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ACC 100 Study Guide - Midterm Guide: Financial Statement

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lavendermole636
12 May 2016
School
Ryerson University
Department
Accounting
Course
ACC 100
Professor
Else Grech

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Document Summary

Why is an accounting system important to external stakeholders? (hint: define an accounting system first before you consider why it is important to external stakeholders!) Companies record their business transactions in an accounting system: an information system that collects, groups, and communicates a business"s financial position, including its financial health and profitability. Without accounting information, stakeholders would not be able to make many of the decisions that help them meet their objectives. External stakeholders do not have access to the business"s accounting system because they are outside of the business. Instead, they depend on the financial statements that businesses produce. Financial statements tell a business"s story, what they do and how well they do it. They provide a business"s financial performance, its current financial position, and its cash flows. In order to make good business decisions all stakeholders need to have a good idea of how the business has progressed in the past.

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Related Questions

The General Accounting Office prepared a report showing thatmany publicly-owned companies restated their financial statementsduring the period 1997 to 2001. Of course, they did not includehappenings such as the situation reported in The Wall StreetJournal, which told its readers that Qwest Communications (whichowns one of the Bell telephone companies) had restated its priorfinancial statements four times from July 2002 to February2003.

Assume that on one of the Sunday television news programs,whether Sunday morning as in Meet the Press or Sunday evening suchas 20/20, an accounting professor was being interviewed. "Hello,professor. Tell our viewers a little about yourself." "I amProfessor Blahblah. I am a certified public accountant, I amlicensed to practice as a certified public accountant, I have anearned doctorate in accounting, and I presently teach auditing atthe university level. Sometimes the department also has me teach acourse in accounting information systems, which I teach as a way ofdesigning accounting systems to provide information to decisionmakers." "What do you think of this situation of Qwest restatingits financial statements four times in seven months?" "Oh, this isterrible. The management of Qwest had a duty to file auditedfinancial statements with the SEC, and to provide those auditedfinancial statements to each of the company's stockholders.Naturally, those financial statements were required to be truthful.The accounting firm which audited those financial statements had aduty to design its audit to assure itself that those financialstatements were free of material misstatement, whatever the cause.If Qwest restated its financial statements four times in sevenmonths, then as they say in law, res ipso loquitur, which means'the thing speaks for itself.'" In other words, the very fact thatthe company restated its financial statements four times in sevenmonths, and by material amounts each time, suggests that neithermanagement nor the auditors did what they were obligated todo."

"Thank you, Professor Blahblah. Do you think our millions ofviewers should know anything else?"

"Yes, I do. If management was making decisions based on thosewrong numbers, then management probably made some bad decisionswhich they would not have made if they would have used correctnumbers."

"Thank you very much, Professor Blahblah. Let's hope that noneof our millions of viewers was among the people who sufferedfinancially as a result of what management and the auditors did orfailed to do."

Required:

1. Does the audit firm which gave clean opinions on thoseoriginal sets of financial statements have any obligation to doanything now about those earlier audit reports? Cite theauthoritative professional literature.

2. Design an audit program for asserted and unasserted claimsagainst this client company. Cite the authoritative professionalliterature related to the claims, and show how your audit programfulfills your professional responsibilities.

Thanks

QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

note: Working managers may complete this exercise based on the practices of their own organizations. Students may complete this exercise based on the practices of a current or previous employer. Instructions 1. Select and describe the boundaries of the system of interest; the term “organization” will be used to refer to this selected system. You may select a team, a department, a small organization (e.g., an office practice), or an entire organization. 2. To familiarize yourself with the criteria, review the section called “Category and Item Descriptions” in the Baldrige Criteria for Performance Excellence available from: www.nist.gov/baldrige/ publications/hc_criteria.cfm 3. The Organizational Assessment Worksheet provides a general description of the criteria category followed by selected questions from the respective 2011–2012 Health Care Criteria for Performance Excellence category. 4. Based on the system selected in question 1, write a brief reply to the selected questions. Briefly describe your organization, including its services; size; geographic community; key patient or customer groups; and current facilities, equipment, and technology, as well as the number of patients or clients it serves. Briefly describe your organization’s key challenges and your organization’s current performance improvement system. How do senior leaders deploy your organization’s vision and values through your leadership system, to the workforce, to key suppliers and partners, and to patients and stakeholders as appropriate? How do senior leaders encourage frank two-way communication throughout the organization? How does your organization conduct strategic planning? Summarize your organization’s action plans, how they are deployed, and key action plan performance measures or indicators. How do you identify patient, stakeholder, and market requirements for service offerings? How do you build and manage relationships with patients and stakeholders to meet their requirements and exceed their expectations at each stage of their relationship with you? What are your key organizational performance measures? How do you use these data and information to support organizational decision making and innovation? How do you assess your workforce capability and capacity needs, including skills, competencies, and staffing levels? How do you address workplace environmental factors to ensure and improve workplace health, safety, and security? How do you design and innovate your work processes to meet all the key requirements? How do you improve your work processes to improve healthcare outcomes, to achieve better performance, to reduce variability, and to improve healthcare services? Provide data for one key measure or indicator of healthcare outcomes that is important to your patients and stakeholders. Provide data for one key measure or indicator of patient or stakeholder satisfaction. Provide data for one key measure or indicator of financial performance. Provide data for one key measure or indicator related to operational performance. Provide data for one key measure related to achieving legal, regulatory, and accreditation requirements. Prioritizing Improvement Opportunities 1. Review the responses to the organizational assessment questions. 2. Note any questions for which you could not provide a response (i.e., the organization does not have a defined process or approach to address the topic of the question). 3. Review the organizational performance results data. 4. Select one or more measures that demonstrate less than desirable results. 5. Select one item from question 2 or 4 as the performance gap for the performance improvement exercise .