Chapter 1, Problem 2DIE

1.

To determine

Sarbanes Oxley Act: Sarbanes Oxley Act was established by the U.S. government to protect the interest of the investors from the companies.

Ethics: Ethics refer to the moral principles and practices that a company shall adopt for the operation of its business.

Securities and Exchange Commission (SEC): SEC is an independent body set up by the U.S. government whose main objective is to protect the investors from any fraudulent activity by the companies.

Historical Cost Principle: The historical cost principle is the concept in accounting which states that the assets should be recorded at the value at which they were purchased

Monetary Unit Assumption: The monetary unit assumption is the concept in accounting that assumes that the events that have a monetary value are the only events that are recorded in the books.

To identify: Whether the given statement is true or false.

Statement: Congress passed the Sarbanes Oxley Act to ensure that investors invest only in companies that will be profitable.

2.

To determine

To identify: Whether the given statement is true or false.

Statement: The standards of conduct by which actions are judged as loyal or disloyal are ethics.

3.

To determine

To identify: Whether the given statement is true or false.

Statement: The primary accounting standard-setting body in United States is Securities and Exchange Commission.

4.

To determine

To identify: Whether the given statement is true or false.

Statement: The historical cost principle dictates that companies record assets at their cost and continue to report them at their cost over the time the assets are held.

5.

To determine

To identify: Whether the given statement is true or false.

Statement: The monetary unit assumption requires that companies record only transactions that can be measured in money.