Contemporary Issues in Accounting 2nd Edition Rankin Test Bank

Testbank

to accompany

Contemporary issues in accounting

2 nd edition

by Rankin et al.

© John Wiley & Sons Australia, Ltd 2018

Contemporary Issues in Accounting 2nd Edition Rankin Test Bank Visit TestBankDeal.com to get complete for all chapters

Chapter 3: Standard setting

© John Wiley & Sons Australia, Ltd 2018 3.1

Chapter 3: Standard setting

Multiple choice questions

• Which of the following is NOT a function of the AASB?

standard setting.

• Participate in the development of international accounting standards.
• Making accounting standards.
• Promoting international accounting standards.

*d. Enforcing compliance with accounting standards.

Correct answer: d

Learning objective 3.1

2. The Financial Reporting Council (FRC) are responsible for:

• Appointing board members to the AASB.
• Broad oversight of the standard-setting process.
• Providing strategic direction and advice to the AASB.

*d. all of the above.

Correct answer: d

Learning objective 3.1

• Which of the following can the AASB NOT do when adopting IFRSs?

• Require additional disclosure.

*b. Change or remove requirements that are seen as anti-competitive.

• Change words to take into account Australian legislation.
• Limit the number of optional treatments.

Correct answer: b

Learning objective 3.2

4. One of the rules-based standard disadvantages can be:

• They allow for no manipulation.

*b. They can be very complex.

• They can be very simple.
• None of the above.

Correct answer: b

Learning objective 3.3

Testbank to accompany Contemporary Issues in Accounting 2e by Rankin et al.

© John Wiley & Sons Australia, Ltd 2018 3.2

• Which if the following is an advantage of rules-based accounting standards?

• Can cover most situations.
• Reduced complexity of standards.

*c. Reduced opportunities for earnings management through judgements.

• Improve representational faithfulness of financial statements.

Correct answer: c

Learning objective 3.3

6. Disadvantage of principles-based standards is:

• They supply broad guidelines.

*b. They allow mangers to select policies that may not reflect the substance of a transaction.

• They allow accountants to use professional judgement.
• All of the above.

Correct answer: b

Learning objective 3.3

7. One of the advantages of principles-based standard is:

• They do not improve representational faithfulness of financial statements.
• They allow for no professional judgement.

*c. They are generally simpler.

• None of the above.

Correct answer: c

Learning objective 3.3

8. Signalling Theory postulates that:

*a. Regulation is largely unnecessary.

• Non-disclosing entities will do better in the market for finance.
• Regulation decreases the cost of capital.
• Financial reporting is a pointless activity.

Correct answer: a

Learning objective 3.4

• Which of the following is NOT a key element of regulation?

*a. Regulation should be biased.

• An intention to intervene.
• A restriction on choice.
• The exercise of control.

Correct answer: a

Learning objective 3.4

Chapter 3: Standard setting

© John Wiley & Sons Australia, Ltd 2018 3.3

• Which of the following is a fundamental assumption of Capture Theory?

• Regulation is costly.

*b. People rationally advance their own self-interest.

• Economic markets are fragile.
• The market is an efficient market.

Correct answer: b

Learning objective 3.4

• Which of the following is a fundamental assumption of Bushfire theory?

• People are not influenced by media when it comes to regulation.
• People are proactive when it comes to regulation.

*c. People are reactive when it comes to regulation.

• People are apathetic when it comes to regulations.

Correct answer: c

Learning objective 3.4

• Which of the following is a fundamental assumption of public interest theory?

• Regulation is costly.
• People rationally advance their own self-interest.

*c. Economic markets are fragile.

• There is an efficient market.

Correct answer: c

Learning objective 3.4

• Which of the following is NOT a disadvantage of regulation?

• It can restrict communication.
• It can be difficult to reverse.

*c. It leads to standardisation.

• It can be difficult to determine the optimal regulations.

Correct answer: c

Learning objective 3.4

• Which of the following is NOT an advantage of accounting regulation?

*a. Reduced lobbying to produce favourable outcomes.

• Increased efficiency in allocating capital.
• Cheaper production of accounting disclosure.
• Increased public confidence.

Correct answer: a

Learning objective 3.4