Research & Evidence-Based Practice Flashcards
7 cards from real Certified Public Accountant practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Research & Evidence-Based Practice flashcards as text
When a CPA cannot find authoritative guidance in FASB ASC, which source is the MOST appropriate next step?
Answer: Non-authoritative sources such as FASB concept statements
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.
A CPA is researching whether a software license arrangement contains a lease under ASC 842. What is the PRIMARY criterion to evaluate?
Answer: Whether the customer controls an identified asset throughout the period of use
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.
Which AICPA professional standard provides the authoritative framework for a CPA performing an audit of financial statements?
Answer: AU-C sections
The AU-C sections (Statements on Auditing Standards) govern audits of non-issuer financial statements performed under AICPA standards.
A CPA researching tax issues finds a court decision that directly contradicts an IRS Revenue Ruling. Which authority generally carries MORE weight?
Answer: The court decision, if issued by the Supreme Court
Supreme Court decisions are the highest judicial authority and override IRS administrative pronouncements like Revenue Rulings.
Under the Conceptual Framework for GAAP, what is the PRIMARY objective of general purpose financial reporting?
Answer: To provide information useful to existing and potential investors, lenders, and other creditors
FASB's Conceptual Framework states the primary objective is to provide financial information useful to capital providers for making resource allocation decisions.
A client asks a CPA whether a contingent liability should be accrued. Under ASC 450, which TWO conditions must BOTH be met to require accrual?
Answer: It is probable that a liability has been incurred and the amount can be reasonably estimated
ASC 450-20 requires accrual only when it is probable that a liability has been incurred AND the amount can be reasonably estimated.
Which of the following is the BEST example of professional skepticism applied during audit research?
Answer: Questioning whether evidence obtained contradicts other audit evidence, even when management is cooperative
Professional skepticism requires a questioning mind and critical assessment of audit evidence, including scrutinizing potentially contradictory evidence regardless of management's cooperation.