aliyah hanani
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ANSWER ALL QUESTIONS TOPIC : APPLYING THEORY TO ACCOUNTING REGULATION

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aliyah hanani
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FAR6606D

FAR6606D

Question 1 of 15

1

Theory of efficient markets

Free market economists would argue that markets function best without government intervention, and that maximum efficiency is achieved by allowing forces of supply and demand to dictate market behaviour.

What is one of the aims of government intervention?

Select one of the following:

  • A. Assist market development and promote economic growth

  • B. Markets lead by the capitalist

  • C. Opportunities only for established companies

Explanation

Question 2 of 15

1

Theory of efficient markets

‘When the information is available to everyone, the information may be sold to certain people. Other people who did not pay for it cannot be easily excluded from using the information.’

This phenomenon is referred to as ______?

Select one of the following:

  • A. Free-rider problem

  • B. Free-driver problem

  • C. Free-customer problem

Explanation

Question 3 of 15

1

Theory of efficient markets

Why does the regulatory board still be needed even though there is a free market for accounting information?

I- Users are unable to agree on what they want
II - Accountants will disagree on procedure to derive the information
III- If the information of the company can be compared with others, the value of the information is greatly enhanced.

Select one of the following:

  • A. I and II

  • B. II and III

  • C. I and III

  • D. All of the above

Explanation

Question 4 of 15

1

Agency Theory

“To study contracts between principals and agents and to predict the economic consequences of standards” is a framework of

Select one of the following:

  • A. Theory of efficient markets

  • B. Agency theory

  • C. Theory of regulation

Explanation

Question 5 of 15

1

Agency Theory

Demand for stewardship information relates to the desire to :

i- Motivate the agent
ii- Distribute risk efficiently
iii- To obtain power

Select one of the following:

  • A. i and ii

  • B. ii and iii

  • C. All of the above

Explanation

Question 6 of 15

1

The theories of regulation relevant to accounting and auditing

Which are the theories that are relevant to financial reporting?

I. Theory of efficient market
II. Agency theory
III. Industrial theory
IV. Theory of regulation

Select one of the following:

  • A. I and II

  • B. I, II and IV

  • C. II, III and IV

  • D. I, III and IV

Explanation

Question 7 of 15

1

Theory of Regulation

Which of the following theories are not included in the theories of regulation?

Select one of the following:

  • A. Regulation capture theory

  • B. Agency theory

  • C. Public interest theory

  • D. Private interest theory

Explanation

Question 8 of 15

1

Public Interest Theory

Government regulation is required in the ‘public interest’ whenever there is market failure (inefficiency) due to:

I- lack of competition
II- barriers to entry
III- information asymmetry
Iv- public-good products

Select one of the following:

  • A. I only

  • B. I, III and IV only

  • C. II and III only

  • D. All above

Explanation

Question 9 of 15

1

Public Interest Theory

One of the regulation relating to application of public interest theory is

Select one of the following:

  • A . The Sarbanes-Oxford Act (US, 2002)

  • B. Accounting Standards Review Board (AUS, 1984)

  • C. Malaysia Accounting Standard Board

Explanation

Question 10 of 15

1

Private Interest Theory

Choose the right statement

Select one of the following:

  • A. Private interest theorists believe there is a market regulation with different supply and demand forces operating as in the capital market.

  • B. The theory came out as a response to satisfaction with explanations provided by both the public interest and the capture theories.

  • C. George Stigler’s challenge were on the basic that governments have one basic resource which ‘is not shared even with citizens’ and regulatory activity reflects the relative political power of interest groups

Explanation

Question 11 of 15

1

Theory of Regulation

Which of the following theories are not included in the theories of regulation?

Select one of the following:

  • A. Regulation capture theory

  • B. Agency theory

  • C. Public interest theory

  • D. Private interest theory

Explanation

Question 12 of 15

1

Regulatory Capture Theory

Which of the following conditions must be met before the regulatory agency capture is pronounced?

I- There is complexity of information and product.
II- The regulatory agency has maximum resources in compare with the the industry it is regulating
III- The regulated industry controls the information needed for regulation
IV- There is a small number of client entities

Select one of the following:

  • A. I, II and III

  • B. I, II and IV

  • C. I, III and IV

  • D. II, III and IV

Explanation

Question 13 of 15

1

Regulatory Capture Theory

Based on the situation listed below, capture theory will not occur in which situation?

Select one of the following:

  • A. Regulated entities in control the regulation and the regulatory agency

  • B. Regulated entities failed in coordinating the regulatory body’s activities

  • C. Regulated entities neutralised or ensure non-performance by the regulating bodies.

Explanation

Question 14 of 15

1

Which of the following are the definition of ‘sector neutral standard’ ?

Select one of the following:

  • A. A set of accounting standard that give benefits to the public sector

  • B. A set of auditing standard that give benefits to the private sector

  • C. A set of auditing standard that five benefits to the public sector

  • D. A set of accounting standard that suitable for both public and private sector

Explanation

Question 15 of 15

1

Potential market failure occurs when there is a failure of one of the conditions necessary for the best operation of a competitive market. Which of the conditions are true?

Select one of the following:

  • A. The ‘private-good’ nature of some products

  • B. There is no lack of market competition

  • C. The ‘public-good’ nature of some product

  • D. There is no barriers to enter the market

Explanation

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