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The two groups identified as the principal users of external financial information are
investors and creditors.
T 2.External financial information is generally more highly summarized than the
information reported internally.
T 3.The auditors report that accompanies the financial statements is based on evidence
gathered by the auditor from the detailed records and documents maintained by the
company and from a review of the controls over the accounting system.
F 4.The Securities and Exchange Commission recommends, but does not require, that all
nationally registered companies have an annual independent audit as protection for the
shareholders.
F 5.The standard three-paragraph auditors report deemphasizes the separate
responsibilities of management and the auditors for the accounting system and the
information in the financial statements.
F 6.The Financial Accounting Standards Board is an independent organization consisting
of seven part-time board members who are permitted to retain limited connections with
their firms or institutions after assuming membership on the Board.
T 7.Following the research of a major project by a task force, the FASB issues a
Discussion Memorandum that identifies the principal issues involved.
T 8.The primary responsibilities of the Emerging Issues Task Force are to identify new
accounting issues for which no authoritative statements exist and to discuss alternative
approaches to the issues and arrive at a consensus statement that provides guidance until
such time as they may be addressed by the FASB.
T 9.Congress gave the Securities and Exchange Commission the power to establish
accounting principles.
F 10.Generally accepted accounting principles have, in most cases, eliminated the need
for accountants to exercise professional judgment in interpreting and applying accounting
standards.
T 1.GAAP includes standards and interpretations issued by the FASB and those
pronouncements issued by previous standard-setting bodies that have not been suspended
or superseded.
T 2.One major purpose of the conceptual framework is to provide broad definitions of the
objectives, terms, and concepts involved in the practice of accounting.
T 3.The overriding quality or characteristic of accounting information is decision
usefulness.
F 4.Conservatism means that when accountants have genuine doubt concerning which of
two or more reporting alternatives to select, the alternative with the most favorable
impact on owners equity should be chosen.
F 5.Current general-purpose financial statements would seem to satisfy all there
commendations of Statement of Financial Accounting Concepts No. 5.
T 6.According to the conceptual framework of the FASB, the qualities that distinguish
more useful information from less useful information are primarily the qualities of
relevance and reliability.
T 7.The overall objective of financial reporting is to provide information that is useful for