Deck 1: Nature and Regulation of Companies

Question 1

The certificate of registration issued by the Australian Securities and Investments Commission is valid:

A)for 12 months only and must be renewed annually
B)for a maximum period of 5 years
C)for 15 years
D)until the company is deregistered.

Answer 1

D

Question 2

The main functions of the Financial Reporting Council include:
I)overseeing the process for the setting of accounting standards of the AASB.
II)determining the AASB's broad strategic direction.
III)monitoring and reviewing the level of funding for the AASB.
IV)directing the AASB in relation to the development or making of a particular standard.
V)the power to veto a standard recommended by the AASB.

A)I,II,III and V only
B)I,II,and III only
C)I,II,IV and V only
D)II,III,IV and V only.

Answer 2

B

Question 3

The functions of the Australian Accounting Standards Board include:
I)Development of a conceptual framework for the purpose of evaluating proposed accounting standards.
II)Making accounting standards for the purpose of the Corporations Act.
III)Formulating accounting standards for non-companies,the public sector and the not-for-profit sector.

A)I only
B)II and III only
C)I and III only
D)I,II and III.

Answer 3

D

Question 4

A key role of the Australian Securities and Investments Commission (ASIC)is to ensure that all company financial statements lodged with it:

A)present a true and fair view.
B)are approved by the Financial Reporting Panel.
C)comply with accounting standards
D)comply with the Corporations Act,including accounting standards.

Question 5

A proprietary company must have at least one shareholder and cannot have more than:

A)100 shareholders
B)50 shareholders
C)20 shareholders
D)10 shareholders.

Question 6

Which of the following statements is NOT correct?

A)AASB 1053 Application of Tiers of Australian Accounting Standards requires 'Tier 2' entities to apply reduced disclosure requirements.
B)The IASBs Conceptual Framework identifies capital providers as a primary user group of general purpose financial reports.
C)All general purpose financial reports are prepared in accordance with accounting standards.
D)SAC 1 Definition of the Reporting Entity defines a general purpose financial report as "a report intended to meet the information needs of users who are unable to command the preparation of reports tailored to satisfy their information needs".

Question 7

Replaceable rules deal with:
I)The appointment,powers and remuneration of directors.
II)Director's and member's meetings.
III)Share transfers.
IV)Inspection of the company's books by members.

A)I,II,III and IV
B)II and III only
C)I and IV only
D)I,II and III only.

Question 8

Accounting Standards approved by the Accounting Standards Review Board (ASRB):

A)Had no legal backing under the Companies Act,and their application was optional.
B)Had no legal backing under the Companies Act,although almost all companies followed their guidance.
C)Had legal backing under the Companies Act,although companies could depart from the accounting standards if it was maintained that application did not result in the financial reports showing a 'true & fair view'
D)Had legal backing under the Companies Act,and their application was mandatory at all times.

Question 9

According to s.224 (a)of the ASIC Act (2001),accounting standards should result in financial information,which has which of the following characteristics?
I allows user to make decisions about allocating scarce resources
II assists directors in discharging their obligations in relation to financial reporting
III is able to be prepared on a timely basis
IV is readily understandable
V facilitates comparability
VI is relevant and reliable

A)I,IV and VI only
B)I,III,IV and VI
C)I,II,IV,V and VI
D)all of the above

Question 10

Compared to IFRS standards,Australian accounting standards require:

A)less disclosure in notes to the financial statements.
B)identical disclosures in notes to the financial statements
C)additional disclosure in the notes to the financial statements
D)different disclosures in the notes to the financial statements.

Question 11

The role of the Australian Securities and Investments Commission is to:
I)Enforce and administer the Corporations Act.
II)Inform the public about Australian companies,financial markets and financial professionals who deal and advise in financial instruments.
III)Issue accounting standards.
IV)Improve the performance of the financial system.

A)I,II,III and IV
B)I,III and IV only
C)I,II and IV only
D)II,and III only.

Question 12

In terms of the numbering of AASB accounting standards:

A)AASB 1-99 are equivalent to the IFRSs issued by the IASB.
B)AASB 101-199 are equivalent to the IFRSs issued by the IASB.
C)AASB 1-99 address domestic issues such as director and executive disclosures and concise financial reports.
D)AASB 101-199 address domestic issues such as director and executive disclosures and concise financial reports.

Question 13

In July 2002 the Financial Reporting Council (FRC)issued a bulletin requiring what type of entities to adopt standards issued by the IASB from 1 January 2005.

A)all entities
B)reporting entities
C)for-profit entities
D)listed entities

Question 14

Which of the following was NOT one of the objectives of the CLERP policy initiatives?

A)To make access to capital easier for small business
B)To provide greater protection for directors
C)To improve takeover legislation
D)To facilitate the more widespread use of electronic commerce

Question 15

The share capital of a company may consist of:

A)ordinary shares either fully paid or partly paid issued by the company
B)mortgages issued by the company
C)secured and unsecured notes issued by the company
D)debentures issued by the company.

Question 16

According to the ASIC Act (2001)a key way in which accounting standards should facilitate the Australian economy is by

A)having regard to the interests of Australian corporations that propose to raise capital in major international financial markets.
B)ensuring that all standards are relevant and reliable.
C)reducing the cost of capital
D)ensuring harmonization with IFRSs

Question 17

The main role of the trustee for debenture holders is to protect the interests of:

A)shareholders
B)debenture holders
C)directors
D)auditors.

Question 18

The two main types of companies permitted to be registered under the Corporations Act are:

A)a private company,and a proprietary company
B)a public company,and a trade union
C)a proprietary company,and a public company
D)a proprietary company,and a partnership.

Question 19

The existence of a limited liability company means the:
I)company's members are liable for only a limited amount of business debts.
II)company has a legal existence distinct from its owners.
III)company may raise large amounts of funds by issuing shares.

A)I only
B)I and II only
C)II and III only
D)I,II and III.

Question 20

AASB 1048 Interpretation and Application of Standards contains:

A)the IFRS interpretations approved by the AASB.
B)the UIG interpretations approved by the IASB.
C)the IFRS interpretations approved by the IASB.
D)the UIG interpretations approved by the AASB.

Question 21

Explain the difference between replaceable rules and a constitution.

Question 22

The ASIC Act details that one of the primary accounting standard functions of the Financial Reporting Council (FRC)is to ensure that accounting standards serve the best interests of both the private and public sector.Why is it important that the FRC ensure that the interests of the public sector are met?

Question 23

Explain how a company comes into existence and identify five powers that a company has.

Question 24

Explain the numbering system used by the AASB for accounting standards.