Introduction to Financial Statements
56. Which of the following are internal reports that accounting provides to internal users?
a. Forecasts of cash needs for next year.
b. Financial comparisons of operating activity alternatives.
c. Both forecasts of cash needs and financial comparisons are internal reports.
d. Neither forecasts of cash needs or financial comparisons is an internal report.
57. Which of the following is the best definition of an internal user of accounting information?
a. Investors who use accounting information to decide whether to buy or sell stock.
b. Creditors like banks that use accounting information to evaluate the risk of lending
c. Labor unions who use accounting information to examine the ability of the company to
pay increased wages and benefits.
d. Managers who use accounting information to plan, organize, and run a business.
58. External users of accounting information, like the Internal Revenue Service, are most
commonly known as
a. taxing authorities.
b. labor unions.
d. regulatory agencies.
59. Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)?
a. The Act calls for increased oversight responsibilities for boards of directors.
b. The Act has resulted in increased penalties for financial fraud by top management.
c. The Act calls for decreased independence of outside auditors reviewing corporate
d. The Act is meant to decrease the likelihood of unethical corporate behavior.
60. Which of the following is not a step for solving an ethical dilemma?
a. Identifying the alternatives and weighing the impact of each alternative on various
b. Certifying the ethical accuracy of the financial information.
c. Identifying and analyzing the principal elements in the situation.
d. Recognizing the ethical situation and issues involved.
61. Which of the following is the most appropriate and modern definition of accounting?
a. The information system that identifies, records, and communicates the economic
events of an organization to interested users.
b. A means of collecting information.
c. The interconnected network of subsystems necessary to operate a business.
d. Electronic collection, organization, and communication of vast amounts of information.