Question 1

Which of the following is a valid argument against regulatory capture?

Accepted Answer

A)  The regulated are best equipped to address the technical issues 
B)  The regulated are not independent from the regulator, and therefore lack neutrality and freedom from bias 
C)  The regulated are better able to understand the issues and need for regulation in specific areas 
D)  The regulation can be fast-tracked, because there is less time taken to argue the issues with other parties 
A)  The regulated are best equipped to address the technical issues 
B)  The regulated are not independent from the regulator, and therefore lack neutrality and freedom from bias 
C)  The regulated are better able to understand the issues and need for regulation in specific areas 
D)  The regulation can be fast-tracked, because there is less time taken to argue the issues with other parties

Question 2

Which of the following may be the result of direct or indirect economic and social consequences of a proposed accounting standard?

Accepted Answer

A)  Increased lobbying to maximise the expected positive economic benefits from the standard 
B)  Increased lobbying to minimise the expected negative economic and social consequences from the standard 
C)  Impact on managerial decisions to optimise the reported numbers 
D)  All of the above 
A)  Increased lobbying to maximise the expected positive economic benefits from the standard 
B)  Increased lobbying to minimise the expected negative economic and social consequences from the standard 
C)  Impact on managerial decisions to optimise the reported numbers 
D)  All of the above

Question 3

Which of the following is not a valid criticism that management will enter performance-based contracts that will reward or constrain their behaviour,to maximise the value of the firm?

Accepted Answer

A)  It assumes management can gain more by entering a performance-based contract than by continuing to act opportunistically 
B)  It relies on credible accounting numbers to monitor performance, but there is no incentive to provide credible unbiased information 
C)  It assumes that managers always act from self-interest and do not attempt to maximise the value of the firm, which may not be true 
D)  It is too difficult to achieve in practice if there is a multitude of different contracting parties 
A)  It assumes management can gain more by entering a performance-based contract than by continuing to act opportunistically 
B)  It relies on credible accounting numbers to monitor performance, but there is no incentive to provide credible unbiased information 
C)  It assumes that managers always act from self-interest and do not attempt to maximise the value of the firm, which may not be true 
D)  It is too difficult to achieve in practice if there is a multitude of different contracting parties

Question 4

Which of the following assumptions of the market for corporate takeovers can be criticised for being unrealistic in practice?

Accepted Answer

A)  An under-performing firm will be taken over by another firm, which will then subsequently replace the current management team 
B)  Managers will be motivated to maximise the firm's value to minimise the likelihood that outsiders could seize control 
C)  Management will know the marginal cost and benefit involved in producing the optimum amount of information required to minimise the firm's cost of capital 
D)  All of the given options are correct 
A)  An under-performing firm will be taken over by another firm, which will then subsequently replace the current management team 
B)  Managers will be motivated to maximise the firm's value to minimise the likelihood that outsiders could seize control 
C)  Management will know the marginal cost and benefit involved in producing the optimum amount of information required to minimise the firm's cost of capital 
D)  All of the given options are correct

Question 5

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 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 the accounting numbers are properly measured 
C)  Regulation that restricts the choice of accounting methods 
D)  All of the given options are correct

Which of the following is a valid argument against regulatory capture?

Which of the following may be the result of direct or indirect economic and social consequences of a proposed accounting standard?

Which of the following is not a valid criticism that management will enter performance-based contracts that will reward or constrain their behaviour,to maximise the value of the firm?

Which of the following assumptions of the market for corporate takeovers can be criticised for being unrealistic in practice?

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?

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

Exam 3: The Regulation of Financial Accounting

Which of the following is a valid argument against regulatory capture?

Which of the following may be the result of direct or indirect economic and social consequences of a proposed accounting standard?

Which of the following is not a valid criticism that management will enter performance-based contracts that will reward or constrain their behaviour,to maximise the value of the firm?

Which of the following assumptions of the market for corporate takeovers can be criticised for being unrealistic in practice?

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?

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