Compliance and Auditing Financial Reporting Compliance 1

Question 1

Which accounting standards are publicly traded US companies required to use for financial reporting?

Accepted Answer

GAAP (Generally Accepted Accounting Principles)

Answer

Publicly traded US companies are required by the SEC to prepare financial statements in accordance with US GAAP, established by the Financial Accounting Standards Board (FASB).

Question 2

What is the purpose of management's discussion and analysis (MD&A) in an annual report?

Accepted Answer

To provide management's perspective on financial results, trends, and risks

Answer

MD&A provides management's narrative explanation of the company's financial condition, results of operations, liquidity, and known trends or uncertainties that could affect future performance.

Question 3

What is 'earnings management' in the context of financial reporting compliance?

Accepted Answer

Manipulating financial results within or outside GAAP to achieve desired outcomes

Answer

Earnings management involves the use of accounting discretion or transactions to influence reported financial results, which may range from legitimate judgment to fraudulent misrepresentation.

Question 4

Which SEC filing must publicly traded US companies file annually with audited financial statements?

Accepted Answer

Form 10-K

Answer

Form 10-K is the annual report that publicly traded companies must file with the SEC, containing audited financial statements, MD&A, risk factors, and SOX management attestations.

Question 5

What does 'revenue recognition' compliance require under ASC 606?

Accepted Answer

Recognizing revenue when performance obligations to customers are satisfied

Answer

ASC 606 requires companies to recognize revenue when (or as) they satisfy performance obligations by transferring promised goods or services to customers, in an amount reflecting the consideration entitled.

Compliance and Auditing Practice Test

Compliance and Auditing Practice Test

Compliance and Auditing Financial Reporting Compliance 1