Chapter 2 - The financial reporting environment - P1 | Take the Quiz

What is the minimum level of accounting knowledge that readers of financial statements are assumed to possess, according to most professional accounting bodies around the world?

A. None

B. A level of knowledge sufficient to understand the financial reports properly

C. A sound working knowledge

D. An expert level of knowledge

Which of the following is not a rationale for regulating financial accounting information?

A. To protect users from fraudulent or misleading information.

B. A market for information without regulation is inefficient, and may result in the production of a sub-optimal amount of information.

C. To assist management with better information, and to provide reports for use by management and parties within the organisation.

D. To ensure equal access to information by all interested parties, including those that have limited power to demand it

Which of the following statements is true about accounting measurements such as profits and assets?

A. They are subject to professional judgment.

B. They would not vary if prepared by different accountants, providing they were based on the same set of accounting standards.

C. They are based on hard, objective, evidence.

D. All of the given options are correct.

Which of the following statements is true about management accounting?

A. Management accounting provides financial reports to external parties that require information to meet their decision needs.

B. Management accounting is largely unregulated

C. Management accounting attempts to protect the information rights and needs of all users.

D. Management accounting adopts a pro-regulation perspective.

Financial accounting leads to the generation of:

A. Reports to meet the specific information needs of users

B. Monthly financial reports for management

C. Special purpose financial reports

D. General purpose financial reports

Which of the following is a criticism of the double-entry financial accounting system?

A. It has a general inability to take the social and environmental consequences of a reporting entity's existence into account.

B. It uses a system of debts and credits to account for increases and decreases, instead of positive and negative numbers.

C. Its initial development in a generally unregulated environment has resulted in a lack of uniformity and comparability.

D. All of the given options are correct.

Which of the following statements is true about the regulation of accounting practice in its early period of development?

A. Accounting was largely determined by accounting theory

B. Accounting was largely determined by accounting standards issued by the accounting profession.

C. Accounting was largely determined by the national Securities and Exchange Commissions and resulting legislation.

D. Accounting was largely determined by generally accepted practice.

Which of the following is not a rationale for regulation?

A. To redress the inequality of access to information by users.

B. To protect users from the fraudulent activities of insiders.

C. To reduce the oversupply of information caused by excess user demand, because users do not have to pay for its cost.

D. To enhance the consistency and comparability of prepared financial reports.

What is the role of the accounting profession in the US with regard to stipulating accounting standards?

A. It has the authority to develop and issue accounting standards.

B. It has been delegated responsibility from the Securities and Exchange Commission, providing it performs such duties diligently

C. Indirect authority. Standards are issued by the Accounting Principles Board, a committee of the accounting professional bodies.

D. No authority. Standards are issued by the Federal Accounting Standards Board, which is independent of the accounting profession.

Who has overall responsibility for issuing accounting standards in Australia?

A. The Financial Reporting Council (FRC)

B. The Australian Accounting Standards Board (AASB)

C. The International Accounting Standards Board (IASB)

D. The Australian Accounting Research Foundation (AARF)

Chapter 2 - The financial reporting environment - P1

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