Question 1

A pro-regulatory perspective would argue that accounting information will be provided.

Accepted Answer

A)  Freely, to protect the public interest 
B)  According to the forces of demand and supply 
C)  To reduce the costs of capital 
D)  To reduce uncertainty about the firm 
A)  Freely, to protect the public interest 
B)  According to the forces of demand and supply 
C)  To reduce the costs of capital 
D)  To reduce uncertainty about the firm A

Question 2

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 have influence on the final outcome 
C)  An exclusive process where the AASB sets the agenda and determines what 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 have influence on the final outcome 
C)  An exclusive process where the AASB sets the agenda and determines what 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 B

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 D

Question 4

Which of the following is not an argument for regulation of accounting information by pro-regulation proponents?

Accepted Answer

A)  Regulation is needed because it is difficult to make 'free riders' pay for its production 
B)  Regulation is needed to prevent wasteful over-supply, because users will overstate their need for information if they do not have to pay for it 
C)  Regulation is needed to correct market failure and under-supply due to the reluctance of producers of information to charge 'free riders' for it 
D)  Regulation is needed because the price system cannot function properly if it is not possible to exclude non-purchasers from consuming the good 
A)  Regulation is needed because it is difficult to make 'free riders' pay for its production 
B)  Regulation is needed to prevent wasteful over-supply, because users will overstate their need for information if they do not have to pay for it 
C)  Regulation is needed to correct market failure and under-supply due to the reluctance of producers of information to charge 'free riders' for it 
D)  Regulation is needed because the price system cannot function properly if it is not possible to exclude non-purchasers from consuming the good

Question 5

Which of the following is not an example of a qualitative characteristic guiding the production of financial accounting information?

Accepted Answer

A)  Neutrality 
B)  Representational faithfulness 
C)  Consideration of economic and social consequences 
D)  Consistency and comparability 
A)  Neutrality 
B)  Representational faithfulness 
C)  Consideration of economic and social consequences 
D)  Consistency and comparability

Question 6

Which of the following is a valid criticism of the economics-based rationality argument that asserts that credible information will be supplied in the absence of regulation,by aligning management's self-interest with that of the owners and lenders,thereby reducing the cost of capital?

Accepted Answer

A)  The arguments do not follow logically 
B)  The arguments do not have historical support 
C)  The assumptions of management self-interest is too pessimistic 
D)  The argument has no empirical support 
A)  The arguments do not follow logically 
B)  The arguments do not have historical support 
C)  The assumptions of management self-interest is too pessimistic 
D)  The argument has no empirical support

Question 7

Which of the following was not one of the pieces of evidence put forward by Walker (1987)to argue that the ASRB had been captured by the Accounting Profession?

Accepted Answer

A)  Fast-tracking of accounting profession's AARF proposals for standards, but more stringent requirements for others 
B)  The profession influenced new appointments to the AASB so that, after just 2 years, virtually all members had some community of interest with the professional accounting bodies 
C)  The whole of AARF was merged with the AADB in 1987 
D)  By the beginning of 1986, the accounting profession indirectly managed to influence the procedures, priorities and output of the AASB 
A)  Fast-tracking of accounting profession's AARF proposals for standards, but more stringent requirements for others 
B)  The profession influenced new appointments to the AASB so that, after just 2 years, virtually all members had some community of interest with the professional accounting bodies 
C)  The whole of AARF was merged with the AADB in 1987 
D)  By the beginning of 1986, the accounting profession indirectly managed to influence the procedures, priorities and output of the AASB

Question 8

Which of the following arguments is used in support of reducing accounting regulation?

Accepted Answer

A)  Accounting information is like any other good, and the forces of supply and demand should be allowed to operate so that the optimal amount of accounting information is produced 
B)  The capital market operates quite efficiently, and will impose penalties on managers who elect to provide biased information about an organisation's financial performance and position 
C)  Individuals act in their own self-interest and will use the given regulation to maximise their own wealth 
D)  All of the given options are correct 
A)  Accounting information is like any other good, and the forces of supply and demand should be allowed to operate so that the optimal amount of accounting information is produced 
B)  The capital market operates quite efficiently, and will impose penalties on managers who elect to provide biased information about an organisation's financial performance and position 
C)  Individuals act in their own self-interest and will use the given regulation to maximise their own wealth 
D)  All of the given options are correct

Question 9

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 10

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 11

Which of the following is not a cause or result of 'information overload' or standards overload?

