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Chapter 01 Testbank

• Financial accounting can be considered a process involving the collection and processing of financial information to assist the

decision-making needs of parties internal to an organisation.

FALSE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-01 Understand the meaning of 'financial accounting' and its relationship to the broader areas of accounting and accountability.

Section: Financial accounting defined

Topic: Role of financial accounting

• The regulation of accounting can be argued to be necessary to protect the information rights of parties not involved in the day-to-day

operations of the organisation.

TRUE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-02 Be able to explain who is likely to be a user of general purpose financial statements.

Section: Financial accounting defined

Topic: Users of financial accounting information

• The financial statements and supporting notes included in an annual report presented to shareholders at a company's annual general

meeting is an example of general-purpose financial statements.

TRUE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-01 Understand the meaning of 'financial accounting' and its relationship to the broader areas of accounting and accountability.

Section: Users demand for general purpose financial statements

Topic: Role of financial accounting

• There has been a trend by governments and government departments towards adopting specialised public-sector related standards.

FALSE

AACSB: Reflective Thinking

Difficulty: Medium

Learning Objective: 01-03 Understand the scope of regulation relating to Australian external financial reporting.

Section: Sources of external financial reporting regulations

Topic: Scope of financial reporting

• Directors could elect not to comply with an accounting standard on the grounds that applying the particular accounting standard would

cause the accounts not to present a 'true and fair view'.

FALSE

AACSB: Analytic

Difficulty: Hard

Learning Objective: 01-06 Be able to explain the central requirement that financial statements be 'true and fair'.

Section: Sources of external financial reporting regulations

Topic: True and fair view requirement of financial statements

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• The Australian Securities and Investment Commission (ASIC) has the responsibility, among other things, to monitor and regulate

various investment products and superannuation.

TRUE

AACSB: Reflective Thinking

Difficulty: Medium

Learning Objective: 01-04 Understand the sources of accounting regulation within Australia and thus be able to explain the general functions of the Australian Securities and Investments Commission, the Australian Accounting Standards Board, the Financial Reporting Council and the Australian Securities Exchange.

Section: Sources of external financial reporting regulations

Topic: Accounting regulatory environment in Australia

• The Australian Accounting Standards Board (AASB) issues only one set of accounting standards which have general applicability to

the private, public and not-for-profit sectors.

TRUE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-03 Understand the scope of regulation relating to Australian external financial reporting.

Section: Sources of external financial reporting regulations

Topic: Accounting regulatory environment in Australia

• The role of the Financial Reporting Council is to provide broad oversight of the process for setting standards in Australia, including

the authority to direct the AASB to develop, amend or revoke a particular standard.

FALSE

AACSB: Reflective Thinking

Difficulty: Medium

Learning Objective: 01-04 Understand the sources of accounting regulation within Australia and thus be able to explain the general functions of the Australian Securities and Investments Commission, the Australian Accounting Standards Board, the Financial Reporting Council and the Australian Securities Exchange.

Section: Sources of external financial reporting regulations

Topic: Accounting regulatory environment in Australia

• Accounting cannot be considered to be 'culture free' because the value systems of accountants may be expected to be related to and

derived from the values of the society with special reference to work related values and, as such, impacts on accounting systems.

TRUE

AACSB: Multicultural/diversity

Difficulty: Medium

Learning Objective: 01-15 Be aware of some research which suggests that international standardisation of accounting ignores international differences in culture.Section: International cultural differences and the harmonisation of accounting standards

Topic: Culture and accounting

• The Corporations Act is very specific about what must, and must not, be included in the Directors' Report that is attached to a

company's financial statements.

FALSE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-05 Be aware of the requirements within the Corporations Act that require the preparation of a Directors' Declaration, Directors' Report and a Declaration by the Chief Executive Officer and Chief Financial Officer.

Section: Sources of external financial reporting regulations

Topic: Director reporting requirements in Australia and the Corporations Act

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• The main role of the Financial Reporting Council (FRC) is to develop a new conceptual framework for financial reporting.

