Question 1

Stakeholder theory accounting disclosure practice.&#10;A) Is completely different to legitimacy theory&#10;B) Focuses on government power&#10;C) Has both a normative and positive version&#10;D) All of the above

Accepted Answer

Stakeholder theory of accounting disclosure practice refers to disclosing information that is important to stakeholders such as investors, employees, customers, and suppliers. It has both a normative (what should be disclosed) and positive (what is being disclosed) version. It is different from legitimacy theory which focuses on the organization's perception of acceptable behavior by society and concentrates on securing its survival by ensuring its legitimacy. Government power may or may not be a concern under stakeholder theory, depending on the specific stakeholders being considered.

Question 2

Which of the following theories have been used to explain voluntary disclosure in the annual report?&#10;A) Stakeholder Theory&#10;B) Legitimacy Theory&#10;C) Institutional Theory&#10;D) All of the above

Accepted Answer

All three theories, Stakeholder Theory, Legitimacy Theory, and Institutional Theory, have been used to explain voluntary disclosure in the annual report. The Stakeholder Theory suggests that firms disclose information to satisfy the needs of their stakeholders. The Legitimacy Theory proposes that companies disclose information to gain and maintain legitimacy in the eyes of their stakeholders. The Institutional Theory argues that firms disclose information because it is a norm in their institutional environment.

Question 3

Which of the following is NOT an important role for accounting in the agency relationship?&#10;A) Identifying excessive perquisite consumption&#10;B) Signalling good news to the market&#10;C) Determining performance&#10;D) Protecting lenders' interests

Accepted Answer

A

Question 4

Agency theory would hold that managers on compensation contracts which have bonuses tied to a current measure of performance would prefer to:&#10;A) Be indifferent to expensing or capitalising transactions&#10;B) Expense transactions rather than capitalise them.&#10;C) Smooth income using either expensing or capitalising.&#10;D) Capitalise transactions rather than expense them.

Accepted Answer

Agency theory suggests that managers will act in their own self-interest to maximize their compensation. In this scenario, capitalizing transactions would increase the current measure of performance, leading to higher bonuses for managers. Therefore, managers would prefer to capitalize transactions rather than expense them.

Question 5

A positive theory&#10;A) Is completely divorced from reality&#10;B) Describes, explains or predicts activities&#10;C) Is based on what should be the case given a certain objective&#10;D) Only focuses on rewarding activities

Accepted Answer

A positive theory is one that describes, explains, or predicts activities based on empirical evidence and observations, rather than what should or ought to happen. It is grounded in reality and seeks to understand the world as it is, rather than as it should be.

Question 6

According to stakeholder theory accounting information accounting disclosure practice.&#10;A) is seen as largely advertising&#10;B) is unimportant to most stakeholders&#10;C) is usually misleading&#10;D) is an important way to communicate with stakeholders

Accepted Answer

According to stakeholder theory, accounting information and disclosure practice is an important way to communicate with stakeholders. This is because stakeholders, such as investors and creditors, rely on accounting information to make informed decisions about the organization. Without transparent and accurate accounting information, stakeholders may have an incomplete or misleading picture of the organization's financial health and performance. Therefore, accounting information and disclosure practice is crucial for effective stakeholder communication and management.

Question 7

Which of the following has been identified as a problem in owner-manager relationships?&#10;A) Short-term focus&#10;B) Risk aversion&#10;C) Dividend retention&#10;D) All of the above

Accepted Answer

All of the options listed have been identified as problems in owner-manager relationships. Short-term focus can lead to neglecting long-term growth and stability. Risk aversion can prevent necessary investment and innovation. Dividend retention can limit opportunities for growth and reduce shareholder value.

Question 8

Contingency theory proposes that accounting disclosure practice.&#10;A) Accounting policies are likely to be consistent within industries.&#10;B) Size is not an important factor when considering management accounting systems.&#10;C) Shareholder needs drive accounting system choices.&#10;D) No universally consistent accounting system can apply to all organisations.

Accepted Answer

According to contingency theory, there is no universally consistent accounting system that can apply to all organizations. Accounting system choices are influenced by various factors such as the organization's size, structure, technology, culture, and external environment. Therefore, accounting disclosure practices will vary depending on the specific circumstances of each organization.

