Question 1

Management's primary responsibility with respect to financial statements is to

Accepted Answer

A)  prepare them, as they have the best insight and know what should be included. 
B)  audit them, as they are distant enough from daily operations. 
C)  rely on them to make decisions. 
D)  None of the above are true. 
A)  prepare them, as they have the best insight and know what should be included. 
B)  audit them, as they are distant enough from daily operations. 
C)  rely on them to make decisions. 
D)  None of the above are true.

Question 2

The adoption of International Financial Reporting Standards in Canada is an example of

Accepted Answer

A)  the impact of technology on user's needs. 
B)  the impact of globalization on capital markets. 
C)  ethical behaviour. 
D)  the desire of most private companies to expand internationally. 
A)  the impact of technology on user's needs. 
B)  the impact of globalization on capital markets. 
C)  ethical behaviour. 
D)  the desire of most private companies to expand internationally.

Question 3

Where information asymmetry exists, the capital market may attract the wrong kind of company. This is known as

Accepted Answer

A)  moral hazard. 
B)  conservative accounting. 
C)  adverse selection. 
D)  an inefficient marketplace. 
A)  moral hazard. 
B)  conservative accounting. 
C)  adverse selection. 
D)  an inefficient marketplace.

Question 4

Which of the following does NOT support the use of Accounting Standards for Private Enterprises (ASPE)?

Accepted Answer

A)  Private enterprises usually have less complex business models. 
B)  Private enterprises that are "going public." 
C)  Private enterprises usually have fewer users. 
D)  Private enterprises' financial statement users tend to have first-hand information. 
A)  Private enterprises usually have less complex business models. 
B)  Private enterprises that are "going public." 
C)  Private enterprises usually have fewer users. 
D)  Private enterprises' financial statement users tend to have first-hand information.

Question 5

Extensible business reporting
What is extensible business reporting language and how is it used?

Accepted Answer

Extensible business reporting language (

Question 6

Which of the following is likely to be an advantage of the advancement of technology on financial reporting?

Accepted Answer

A)  Users of financial information will have access to more information. 
B)  The quality and reliability of the information may be compromised. 
C)  Equal and fair access may be at issue. 
D)  Internet reporting will increase costs. 
A)  Users of financial information will have access to more information. 
B)  The quality and reliability of the information may be compromised. 
C)  Equal and fair access may be at issue. 
D)  Internet reporting will increase costs.

Question 7

Which of the following does NOT describe a step in the IASB's standard-setting process?

Accepted Answer

A)  appointing trustees to the IFRS Foundation 
B)  development of an exposure draft 
C)  provision of strategic advice by the IFRS Advisory Council 
D)  public consultation 
A)  appointing trustees to the IFRS Foundation 
B)  development of an exposure draft 
C)  provision of strategic advice by the IFRS Advisory Council 
D)  public consultation

Question 8

Where people think that no one is watching, they will often shirk their responsibilities. This is known as

Accepted Answer

A)  moral hazard. 
B)  conservative accounting. 
C)  adverse selection. 
D)  an inefficient marketplace. 
A)  moral hazard. 
B)  conservative accounting. 
C)  adverse selection. 
D)  an inefficient marketplace.

Question 9

The auditor's primary responsibility is to

Accepted Answer

A)  review financial statements and discuss them with management. 
B)  prepare financial statements. 
C)  report to Canada Revenue Agency. 
D)  report to standard setters. 
A)  review financial statements and discuss them with management. 
B)  prepare financial statements. 
C)  report to Canada Revenue Agency. 
D)  report to standard setters.

Question 10

Maintaining competitive advantage
In the most efficient and effective marketplace possible, all stakeholders would have equal access to all relevant information. However, a company may feel that complete disclosure may hurt their competitive advantage or position. Offer an example of a circumstance where this may be the case. What do you think the company should do?

Accepted Answer

An example where disclosure may hurt the

Question 11

Professional judgement
Explain the principle of professional judgement. When or why might it be necessary to employ professional judgement, even in a rules-based system?

Accepted Answer

Professional judgement is the process by

Question 12

Entity vs. proprietary perspective
Explain the difference between the entity perspective and the proprietary perspective.

Accepted Answer

The entity perspective views companies a

Question 13

Which of the following does NOT describe a cause of management bias?

