d) None of the above are true.
 
Answer: a
 
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
CPA: Strategy & Governance
Bloomcode: Knowledge
AACSB: Analytic
 
 
14. The primary responsibility of security and exchange commissions with respect to financial statements is to
a) set generally accepted accounting principles (GAAP), which must be followed in  preparing statements.
b) review accounting choices made by companies in the financial statements to ensure decision-making logic is sound.
c) monitor financial statements to ensure full and plain disclosure of material information, thus maintaining compliance with listing requirements.
d) monitor and analyze the information looking for signs of an improved or weakened financial condition.