1291191
Question 1
Question
Which of the following is not a rationale for regulating financial accounting information?
Answer
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To protect users from fraudulent or misleading information.
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A market for information without regulation is inefficient, and may result in the production of a sub-optimal amount of information.
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To assist management with better information, and to provide reports for use by management and parties within the organisation.
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To ensure equal access to information by all interested parties, including those that have limited power to demand it.
Question 2
Question
Which theoretical perspective suggests that where firms are able to choose accounting methods, they will choose those that best reflect their economic performance?
Answer
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Opportunistic perspective
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Efficiency perspective
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Creative accounting perspective
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Economic interest perspective
Question 3
Question
According to some free-market theorists, there are private economics-based incentives for the organisation that will ensure that credible information will be provided. Which of the following assumptions is not consistent with this?
Answer
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Managers will provide true and correct information for fear of not being rewarded, or fired for not doing so.
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Shareholders will assume managers will act opportunistically and so, in the absence of safeguards, will pay less for shares.
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Lenders will price protect, in that the higher the preserved risk, the higher will be the cost of loan funds demanded.
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All of the given options are correct.
Question 4
Question
Which of the following assumptions of the market for corporate takeovers can be criticised for being unrealistic in practice?
Answer
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An under-performing firm will be taken over by another firm, which will then subsequently replace the current management team.
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Managers will be motivated to maximise the firm's value to minimise the likelihood that outsiders could seize control.
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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.
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All of the given options are correct.
Question 5
Question
Which of the following was not one of the pieces of evidence put forward by Walker (1987) to argue that the ASRB had been captured by the accounting profession?
Answer
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The accounting profession's AARF proposals for standards were fast-tracked, but more stringent requirements were in place for others.
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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.
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The whole of AARF was merged with the AADB in 1987.
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By the beginning of 1986, the accounting profession indirectly managed to influence the procedures, priorities and output of the AASB.
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