ACC341 - Topic 5

To protect users from fraudulent or misleading information.

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

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

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

Opportunistic perspective

Efficiency perspective

Creative accounting perspective

Economic interest perspective

Managers will provide true and correct information for fear of not being rewarded, or fired for not doing so.

Shareholders will assume managers will act opportunistically and so, in the absence of safeguards, will pay less for shares.

Lenders will price protect, in that the higher the preserved risk, the higher will be the cost of loan funds demanded.

All of the given options are correct.

An under-performing firm will be taken over by another firm, which will then subsequently replace the current management team.

Managers will be motivated to maximise the firm's value to minimise the likelihood that outsiders could seize control.

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.

All of the given options are correct.

The accounting profession's AARF proposals for standards were fast-tracked, but more stringent requirements were in place for others.

The profession influenced new appointments to the AASB so that, after just 2 years, virtually all members had some community of interest with the professional accounting bodies.

The whole of AARF was merged with the AADB in 1987.

By the beginning of 1986, the accounting profession indirectly managed to influence the procedures, priorities and output of the AASB.