Certified Public Accountant Research & Evidence-Based Practice 2

Question 1

When a CPA cannot find authoritative guidance in FASB ASC, which source is the MOST appropriate next step?

Accepted Answer

Non-authoritative sources such as FASB concept statements

Answer

Under the GAAP hierarchy, when authoritative ASC guidance is absent, CPAs should consider non-authoritative sources like FASB concept statements to develop an appropriate accounting policy.

Question 2

A CPA is researching whether a software license arrangement contains a lease under ASC 842. What is the PRIMARY criterion to evaluate?

Accepted Answer

Whether the customer controls an identified asset throughout the period of use

Answer

ASC 842 requires evaluating whether the customer has the right to obtain substantially all economic benefits and the right to direct use of the identified asset — i.e., control.

Question 3

Which AICPA professional standard provides the authoritative framework for a CPA performing an audit of financial statements?

Accepted Answer

AU-C sections

Answer

The AU-C sections (Statements on Auditing Standards) govern audits of non-issuer financial statements performed under AICPA standards.

Question 4

A CPA researching tax issues finds a court decision that directly contradicts an IRS Revenue Ruling. Which authority generally carries MORE weight?

Accepted Answer

The court decision, if issued by the Supreme Court

Answer

Supreme Court decisions are the highest judicial authority and override IRS administrative pronouncements like Revenue Rulings.

Question 5

Under the Conceptual Framework for GAAP, what is the PRIMARY objective of general purpose financial reporting?

Accepted Answer

To provide information useful to existing and potential investors, lenders, and other creditors

Answer

FASB's Conceptual Framework states the primary objective is to provide financial information useful to capital providers for making resource allocation decisions.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Research & Evidence-Based Practice 2