Multiple Choice Questions

1. Rule 203 of the AICPA’s Code of Professional Conduct pertains to

a. CPAs’ independence

b. Authorities designated to establish accounting standards

c. Standards of competency

d. Solicitation of new clients by a CPA

2. Which of the following rule-making authorities would establish accounting standards for Stanford University (a private university)?

a. The AICPA

b. The FASB

c. The FASAB

d. The GASB

3. Which of the following rule-making authorities would establish accounting standards for the University of Texas (a public university)?

a. The AICPA

b. The FASB

c. The FASAB

d. The GASB

4. If the GASB has not issued a pronouncement on a specific issue, which of the following is true with respect to FASB pronouncements?

a. They would automatically govern

b. They could be taken into account but would have no higher standing than other accounting literature

c. They are irrelevant

d. They could be taken into account by the reporting entity, but only if disclosure is made in notes to the financial statements
5. The FASB is to the GASB as

a. A brother is to a sister

b. A father is to a son

c. A son is to a father

d. A daughter is to a friend

6. Standards promulgated by the FASB are most likely to be adhered to by which of the following governmental units?

a. A police department

b. A public school

c. An electric utility

d. A department of highways

7. Which of the following practices is most likely to undermine inter-period equity?

a. Paying for a new school building out of current operating funds

b. Paying the administrative staff of a school out of current operating funds

c. Issuing 20-year bonds to finance construction of a new highway

d. Recognizing gains and losses on marketable securities as prices increase and decrease

8. The term ‘‘independent sector’’ refers to

a. States that have opted not to receive federal funds

b. Not-for-profit organizations

c. Churches that are unaffiliated with a particular denomination

d. Universities that are not affiliated with a particular athletic conference

9. Which of the following is not an objective of external financial reporting by either the GASB or the FASB?

a. To enable the statement user to detect fraud

b. To disclose legal or contractual restrictions on the use of resources

c. To provide information about how the organizations meet their cash requirements

d. To provide information that would enable a user to assess the service potential of long-lived assets

10. Which of the following is the least appropriate use of the external financial statements of a government?

a. To assess the entity’s financial position

b. To assess whether the compensation of management is reasonable in relation to that in comparable entities

c. To compare actual results with the budget

d. To evaluate the efficiency and effectiveness of the entity in achieving its objectives