FALSE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-04 Understand the sources of accounting regulation within Australia and thus be able to explain the general functions of the Australian Securities and Investments Commission, the Australian Accounting Standards Board, the Financial Reporting Council and the Australian Securities Exchange.Section: The process of Australia adopting accounting standards issued by the International Accounting Standards Board

Topic: Accounting regulatory environment in Australia

• The main role of the International Financial Reporting Interpretations Committee (IFRIC) is to review accounting issues that are

likely to receive divergent or unacceptable treatment in the absence of authoritative guidance.

TRUE

AACSB: Reflective Thinking

Difficulty: Medium

Learning Objective: 01-08 Understand the relevance of the IFRS Interpretations Committee to Australian financial reporting.

Section: Structure of the International Accounting Standards Board

Topic: International Financial Reporting Interpretations Committee (IFRIC) role

• The main role of the Financial Reporting Panel (FRP) is to resolve disputes between ASIC and companies concerning accounting

treatments in their financial reports.

TRUE

AACSB: Analytic

Difficulty: Easy

Learning Objective: 01-04 Understand the sources of accounting regulation within Australia and thus be able to explain the general functions of the Australian Securities and Investments Commission, the Australian Accounting Standards Board, the Financial Reporting Council and the Australian Securities Exchange.

Section: Sources of external financial reporting regulations

Topic: Accounting regulatory environment in Australia

• Corporate governance is the framework of rules, relationships, systems and processes within and by which authority is exercised and

controlled in corporations.

TRUE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-04 Understand the sources of accounting regulation within Australia and thus be able to explain the general functions of the Australian Securities and Investments Commission, the Australian Accounting Standards Board, the Financial Reporting Council and the Australian Securities Exchange.

Section: Users demand for general purpose financial statements

Topic: Accounting regulatory environment in Australia

• Disclosing entities generally, are entities that have: securities (including debentures) quoted on the ASX; issued securities (including

debentures) pursuant to a prospectus or a takeover scheme; and borrowing corporations.

FALSE

AACSB: Reflective Thinking

Difficulty: Medium

Learning Objective: 01-04 Understand the sources of accounting regulation within Australia and thus be able to explain the general functions of the Australian Securities and Investments Commission, the Australian Accounting Standards Board, the Financial Reporting Council and the Australian Securities Exchange.

Section: Sources of external financial reporting regulations

Topic: Accounting regulatory environment in Australia

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• The Statements of Accounting Concepts within the conceptual framework are developed by the International Accounting Standards

Board.

TRUE

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-07 Be able to explain the general functions of the International Accounting Standards Board and its direct relevance to Australian accounting standard-setting.

Section: Sources of external financial reporting regulations

Topic: The IASB general functions and direct relevance to Australia

• What are two key ways management accounting is different from financial accounting?

• Management accounting provides special-purpose information to people external to the firm and it is highly regulated.
• Management accounting provides information for the day-to-day running of an organisation and it is governed by the requirements of

ASIC.

• Management accounting is focused on providing information to shareholders who wish to have input into the management of the

organisation and it is regulated by generally accepted accounting principles.

• Management accounting focuses on providing information for internal users and it is largely unregulated.

AACSB: Reflective Thinking

Difficulty: Easy

Learning Objective: 01-01 Understand the meaning of 'financial accounting' and its relationship to the broader areas of accounting and accountability.

Section: Financial accounting defined

Topic: Understanding financial accounting

• The requires which of the following to be included in a Directors' Declaration?

• State whether in their opinion the financial statements comply with accounting standards and the

II. State whether in their opinion the financial statements give a true and fair view of the financial position and financial performance of the entity.III. State whether or not in their opinion, when the declaration was made, there were reasonable grounds to believe that the company would be able to pay its debts as they become due.IV. State details of directors' emoluments.

• State principal activities of the entity.

• All of the given answers are correct.
• I, II and III only.
• I, II, III and IV only.
• IV and V only.

AACSB: Reflective Thinking

Difficulty: Medium

Learning Objective: 01-05 Be aware of the requirements within the Corporations Act that require the preparation of a Directors' Declaration, Directors' Report and a Declaration by the Chief Executive Officer and Chief Financial Officer.

Section: Sources of external financial reporting regulations

Topic: Director reporting requirements in Australia and the Corporations Act