Accounting & auditingLesson 1 of 2 in the course Using Financial Information and Accounting

Accounting Careers, Reporting Irregularities, and Sarbanes–Oxley Reforms

5 flashcards · 5 quiz questions · 5 match pairs · 4 fill-in sentences · English

Save course
Lesson progress
0 / 5

Your progress is kept in this browser only.Sign up to save it

Summary

Accountants do more than calculate numbers: they help organizations understand financial information, follow sound practices, and make decisions. This lesson explains how public and private accountants differ and how professional credentials prepare accountants for their work.

Accounting has expanded as businesses have grown in size, complexity, and number, and as tax laws have changed frequently. Technology has reduced some routine data-gathering and calculation tasks while giving accountants powerful tools for analysis. Accountants therefore need to keep up with information technology as well as financial rules.

All flashcards

Public accountant
An independent accountant who serves multiple clients, usually for a fee.
Private accountant
An accountant employed by one organization to support its accounting and financial decisions.
Financial restatement
A revision of financial statements that a company previously issued.
Sarbanes–Oxley Act (SOX)
A 2002 law intended to strengthen corporate reporting, accountability, and investor confidence.
Public Company Accounting Oversight Board (PCAOB)
An independent body overseen by the SEC that regulates audits of public companies.

Quiz questions

  1. Why can a gap between reported earnings and operating cash flow warrant further analysis?Answer: It may indicate that reported earnings are not supported by the company's operating cash position, but it does not prove fraud.
  2. Which responsibility belongs to the PCAOB under the Sarbanes–Oxley Act?Answer: Setting audit standards and inspecting public accounting firms.
  3. Why does SOX restrict certain non-audit services that auditors may provide to audit clients?Answer: Providing both services can create conflicts that weaken an auditor's willingness to challenge a client.
  4. What must a public company's CEO and CFO do under SOX?Answer: Certify the company's financial statements.
  5. What must companies include in annual reports under SOX regarding financial reporting controls?Answer: A report on the implementation of internal-control procedures.

Based on Introduction to Business 2e by Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

More in Accounting & auditing

All Accounting & auditing lessons
Accounting & auditingIncome Statement Analysis: From Sales to EBITDA5 flashcards · 5 quiz questions · 4 gamesPlay free →Accounting & auditingDepreciation: Cost Allocation, Methods, and Tax Treatment5 flashcards · 5 quiz questions · 4 gamesPlay free →Accounting & auditingOperating Efficiency Ratios: Receivables, Assets, and Inventory5 flashcards · 5 quiz questions · 4 gamesPlay free →Accounting & auditingInternal Auditing: Governance, Risk, Controls, and Professional Practice5 flashcards · 5 quiz questions · 4 gamesPlay free →Accounting & auditingIncome Statements: Sales, Profit Calculation, and Cash-Flow Distinctions5 flashcards · 5 quiz questions · 4 gamesPlay free →Accounting & auditingFIFO and LIFO as Inventory Cost-Flow Assumptions5 flashcards · 5 quiz questions · 4 gamesPlay free →