Importance of Financial Reports
The primary purpose of financial reports
to provide information about a company's financial health
These accountants work for a single organization, managing its internal finances.
Answer: What are private accountants?
The Sarbanes-Oxley Act was passed in this year.
Answer: What is 2002?
The first step in the accounting cycle.
Answer: What is analyzing transactions?
There professionals use financial reports to make investment decisions
investors
These accountants are hired by multiple clients to perform audits and tax preparation.
Answer: What are public accountants?
SOX was a response to these types of corporate scandals.
Answer: What are financial and accounting fraud scandals?
This document is created after transactions are journalized.
Answer: What is the ledger?
Financial reports help business track these two critical components of operations
revenue and expenses
The organization that sets ethical standards for public accountants.
Answer: What is the American Institute of Certified Public Accountants (AICPA)?
SOX requires CEOs and CFOs to personally do this with financial reports.
Answer: What is certify them?
The step in the accounting cycle that involves preparing a financial statement.
Answer: What is step 5?
Accurate financial reports assist with these two organizational funstions
Planning and decision making
This federal act increased the demand for public accountants.
Answer: What is the Sarbanes-Oxley Act (SOX)?
This board was created to oversee the audits of public companies under SOX.
Answer: What is the Public Company Accounting Oversight Board (PCAOB)
Adjusting entries are recorded during this step.
Answer: What is step 4?
Name two external stakeholders, other than investors, who use financial reports.
Answer: Who are creditors and regulators?
Answer: Who are creditors and regulators?
This key difference separates public and private accountants.
Answer: What is the client base (public accountants serve multiple clients; private accountants serve one company)?
Name two industries where SOX has significantly impacted accounting practices.
Answer: What are banking and healthcare?
Name all six steps in the accounting cycle.
Answer: What are analyzing transactions, journalizing, posting to the ledger, adjusting entries, preparing financial statements, and closing entries?