Accepted Answer

A)  Increased compliance costs 
B)  Attempts to create a level playing field by requiring disclosures that provide equal access to information to everyone 
C)  Concerted lobbying by different interest groups that are economically or socially affected 
D)  Increased understanding of accounting information because of the increased quantity of standards and disclosures provided 
A)  Increased compliance costs 
B)  Attempts to create a level playing field by requiring disclosures that provide equal access to information to everyone 
C)  Concerted lobbying by different interest groups that are economically or socially affected 
D)  Increased understanding of accounting information because of the increased quantity of standards and disclosures provided

Question 12

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 13

Which of the following statements is true about accounting regulation?

Accepted Answer

A)  It is a set of prescribed rules that provides authoritative direction 
B)  It is developed by an independent authoritative body that has been given the power to govern how financial statements are to be prepared 
C)  It incorporates a basis for monitoring and enforcing compliance with the specific regulatory requirements 
D)  All of the given options are correct 
A)  It is a set of prescribed rules that provides authoritative direction 
B)  It is developed by an independent authoritative body that has been given the power to govern how financial statements are to be prepared 
C)  It incorporates a basis for monitoring and enforcing compliance with the specific regulatory requirements 
D)  All of the given options are correct

Question 14

Which of the following statements is not true about economics-based perspective of 'rationality' or 'self-interest' in explaining the behaviour of managers?

Accepted Answer

A)  Managers will work in their own self-interest unless constrained to do otherwise 
B)  Managers are opportunistic and in the absence of safeguards will reduce the amount they will pay for the shares 
C)  Managers work towards maximising the benefits of all the stakeholders 
D)  None of the given options are correct 
A)  Managers will work in their own self-interest unless constrained to do otherwise 
B)  Managers are opportunistic and in the absence of safeguards will reduce the amount they will pay for the shares 
C)  Managers work towards maximising the benefits of all the stakeholders 
D)  None of the given options are correct

Question 15

Proponents of the free market approaches to accounting regulation use Adam Smith (1937)as a basis for support.Which of the following is not associated with Adam Smith's writings on the workings of the free market?

Accepted Answer

A)  The concept of the invisible hand to guide allocation of resources for individuals and, as a result, does so for the market as a whole 
B)  No government intervention is necessary, as the free market can optimally allocate and distribute resources 
C)  Individuals pursuing their own self-interest results in resources finding their way to their most productive use for the economy as a whole 
D)  All of the given options are correct 
A)  The concept of the invisible hand to guide allocation of resources for individuals and, as a result, does so for the market as a whole 
B)  No government intervention is necessary, as the free market can optimally allocate and distribute resources 
C)  Individuals pursuing their own self-interest results in resources finding their way to their most productive use for the economy as a whole 
D)  All of the given options are correct

Question 16

Which of the following is not assumed by the 'market for managers argument' for reducing or eliminating regulation?

Accepted Answer

A)  The managerial labour market operates efficiently 
B)  Information about past management performance will be known by other prospective employers 
C)  Information about past management performance will not be fully impounded in future salaries 
D)  Managers are not approaching retirement 
A)  The managerial labour market operates efficiently 
B)  Information about past management performance will be known by other prospective employers 
C)  Information about past management performance will not be fully impounded in future salaries 
D)  Managers are not approaching retirement

Question 17

Which of the following statements is not describing 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, then 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, then the resulting increased community confidence will lead to a reduced cost of capital for all firms

Question 18

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 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 power and financial wealth to afford to buy lobbying power and votes, and suppresses the ability of others without it

Question 19

Which of the following propositions is not true if we accept the notion that accounting regulation is considered to be the output of a political process?

Accepted Answer

A)  Financial accounting is objective, neutral and apolitical 
B)  Standard-setting bodies encourage affected parties to make submissions on draft versions of the proposed accounting standards 
C)  Many decisions that are made are the outcome of compromise 
D)  If the social welfare impact of accounting policies were ignored, the basis for the existence of a regulatory body would disappear 
A)  Financial accounting is objective, neutral and apolitical 
B)  Standard-setting bodies encourage affected parties to make submissions on draft versions of the proposed accounting standards 
C)  Many decisions that are made are the outcome of compromise 
D)  If the social welfare impact of accounting policies were ignored, the basis for the existence of a regulatory body would disappear

Question 20

According to some free market theorists,there are private economics-based incentives for the organisation that will ensure that credible information will be provided.Which of the following assumptions is not consistent with this?

