1. The use of judgment in determining the amounts re-ported in financial statements is known as:
a. Operational freedom
b. Reporting freedom
c. Timing freedom
d. None of the above

2. The accounting principle that directs management to select methods and estimates that avoid overstating as-sets, revenue, and income is called:
a. Ethnicity
b. Confluence
c. Collectivism
d. Conservatism

3. Earnings management actions can be classified as each of the following except:
a. Aggressive
b. Conservative
c. Active
d. Neutral

4. Which of the following is not a financial statement fraud scheme?
a. Overstating dividends
b. Overstating financial condition or liquidity
c. Understating expenses
d. Overstating revenue

5. Privately held companies may present financial statements using which of the following non- GAAP alternatives?
a. Direct and indirect basis
b. Income tax and cash basis
c. Conservation and accumulation
d. Current and deferred

6. Which of the following statements does not accurately reflect the agency problem?
a. Managers always protect the collective interest of shareholders
b. Managers control the operations of an organization
c. Shareholders delegate decision making to managers
d. Managers can make decisions that benefit their personal interests

7. Forensic accountants consider both financial data and nonfinancial data in financial statements analysis.
a. True
b. False

8. Porter’s five forces model includes each of the following except:
a. Threat of new competitors
b. Primary and support activities
c. Bargaining power of customers
d. The intensity of competitive rivalry

9. Nonfinancial material can be found in public companies:
a. 10- K annual report
b. Bank loan application
c. Accreditation report
d. Disclosure report

10. Context brings clarity, perspective, and focus to financial statements analysis.
a. True
b. False