Question 1

Which of the following statements is not true about Positive Accounting Theory?

Accepted Answer

A)  It is used to distinguish research aimed at explanation and prediction. 
B)  It is designed to explain and predict which firms will, and which firms will not, use a particular method, and also prescribes which method a firm should use. 
C)  It focuses on the relationships between the various individuals involved in providing resources to an organisation, and how accounting is used to assist in the functioning of these relationships. 
D)  One of the key theories that underpins Positive Accounting Theory is Agency theory. 
A)  It is used to distinguish research aimed at explanation and prediction. 
B)  It is designed to explain and predict which firms will, and which firms will not, use a particular method, and also prescribes which method a firm should use. 
C)  It focuses on the relationships between the various individuals involved in providing resources to an organisation, and how accounting is used to assist in the functioning of these relationships. 
D)  One of the key theories that underpins Positive Accounting Theory is Agency theory.

Question 2

Positive Accounting Theory suggests that bonus schemes benefit:

Accepted Answer

A)  Only managers 
B)  Only owners 
C)  Both managers and owners 
D)  Neither managers nor owners 
A)  Only managers 
B)  Only owners 
C)  Both managers and owners 
D)  Neither managers nor owners

Question 3

Which of the following is not a criticism of Positive Accounting Theory?

Accepted Answer

A)  It is based on the assumption that all action is driven by wealth maximisation. 
B)  It is not value-free. 
C)  It has developed little in the past 30 years. 
D)  Its claims cannot be objectively verified. 
A)  It is based on the assumption that all action is driven by wealth maximisation. 
B)  It is not value-free. 
C)  It has developed little in the past 30 years. 
D)  Its claims cannot be objectively verified.

Question 4

Which of the following statements is true about what caused the shift in paradigm from normative to positive research?

Accepted Answer

A)  The shift resulted from US reports on business education, and improved computing facilities enabling large-scale statistical analysis. 
B)  The shift occurred because positive accounting researchers are not concerned with explaining or predicting what is (i.e. that which could be tested empirically); rather, they are concerned with what should be. 
C)  The shift occurred because in positive research, falsifiable hypotheses are not generated from theory. 
D)  All of the given options are correct. 
A)  The shift resulted from US reports on business education, and improved computing facilities enabling large-scale statistical analysis. 
B)  The shift occurred because positive accounting researchers are not concerned with explaining or predicting what is (i.e. that which could be tested empirically); rather, they are concerned with what should be. 
C)  The shift occurred because in positive research, falsifiable hypotheses are not generated from theory. 
D)  All of the given options are correct.

Question 5

A manager electing to adopt a depreciation method that increases income,but does not reflect the actual use of the asset,is consistent with:

Accepted Answer

A)  The efficiency perspective of Positive Accounting Theory 
B)  The opportunistic perspective of Positive Accounting Theory 
C)  Both the opportunity and the efficiency perspectives of Positive Accounting Theory 
D)  Neither the opportunity nor the efficiency perspectives of Positive Accounting Theory 
A)  The efficiency perspective of Positive Accounting Theory 
B)  The opportunistic perspective of Positive Accounting Theory 
C)  Both the opportunity and the efficiency perspectives of Positive Accounting Theory 
D)  Neither the opportunity nor the efficiency perspectives of Positive Accounting Theory

Question 6

Which of the following can be used as an accounting measure by the government and other interest groups that a particular organisation (typically large)is generating excessive profits and not paying its 'fair share' to other segments of the community?

Accepted Answer

A)  Total sales 
B)  Total profits 
C)  Total assets 
D)  All of the given options are correct. 
A)  Total sales 
B)  Total profits 
C)  Total assets 
D)  All of the given options are correct.

Question 7

According to Positive Accounting Theory,the existence of debt covenants:

Accepted Answer

A)  Can be explained from an efficiency perspective, and gives management an incentive to manipulate accounting information from an opportunistic perspective 
B)  Can be explained from an opportunistic perspective, and gives management an incentive to manipulate accounting information from an efficiency perspective 
C)  Can be explained from both efficiency and opportunistic perspectives 
D)  Cannot be explained 
A)  Can be explained from an efficiency perspective, and gives management an incentive to manipulate accounting information from an opportunistic perspective 
B)  Can be explained from an opportunistic perspective, and gives management an incentive to manipulate accounting information from an efficiency perspective 
C)  Can be explained from both efficiency and opportunistic perspectives 
D)  Cannot be explained

Question 8

Agency theory suggests that government regulation is:

Accepted Answer

A)  Necessary, because principals know that agents may not act in their interests 
B)  Necessary, because agents know that principals may not act in their interests 
C)  Unnecessary, because principals know that agents may not act in their interests 
D)  Unnecessary, because agents know that principals may not act in their interests 
A)  Necessary, because principals know that agents may not act in their interests 
B)  Necessary, because agents know that principals may not act in their interests 
C)  Unnecessary, because principals know that agents may not act in their interests 
D)  Unnecessary, because agents know that principals may not act in their interests

Question 9

According to agency theory,contracts that align the interests of the principal and agent primarily benefit:

Accepted Answer

A)  The agent 
B)  The principal 
C)  Both the principal and the agent 
D)  Neither the principal nor the agent 
A)  The agent 
B)  The principal 
C)  Both the principal and the agent 
D)  Neither the principal nor the agent

Question 10

It is common practice for managers to be rewarded in a way that is tied to the profits of the firm,the sales of the firm,or the return on assets.That is,their remuneration is based on the output of the accounting system.Which of the following is a drawback for such bonus schemes?

Accepted Answer

A)  Bonus schemes tied to the performance of the firm will be put in place to align the interests of the owners and the managers. 
B)  Rewarding managers on the basis of accounting profits may induce them to manipulate accounting numbers. 
C)  There would be limited incentives for the manager to adopt risky strategies that increase the value of the firm. 
D)  The manager may be reluctant to take on optimal levels of debt. 
A)  Bonus schemes tied to the performance of the firm will be put in place to align the interests of the owners and the managers. 
B)  Rewarding managers on the basis of accounting profits may induce them to manipulate accounting numbers. 
C)  There would be limited incentives for the manager to adopt risky strategies that increase the value of the firm. 
D)  The manager may be reluctant to take on optimal levels of debt.

Which of the following statements is not true about Positive Accounting Theory?

Positive Accounting Theory suggests that bonus schemes benefit:

Which of the following is not a criticism of Positive Accounting Theory?

Which of the following statements is true about what caused the shift in paradigm from normative to positive research?

A manager electing to adopt a depreciation method that increases income,but does not reflect the actual use of the asset,is consistent with:

Which of the following can be used as an accounting measure by the government and other interest groups that a particular organisation (typically large)is generating excessive profits and not paying its 'fair share' to other segments of the community?

According to Positive Accounting Theory,the existence of debt covenants:

Agency theory suggests that government regulation is:

According to agency theory,contracts that align the interests of the principal and agent primarily benefit:

It is common practice for managers to be rewarded in a way that is tied to the profits of the firm,the sales of the firm,or the return on assets.That is,their remuneration is based on the output of the accounting system.Which of the following is a drawback for such bonus schemes?

Introduction to Financial Accounting Theory

The Financial Reporting Environment

The Regulation of Financial Accounting

International Accounting

Measurement Issues: Accounting for the Effects of Changing Prices and Market Conditions

Normative Theories of Accounting: The Case of Conceptual Framework Projects

Unregulated Corporate Reporting Decisions: Considerations of Systems-Oriented Theories

Extending Corporate Accountability: The Incorporation of Social and Environmental Factors Within External Reporting

Reactions of Capital Markets to Financial Reporting

Reactions of Individuals to Financial Reporting: An Examination of Behavioural Research in Accounting

Critical Perspectives of Accounting

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Exam 7: Positive Accounting Theory

Which of the following statements is not true about Positive Accounting Theory?

Positive Accounting Theory suggests that bonus schemes benefit:

Which of the following is not a criticism of Positive Accounting Theory?

Which of the following statements is true about what caused the shift in paradigm from normative to positive research?

A manager electing to adopt a depreciation method that increases income,but does not reflect the actual use of the asset,is consistent with:

Which of the following can be used as an accounting measure by the government and other interest groups that a particular organisation (typically large)is generating excessive profits and not paying its 'fair share' to other segments of the community?

According to Positive Accounting Theory,the existence of debt covenants:

Agency theory suggests that government regulation is:

According to agency theory,contracts that align the interests of the principal and agent primarily benefit:

It is common practice for managers to be rewarded in a way that is tied to the profits of the firm,the sales of the firm,or the return on assets.That is,their remuneration is based on the output of the accounting system.Which of the following is a drawback for such bonus schemes?

Introduction to Financial Accounting Theory

The Financial Reporting Environment

The Regulation of Financial Accounting

International Accounting

Measurement Issues: Accounting for the Effects of Changing Prices and Market Conditions

Normative Theories of Accounting: The Case of Conceptual Framework Projects

Unregulated Corporate Reporting Decisions: Considerations of Systems-Oriented Theories

Extending Corporate Accountability: The Incorporation of Social and Environmental Factors Within External Reporting

Reactions of Capital Markets to Financial Reporting

Reactions of Individuals to Financial Reporting: An Examination of Behavioural Research in Accounting

Critical Perspectives of Accounting

Filters