FAR
This financial statement reports revenues and expenses over a period of time.
Income Statement (P&L)
This type of opinion states that the financial statements are fairly presented.
Unmodified (unqualified) opinion.
What type of accounting basis taxes income when it is earned rather than when cash is received.
+ 50 points if you can name the accounting principle associated
Accrual
Revenue Recognition Principle
BAR: This ratio measures a company's ability to pay short-term obligations
Current Ratio
This U.S. regulatory body was created after the 1929 stock market crash?
Securities and Exchange Commission (SEC)
What are the three most important financial statements used in accounting?
Income Statement
Balance Sheet
Statement of Cash Flows
What system is designed and implemented by companies so that no individual employee can authorize, record, and have custody to reduce fraud risk.
Internal Controls- Segregation of Duties
True or False:
A taxpayer is allowed to structure a transaction solely to create tax losses without changing economic position.
False
TCP: This tax planning technique legally shifts income to a later period
Income Deferral
This act increased corporate accountability and internal control requirements.
+ 50 points for the year
Sarbanes-Oxley Act (SOX)
2002
What are the non‑cash expenses that reduces the book value of assets with finite useful lives?
Depreciation & Amortization
The letter of representation obtained from an audit client should be dated as of:
The date of the audit report
The IRS applies this doctrine when a transaction has no meaningful economic effect other than tax savings.
Economic Substance Doctrine
TCP: This type of tax rate increases as taxable income increases.
Progressive Tax Rate
This energy company’s scandal helped lead to the Sarbanes-Oxley Act (SOX)
+ 100 points if you can also name the telecom company also responsible for SOX
Enron
WorldCom
What should be done when a company discovers an error in prior-year depreciation that materially affects financial statements.
A prior period adjustment.
Name the three types of audits
+100 points if you can describe the audits' purpose
Operational Audit: evaluate efficiency and effectiveness of any part of an organization's operations
Compliance Audit: determine if a company is following specific procedures of rules
Financial Statement Audit: if the FS are stated in accordance with specified criteria (GAAP, GAAS, etc.)
What occurs when a taxpayer sells stock at a loss and repurchases substantially identical stock within 30 days, causing the loss to be deferred and the basis of the new stock to be adjusted
Wash sale with basis adjustment
ISC: This committee created the framework commonly used to evaluate internal controls
Committee of Sponsoring Organizations of the Treadway (COSO)
This ancient civilization developed one of the earliest known accounting systems using clay tablets.
Ancient Mesopotamia
When a company voluntarily changes from FIFO to weighted-average inventory costing to improve comparability, what is required?
+ 100 points if you can name the correct ASC topic requiring this disclosure.
A change in accounting principle requiring a retrospective application.
ASC 250
This audit risk exists when financial statements contain a misstatement before considering controls.
Inherent Risk
This tax rule limits loss deductions when a taxpayer lacks sufficient economic risk.
+ 50 points if you can name the Internal Revenue Code Section Governing these rules
At-risk limitation rules
IRC §465
ISC: This control compares recorded amounts to physical counts or independent records
Detective Control
This accounting standard governs revenue recognition across industries.
ASC 606