Question 9

Legitimacy theory argues that disclosure practice.&#10;A) Organisations can only continue to exist if they demonstrate values consistent with society at large.&#10;B) Organisations should focus on wealth maximisation for their owners&#10;C) The business of business is business&#10;D) Consumers are only interested in minimising costs to themselves.

Accepted Answer

Legitimacy theory suggests that organisations need to act in a way that is consistent with societal norms and values in order to maintain their legitimacy and ultimately their existence. Disclosure practices play a key role in demonstrating this conformity to society. Therefore, option A is the best choice as it is aligned with the core idea of legitimacy theory. Options B, C, and D are not relevant to legitimacy theory.

Question 10

A normative theory&#10;A) Is completely divorced from reality&#10;B) Describes, explains or predicts activities&#10;C) Is based on what should be the case given a certain objective&#10;D) Only focuses on normal activities

Accepted Answer

Normative theories are concerned with what ought to be rather than what is, focusing on ideal conditions or how things should be based on certain principles or objectives, rather than merely describing or explaining what currently exists.

Question 11

Theories in accounting can help us to understand the decisions of:&#10;A) Financial information preparers&#10;B) Financial information users&#10;C) Financial information regulators&#10;D) All of the above

Accepted Answer

The answer of Theories in accounting can help us to...

Question 12

The central proposition of contingency theory is: accounting disclosure practice.&#10;A) Institutional norms drive organisational structure.&#10;B) Organisational performance is largely random and poorly understood&#10;C) Organisational performance depends on the fit between organisational context and structure.&#10;D) Organisations are simply a nexus of contractual agreements.

Accepted Answer

The answer of The central proposition of contingency theory is:...

Question 13

According to agency theory the following are examples of bonding costs:&#10;A) Auditing the financial reports&#10;B) Putting in place operating rules&#10;C) Linking remuneration to performance&#10;D) All of the above

Accepted Answer

The answer of According to agency theory the following are...

Question 14

Accounting theory helps us understand accounting better as:&#10;A) A fundamental part of the natural universe&#10;B) A human endeavour&#10;C) A random process&#10;D) A representation of truth

Accepted Answer

The answer of Accounting theory helps us understand accounting better...

Question 15

Which of the following is NOT one of the four ways an organisation can obtain or maintain organisational legitimacy according to Lindblom? disclosure practice.&#10;A) Change perceptions of society, without changing its own behaviour&#10;B) Manipulate perceptions by deflecting attention from societal concerns&#10;C) Change its behaviour&#10;D) None of the above, i.e. they are all ways an organisation can obtain or maintain legitimacy

Accepted Answer

The answer of Which of the following is NOT one...

Question 16

Which of the following is NOT considered a stakeholder according to the managerial branch of stakeholder theory? accounting disclosure practice.&#10;A) Communities&#10;B) Competitors&#10;C) Customers&#10;D) None of the above, i.e. they are all considered stakeholders

Accepted Answer

The answer of Which of the following is NOT considered...

Question 17

A key underlying assumption of Institutional Theory is that people are:&#10;A) Self-interested&#10;B) Likely to conform to external norms&#10;C) Risk-adverse&#10;D) All of the above

Accepted Answer

The answer of A key underlying assumption of Institutional Theory...

Question 18

According to institutional theory which of the following statements is NOT true about corporate social and environmental disclosure&#10;A) It will be heavily influenced by regulation&#10;B) Well organised external stakeholders will lead to increased disclosure&#10;C) Within industries the nature of the disclosure is likely to diverge over time&#10;D) None of the above, i.e. they are all true.

Accepted Answer

The answer of According to institutional theory which of the...

Question 19

Which of these is NOT an assumption on which positive accounting theory is based?&#10;A) People are rational&#10;B) People are wealth maximisers&#10;C) People prefer to act altruistically&#10;D) None of the above, i.e. they are all assumptions of positive accounting theory?

Accepted Answer

The answer of Which of these is NOT an assumption...

Question 20

Which of the following has been identified as a problem in owner-lender relationships?&#10;A) Dividend retention&#10;B) Asset substitution&#10;C) Over-investment&#10;D) All of the above

Accepted Answer

The answer of Which of the following has been identified...

Deck 5: Theories in Accounting