Accepted Answer

A)  Managers will provide true and correct information for fear of not being rewarded, or fired for not doing so 
B)  Shareholders will assume managers will act opportunistically and so, in the absence of safeguards, will pay less for shares 
C)  Lenders will price protect, in that the higher the preserved risk, the higher will be the cost of loan funds demanded 
D)  All of the given options are correct 
A)  Managers will provide true and correct information for fear of not being rewarded, or fired for not doing so 
B)  Shareholders will assume managers will act opportunistically and so, in the absence of safeguards, will pay less for shares 
C)  Lenders will price protect, in that the higher the preserved risk, the higher will be the cost of loan funds demanded 
D)  All of the given options are correct

A pro-regulatory perspective would argue that accounting information will be provided.

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

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 is not an argument for regulation of accounting information by pro-regulation proponents?

Which of the following is not an example of a qualitative characteristic guiding the production of financial accounting information?

Which of the following is a valid criticism of the economics-based rationality argument that asserts that credible information will be supplied in the absence of regulation,by aligning management's self-interest with that of the owners and lenders,thereby reducing the cost of capital?

Which of the following was not one of the pieces of evidence put forward by Walker (1987)to argue that the ASRB had been captured by the Accounting Profession?

Which of the following arguments is used in support of reducing accounting regulation?

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?

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

Which of the following is not a cause or result of 'information overload' or standards overload?

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

Which of the following statements is true about accounting regulation?

Which of the following statements is not true about economics-based perspective of 'rationality' or 'self-interest' in explaining the behaviour of managers?

Proponents of the free market approaches to accounting regulation use Adam Smith (1937)as a basis for support.Which of the following is not associated with Adam Smith's writings on the workings of the free market?

Which of the following is not assumed by the 'market for managers argument' for reducing or eliminating regulation?

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

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

Which of the following propositions is not true if we accept the notion that accounting regulation is considered to be the output of a political process?

According to some free market theorists,there are private economics-based incentives for the organisation that will ensure that credible information will be provided.Which of the following assumptions is not consistent with this?

Introduction to Financial Accounting Theory

The Financial Reporting Environment

International Accounting

Normative Theories of Accountingthe Case of Accounting for Changing Prices

Normative Theories of Accountingthe Case of Conceptual Framework Projects

Positive Accounting Theory

Unregulated Corporate Reporting Decisions: Considerations of Systems-Oriented Theories

Extended Systems of Accountingthe 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

Critical Perspectives of Accounting

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Exam 3: The Regulation of Financial Accounting

A pro-regulatory perspective would argue that accounting information will be provided.

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

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 is not an argument for regulation of accounting information by pro-regulation proponents?

Which of the following is not an example of a qualitative characteristic guiding the production of financial accounting information?

Which of the following is a valid criticism of the economics-based rationality argument that asserts that credible information will be supplied in the absence of regulation,by aligning management's self-interest with that of the owners and lenders,thereby reducing the cost of capital?

Which of the following was not one of the pieces of evidence put forward by Walker (1987)to argue that the ASRB had been captured by the Accounting Profession?

Which of the following arguments is used in support of reducing accounting regulation?

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?

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

Which of the following is not a cause or result of 'information overload' or standards overload?

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

Which of the following statements is true about accounting regulation?

Which of the following statements is not true about economics-based perspective of 'rationality' or 'self-interest' in explaining the behaviour of managers?

Proponents of the free market approaches to accounting regulation use Adam Smith (1937)as a basis for support.Which of the following is not associated with Adam Smith's writings on the workings of the free market?

Which of the following is not assumed by the 'market for managers argument' for reducing or eliminating regulation?

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

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

Which of the following propositions is not true if we accept the notion that accounting regulation is considered to be the output of a political process?

According to some free market theorists,there are private economics-based incentives for the organisation that will ensure that credible information will be provided.Which of the following assumptions is not consistent with this?

Introduction to Financial Accounting Theory

The Financial Reporting Environment

International Accounting

Normative Theories of Accountingthe Case of Accounting for Changing Prices

Normative Theories of Accountingthe Case of Conceptual Framework Projects

Positive Accounting Theory

Unregulated Corporate Reporting Decisions: Considerations of Systems-Oriented Theories

Extended Systems of Accountingthe 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

Critical Perspectives of Accounting

Filters