Accepted Answer

A)  the need to comply with contracts, such as debt covenants 
B)  the desire to meet financial analysts' expectations 
C)  the tendency to downplay negative events 
D)  the desire for all stakeholders to have access to all information 
A)  the need to comply with contracts, such as debt covenants 
B)  the desire to meet financial analysts' expectations 
C)  the tendency to downplay negative events 
D)  the desire for all stakeholders to have access to all information

Question 14

The Sarbanes-Oxley Act (SOX) was NOT enacted to

Accepted Answer

A)  help prevent fraud and poor financial reporting practices. 
B)  ensure the act was applied internationally. 
C)  enable the SEC to increase its policing efforts. 
D)  introduce new independence rules for auditors. 
A)  help prevent fraud and poor financial reporting practices. 
B)  ensure the act was applied internationally. 
C)  enable the SEC to increase its policing efforts. 
D)  introduce new independence rules for auditors.

Question 15

Explain why U.S. GAAP has and will continue to have a significant impact on GAAP in Canada.

Accepted Answer

U.S. GAAP has and will continue to have

Question 16

standard setting
Explain the relationship between Canadian GAAP and International Financial Reporting Standards (IFRS).

Accepted Answer

Since the decision to adopt IFRS was mad

Question 17

Explain the advantages of an effective capital allocation process.

Accepted Answer

An effective capital allocatio

Question 18

Under ASPE, the primary sources of GAAP include

Accepted Answer

A)  accounting textbooks and journals. 
B)  International Financial Reporting Standards. 
C)  the CICA Handbook and appendices. 
D)  research studies. 
A)  accounting textbooks and journals. 
B)  International Financial Reporting Standards. 
C)  the CICA Handbook and appendices. 
D)  research studies.

Question 19

Imperfection of the stakeholder ecosystem
The stakeholder ecosystem (depicted in Illustration 1-3) provides checks and balances to ensure that the people with capital-investors and creditors-have good information to use when deciding where best to invest and allocate capital. However, the system does not always work. Explain why this is the case.

Accepted Answer

The stakeholder ecosystem does not alway

Question 20

The widely publicized subprime lending crisis was NOT caused by

Accepted Answer

A)  capital market participants who acted in their own self-interest. 
B)  a lack of transparency. 
C)  the practice of securitizing assets. 
D)  a lack of investor understanding of the investment's true risk. 
A)  capital market participants who acted in their own self-interest. 
B)  a lack of transparency. 
C)  the practice of securitizing assets. 
D)  a lack of investor understanding of the investment's true risk.

Management's primary responsibility with respect to financial statements is to

The adoption of International Financial Reporting Standards in Canada is an example of

Where information asymmetry exists, the capital market may attract the wrong kind of company. This is known as

Which of the following does NOT support the use of Accounting Standards for Private Enterprises (ASPE)?

Extensible business reporting What is extensible business reporting language and how is it used?

Which of the following is likely to be an advantage of the advancement of technology on financial reporting?

Which of the following does NOT describe a step in the IASB's standard-setting process?

Where people think that no one is watching, they will often shirk their responsibilities. This is known as

The auditor's primary responsibility is to

Professional judgement Explain the principle of professional judgement. When or why might it be necessary to employ professional judgement, even in a rules-based system?

Entity vs. proprietary perspective Explain the difference between the entity perspective and the proprietary perspective.

Which of the following does NOT describe a cause of management bias?

The Sarbanes-Oxley Act (SOX) was NOT enacted to

Explain why U.S. GAAP has and will continue to have a significant impact on GAAP in Canada.

standard setting Explain the relationship between Canadian GAAP and International Financial Reporting Standards (IFRS).

Explain the advantages of an effective capital allocation process.

Under ASPE, the primary sources of GAAP include

The widely publicized subprime lending crisis was NOT caused by

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Exam 1: The Canadian Financial Reporting Environment

Management's primary responsibility with respect to financial statements is to

The adoption of International Financial Reporting Standards in Canada is an example of

Where information asymmetry exists, the capital market may attract the wrong kind of company. This is known as

Which of the following does NOT support the use of Accounting Standards for Private Enterprises (ASPE)?

Extensible business reporting What is extensible business reporting language and how is it used?

Which of the following is likely to be an advantage of the advancement of technology on financial reporting?

Which of the following does NOT describe a step in the IASB's standard-setting process?

Where people think that no one is watching, they will often shirk their responsibilities. This is known as

The auditor's primary responsibility is to

Professional judgement Explain the principle of professional judgement. When or why might it be necessary to employ professional judgement, even in a rules-based system?

Entity vs. proprietary perspective Explain the difference between the entity perspective and the proprietary perspective.

Which of the following does NOT describe a cause of management bias?

The Sarbanes-Oxley Act (SOX) was NOT enacted to

Explain why U.S. GAAP has and will continue to have a significant impact on GAAP in Canada.

standard setting Explain the relationship between Canadian GAAP and International Financial Reporting Standards (IFRS).

Explain the advantages of an effective capital allocation process.

Under ASPE, the primary sources of GAAP include

The widely publicized subprime lending crisis was NOT caused by

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters