Question 1

Under IFRS 2 and AASB 2 the fair value of share options has to be classified as:

Accepted Answer

A)  An expense 
B)  A liability 
C)  An owner's equity 
D)  An asset 
A)  An expense 
B)  A liability 
C)  An owner's equity 
D)  An asset

Question 2

In the absence of regulation,the 'market for lemons perspective' (Arkerlof,1970)assumes that:

Accepted Answer

A)  There is no incentive for firms to disclose bad news. 
B)  Firms have incentives to disclose both good and bad news. 
C)  No news is good news. 
D)  All of the given options are correct. 
A)  There is no incentive for firms to disclose bad news. 
B)  Firms have incentives to disclose both good and bad news. 
C)  No news is good news. 
D)  All of the given options are correct.

Question 3

Regulators often cite investor protection as a basis for more stringent regulation and financial reporting requirements enacted after a financial crisis.What is not a reason for this?

Accepted Answer

A)  To protect investors in the interests of the public. 
B)  To respond to lobbying by those affected by losing money. 
C)  To look as if the regulators are doing something that seems to be a problem, and therefore maintain their position as regulators. 
D)  All of the given options are correct. 
A)  To protect investors in the interests of the public. 
B)  To respond to lobbying by those affected by losing money. 
C)  To look as if the regulators are doing something that seems to be a problem, and therefore maintain their position as regulators. 
D)  All of the given options are correct.

Question 4

Which of the following statements does not describe why accounting regulation is needed?

Accepted Answer

A)  If a process is regulated, even though people might not understand the regulation they are more likely to have confidence in it. 
B)  Regulation is put in place to protect the favoured positions of those with capital. 
C)  Regulation is put in place so that the interest of the public is served. 
D)  If the financial system is regulated, the resulting increased community confidence will lead to a reduced cost of capital for all firms. 
A)  If a process is regulated, even though people might not understand the regulation they are more likely to have confidence in it. 
B)  Regulation is put in place to protect the favoured positions of those with capital. 
C)  Regulation is put in place so that the interest of the public is served. 
D)  If the financial system is regulated, the resulting increased community confidence will lead to a reduced cost of capital for all firms.

Question 5

It is argued by the pro-regulation supporters that accounting information is a free or public good.What is the characteristic of a free or public good?

Accepted Answer

A)  It is a good or service provided at no cost to anyone. 
B)  It is a good or service whose over-production is an example of market failure. 
C)  It is a good or service that, once available, people can obtain or use without paying. 
D)  All of the given options are correct. 
A)  It is a good or service provided at no cost to anyone. 
B)  It is a good or service whose over-production is an example of market failure. 
C)  It is a good or service that, once available, people can obtain or use without paying. 
D)  All of the given options are correct.

Question 6

Which of the following would be required if we accepted the private contracting argument that managers' interests can be aligned with the maximisation of the wealth of the firm,through contracting arrangements that reward or constrain their behaviour?

Accepted Answer

A)  Credible financial accounting numbers to measure performance 
B)  Independent audit to monitor and check that the accounting numbers are properly measured 
C)  Regulation that restricts the choice of accounting methods 
D)  All of the given options are correct. 
A)  Credible financial accounting numbers to measure performance 
B)  Independent audit to monitor and check that the accounting numbers are properly measured 
C)  Regulation that restricts the choice of accounting methods 
D)  All of the given options are correct.

Question 7

The free-market perspective of accounting regulation suggests that accounting information:

Accepted Answer

A)  Should be provided free of charge 
B)  Should be free of considerations and lobbying of the market 
C)  Should be provided like any other good that is subject to demand and supply 
D)  Will require regulation to avoid underproduction of information 
A)  Should be provided free of charge 
B)  Should be free of considerations and lobbying of the market 
C)  Should be provided like any other good that is subject to demand and supply 
D)  Will require regulation to avoid underproduction of information

Question 8

A lemon market will be produced:

Accepted Answer

A)  By asymmetry of information, in which no buyers can accurately assess the value of a product through examination before a sale is made and all sellers can more accurately assess the value of a product prior to sale. 
B)  By a deficiency of effective public quality assurances-by reputation, regulation and/or effective guarantees or warranties. 
C)  Where either a continuum of seller qualities exists or the average seller type is sufficiently low so that buyers are pessimistic about the seller's quality. 
D)  All of the given options are correct. 
A)  By asymmetry of information, in which no buyers can accurately assess the value of a product through examination before a sale is made and all sellers can more accurately assess the value of a product prior to sale. 
B)  By a deficiency of effective public quality assurances-by reputation, regulation and/or effective guarantees or warranties. 
C)  Where either a continuum of seller qualities exists or the average seller type is sufficiently low so that buyers are pessimistic about the seller's quality. 
D)  All of the given options are correct.

Question 9

Which of the following is not true about the economic (private)interest theory of regulation?

Accepted Answer

A)  Unlike public interest theory, regulation is not considered to be a commodity that is subject to the principles of supply and demand. 
B)  Regulation serves the private interests of particular parties, including politicians, who are seeking re-election. 
C)  Regulation serves the private interest of politically-effective groups. 
D)  Regulation tends to protect and maintain the ability of those with the power and financial wealth to afford to buy lobbying power and votes, and suppresses the ability of others without it. 
A)  Unlike public interest theory, regulation is not considered to be a commodity that is subject to the principles of supply and demand. 
B)  Regulation serves the private interests of particular parties, including politicians, who are seeking re-election. 
C)  Regulation serves the private interest of politically-effective groups. 
D)  Regulation tends to protect and maintain the ability of those with the power and financial wealth to afford to buy lobbying power and votes, and suppresses the ability of others without it.

Question 10

Which of the following best describes the process of setting accounting standards?

Accepted Answer

A)  A technical process where accounting experts determine the most technically correct and logical standards to issue 
B)  A political process where the constituency affected either socially or economically by a proposed AASB standard has influence on the final outcome 
C)  An exclusive process where the AASB sets the agenda and determines which standards to issue and what requirements they will contain 
D)  An inclusive process where standards are proposed from various interested parties for approval by the AASB 
A)  A technical process where accounting experts determine the most technically correct and logical standards to issue 
B)  A political process where the constituency affected either socially or economically by a proposed AASB standard has influence on the final outcome 
C)  An exclusive process where the AASB sets the agenda and determines which standards to issue and what requirements they will contain 
D)  An inclusive process where standards are proposed from various interested parties for approval by the AASB

Under IFRS 2 and AASB 2 the fair value of share options has to be classified as:

In the absence of regulation,the 'market for lemons perspective' (Arkerlof,1970)assumes that:

Regulators often cite investor protection as a basis for more stringent regulation and financial reporting requirements enacted after a financial crisis.What is not a reason for this?

Which of the following statements does not describe why accounting regulation is needed?

It is argued by the pro-regulation supporters that accounting information is a free or public good.What is the characteristic of a free or public good?

Which of the following would be required if we accepted the private contracting argument that managers' interests can be aligned with the maximisation of the wealth of the firm,through contracting arrangements that reward or constrain their behaviour?

The free-market perspective of accounting regulation suggests that accounting information:

A lemon market will be produced:

Which of the following is not true about the economic (private)interest theory of regulation?

Which of the following best describes the process of setting accounting standards?

Introduction to Financial Accounting Theory

The Financial Reporting Environment

International Accounting

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

Normative Theories of Accounting: The Case of Conceptual Framework Projects

Positive Accounting Theory

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

Exam 3: The Regulation of Financial Accounting

Under IFRS 2 and AASB 2 the fair value of share options has to be classified as:

In the absence of regulation,the 'market for lemons perspective' (Arkerlof,1970)assumes that:

Regulators often cite investor protection as a basis for more stringent regulation and financial reporting requirements enacted after a financial crisis.What is not a reason for this?

Which of the following statements does not describe why accounting regulation is needed?

It is argued by the pro-regulation supporters that accounting information is a free or public good.What is the characteristic of a free or public good?

Which of the following would be required if we accepted the private contracting argument that managers' interests can be aligned with the maximisation of the wealth of the firm,through contracting arrangements that reward or constrain their behaviour?

The free-market perspective of accounting regulation suggests that accounting information:

A lemon market will be produced:

Which of the following is not true about the economic (private)interest theory of regulation?

Which of the following best describes the process of setting accounting standards?

Introduction to Financial Accounting Theory

The Financial Reporting Environment

International Accounting

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

Normative Theories of Accounting: The Case of Conceptual Framework Projects

Positive Accounting Theory

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