Question

The following are all outcomes of a soundly developed conceptual framework for financial reporting except: a. increased confidence in financial reporting by financial statement users. b. enhanced comparability among companies' financial statements. c. faster resolution of new and emerging problems related to financial reporting. d. fewer incidents of fraud by employees of companies. Which of the following is not a result of the Sarbanes-Oxley Act? a. Code of ethics for senior officers of a publicly traded company b. Fewer restrictions on the types of work an auditor may perform for a client c. Guidance on the make up of the members of a public company’s audit committee d. Certification of the effectiveness of internal controls within a public company What is the purpose of the Emerging Issues Task Force? a. Providing guidance on ethics issues in the accounting profession. b. Providing implementation guidance on standards issued by the FASB. c. Monitoring adherence to GAAP by publicly traded companies. d. Overseeing the audits of publicly traded companies.

Answer 1

The correct option is d. fewer incidents of fraud by employees of companies.

Explanation: A conceptual framework for financial reporting helps IASB to review IFRS and develop the accounting policies and procedures to cover the transactions which are uncovered under existing standards. Accordingly, employee frauds are not covered under the conceptual framework of financial reporting.

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The correct option is c. Guidance on the make up of the members of a public company’s audit committee.

Explanation: An audit committee looks after the financial reporting process of an organization monitors the best practices of good corporate governance, and selects the independent auditors. Sarbanes-Oxley Act did not bring the concept of the audit committee, instead, it strengthened the concept by raising the membership requirement to add more independent directors.

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The correct option is d. Overseeing the audits of publicly traded companies.

Explanation: Emerging Issues Task Force works under the guidance of FASB and looks after the improvement of financial reporting. It does not have any role in audits of publicly traded companies.