Deck 5: Measurement

Question 1

The set of data that would be measured on a nominal scale is:

A)The height of a group of school children
B)Assets classified into current/non-current and tangible/intangible
C)Investment opportunities classified into 'poor','average' or 'good' with respect to anticipated returns.
D)The share prices of a group of companies

Answer 1

B

Question 2

Stevens's general description of scales is nominal,interval or ratio.

Answer 2

False

Question 3

Since all measurements involve errors,no statement that includes a measurement can be regarded as truthful.

Answer 3

False

Question 4

The ratio scale does not allow for all the fundamental arithmetic operations to be performed on the data.

Question 5

A nominal scale ranks the objects in question with respect to a given property.

Question 6

A measurement may be reliable without being accurate.

Question 7

The statement that is false with regard to the ratio scale is:

A)The intervals between the objects are equal and are known
B)A natural zero point exists where the distance from it for at least one object is known
C)The intervals between the numbers do not tell anything about the differences in the quantity of the property they represent
D)The rank order of the objects or events with respect to a given property is known

Question 8

The term 'validity' is often used by social sciences in preference to the term 'accuracy'.

Question 9

Higher than average income
Which of these measurement scales would her data be measured on?

A)Nominal
B)Ordinal
C)Interval
D)Ratio

Question 10

There could be many different asset values that are acceptable to an auditor.

Question 11

Emma has collected data on the ages of students in a third year accounting course.The data has been group into the following age ranges:
0-18
19-24
24-30
31-35
35+
Which of these measurement scales would her data be measured on?

A)Nominal
B)Ordinal
C)Interval
D)Ratio

Question 12

Changing from the nominal dollar scale to the purchasing power of the dollar scale for historical cost accounting is an example of invariant transformation.

Question 13

The weakness of the interval scale is that the zero point is arbitrarily established.

Question 14

Sarah has collected data on the salaries of part-time third-year accounting students.Which of these measurement scales would her data be measured on?

A)Nominal
B)Ordinal
C)Interval
D)Ratio

Question 15

Which statement is not true with respect to the interval scale?

A)It is less informative than the ratio scale
B)The distance between the intervals on the scale is equal and known
C)The zero point is arbitrarily established
D)A unique origin exists where the distance from it for at least one object is known

Question 16

The act of counting is the only measurement that does not necessarily involve errors.

Question 17

The major problem with fiat measurement is that the scales can be measured in numerous ways.

Question 18

When using an ordinal scale you can use all the fundamental arithmetical operations.

Question 19

Under current international accounting standards,accounting profit determination is based on a principle that includes increases and decreases in the 'fair values' of assets and liabilities.

Question 20

An ordinal scale would be used where the data set consists of the net present value of different projects measured in dollars.

Question 21

Which of these is not an issue discussed under the FASB/IASB joint project on Financial Statement Presentation?

A)The income statement should include the effects of all changes in net assets and liabilities during the period,other than transactions with owners
B)Entities should present a single statement of all recognised income and expense items as a component of a complete set of financial statements
C)For debt and equity instruments held for sale,fair value must be used instead of historical cost
D)Accounting information should be aimed at decision makers making economic decisions about the entity

Question 22

'If all measurement except counting inherently involve errors then how can any statement that includes a measurement be regarded as true'.J.Godfrey,et el,'Accounting Theory',7^th Ed.p.141
Discuss four sources of error in measurement giving an example related to accounting measurement for each of the four sources you have discussed.Briefly explain how,in overall terms,accountants deal with error in measurement.

Question 23

The event that was not a contributory factor towards the evolution of capital valuation is:

A)The development of joint stock companies with limited liability in England
B)The World War II
C)The railway expansion in the United States
D)Publication of the first definitive statement on the concepts of capital and profit by Paton and Littleton

Question 24

Michael measures the varying depths of the seabed around the Australian coastline.These measurements are best described as:

A)Fundamental measurements
B)Fiat measurements
C)Derived measurements
D)All of the above

Question 25

What is the main problem in determining accuracy in accounting?

A)The measurement is not reliable
B)The measurement does not give precise results
C)The true value of the measurement is not known
D)There is no repetition of operations in the measurement

Question 26

The incorrect statement in relation to measurement issues for auditors is:

A)It is easier for the auditor to gather evidence if profit is measured by changes in fair value than when it is determined by matching revenue and expense transactions.
B)ISA 540 is the international auditing standard that provides guidance for auditing impairment losses.
C)Under the international auditing standard on impairment losses auditors are required to judge if the amount recognised as an impairment loss is reasonable
D)Auditors must assess whether the asset or liability values are properly determined from management's significant assumptions.

Question 27

What type of measurement does the following description relate to?
'A measurement that depends on the measurement of two or more other quantities'

A)Fiat measurement
B)Fundamental measurement
C)Derived measurement
D)All of the above

Question 28

Which of these is not the condition of invariance?

A)The rank order of the points is unchanged
B)The numbers in the scale are unchanged
C)The ratios of the points are unchanged
D)The zero point is unchanged

Question 29

'…when profit is derived from changes in fair values more difficult questions arise for the auditor …' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.150.
Discuss the implications for auditors of the shift in the focus of profit measurement from matching revenues and expenses to assessing changes in the fair value of the net assets.

Question 30

Which of these arguments is not a criticism of historical cost valuation?

A)The historical cost allocation system is based on the matching principle
B)The derived profit does not measure contemporary resource usage
C)Valuation of firms based on outdated historical costs is not useful for economic decision-making
D)B and C

Question 31

The statement that is describing the concept of reliability is:

A)The measurements are repeatable or reproducible and as a result demonstrate their consistency
B)The agreement of the results among repeated use of the measurement operation as applied to a given property
C)The proven consistency of an operation to produce satisfactory results
D)All of the above describe the concept of reliability.

Question 32

Discuss how the move away from historical cost towards fair value accounting may affect the reliability and relevance of financial reports.

Question 33

Which of these is not a source of error in measurement?

A)The environment
B)Risk and uncertainty
C)An unclear attribute
D)All are sources of error

Question 34

A researcher wishes to measure the success of accountants in using graphs to determine the liquidity of a firm,and compare this with their success when using tables.The researcher has decided to use accounting students in the research and has told the students that their performance in the experiment will form part of their assessment for the accounting course they are enrolled in.A limitation of the study is whether students are an adequate proxy for experienced accountants.Which of the following measurement errors may occur when the experiment is conducted?

A)Instrument error
B)Environment error
C)Attribute unclear error
D)All of the above

Question 35

An example of attribute unclear error is:

A)An accountant measures the value of a manufacturing plant
B)A tax officer uses an outdated list of tax rates when calculating tax returns
C)A manager misreads a question while completing a survey
D)An accountant applies the reducing-balance depreciation method instead of the straight-line method due to pressures from his manager

Question 36

Briefly outline the nominal,ordinal and ratio scales of measurement and explain why the ratio scale is the one most commonly used by accountants.Include in your discussion an example for each of the three scales.

Question 37

The operations that can be performed with reference to particular numbers on the interval scale is/are:

A)Multiplication and division
B)Subtraction
C)Addition
D)B and C only

Question 38

It has been argued by some firms that IASB fair value accounting fundamentally changes the focus of risk management.Which of these is a way in which the focus may change?

A)Firms may increase their hedging activities because they are worried about the impact on accounting profits
B)Firms may decrease their hedging activities because they are worried about the impact on accounting profits
C)Firms may increase their hedging for pension liabilities as these now must show up as a liability on the balance sheet
D)B and C