Question 1

Under ASPE, the primary sources of GAAP include
A)accounting textbooks and journals.
B)International Financial Reporting Standards.
C)the CICA Handbook and appendices.
D)research studies.

Accepted Answer

Under ASPE (Accounting Standards for Private Enterprises), the primary sources of GAAP (Generally Accepted Accounting Principles) include the CICA (Canadian Institute of Chartered Accountants) Handbook and its appendices. Other sources such as accounting textbooks, journals, research studies, and International Financial Reporting Standards may be used for additional guidance, but the CICA Handbook is considered the primary source for ASPE.

Question 2

Stakeholders in the financial reporting environment Briefly describe the much-publicized subprime lending crisis in the United States, and identify the stakeholders and how they were affected.

Accepted Answer

The answer of Stakeholders in the financial reporting environment Briefly...

Question 3

Which of the following statements does NOT describe the activities and authority of the Ontario Securities Commission (OSC)?
A)The OSC reviews and monitors the financial statements of companies whose shares are
Listed on the Toronto Stock Exchange
B)The OSC issues its own disclosure requirements for listed companies.
C)The OSC has the ability to fine or delist companies.
D)The OSC issues financial accounting standards for Canadian companies.

Accepted Answer

The OSC does not issue financial accounting standards for Canadian companies; this is the role of the Accounting Standards Board (AcSB) in Canada. The OSC enforces securities law and regulates the capital markets in Ontario.

Question 4

Which of the following does NOT support the use of Accounting Standards for Private Enterprises (ASPE)?
A)Private enterprises usually have less complex business models.
B)Private enterprises that are "going public."
C)Private enterprises usually have fewer users.
D)Private enterprises' financial statement users tend to have first-hand information.

Accepted Answer

Private enterprises that are "going public" will need to switch over to using International Financial Reporting Standards (IFRS) as required by securities regulators. ASPE is only used for private enterprises that do not have publicly traded securities. A, C, and D all support the use of ASPE.

Question 5

Which of the following is NOT part of the conceptual framework for financial reporting?
A)Elements of financial statements
B)Qualitative characteristics of accounting information
C)Notes to financial statements
D)Foundational principles

Accepted Answer

Notes to financial statements are not part of the conceptual framework; they are part of the financial statements themselves. The conceptual framework includes elements, qualitative characteristics, and foundational principles.

Question 6

The exercise of professional judgement does NOT involve
A)the use of knowledge gained through education.
B)the application of knowledge gained through experience.
C)the use of ethical decision making.
D)aggressive accounting.

Accepted Answer

Aggressive accounting is not a part of exercising professional judgement as it goes against ethical principles and may result in misrepresentation of financial statements. The other options, A, B, and C, are essential in the exercise of professional judgement.

Question 7

Standard setting Explain the relationship between Canadian GAAP and International Financial Reporting Standards (IFRS).

Accepted Answer

The answer of Standard setting Explain the relationship between Canadian...

Question 8

Which of the following does NOT describe a step in the IASB's standard setting process?
A)appointing trustees to the IFRS Foundation
B)development of an Exposure Draft
C)provision of strategic advice by the IFRS Advisory Council
D)public consultation

Accepted Answer

Appointing trustees to the IFRS Foundation is not a step in the IASB's standard setting process; it is an administrative function related to the governance of the IFRS Foundation.

Question 9

User Needs The Canadian Financial Reporting Environment 1 - 13 Explain why providing information to users is a challenging task.

Accepted Answer

The answer of User Needs The Canadian Financial Reporting Environment...

Question 10

Role of Securities Commissions and Stock Exchanges Explain the role of securities commissions and stock exchanges in financial reporting.

Accepted Answer

The answer of Role of Securities Commissions and Stock Exchanges...

Question 11

Effective capital allocation Explain the advantages of an effective capital allocation process.

Accepted Answer

The answer of Effective capital allocation Explain the advantages of...

Question 12

Information asymmetry In markets where information asymmetry exists, there can be adverse selection and moral hazard.Explain what these terms mean.

Accepted Answer

The answer of Information asymmetry In markets where information asymmetry...

Question 13

Which of the following is/are major factors in the rapidly changing financial reporting environment in Canada?
A)increased demand for accountants and the impact of technology
B)globalization and the unethical actions of accountants
C)the growing number of institutional investors who want more information regarding
Environmental and social issues
D)increased use of the Internet

Accepted Answer

The answer of Which of the following is/are major factors...

Question 14

The adoption of International Financial Reporting Standards in Canada is an example of
A)the impact of technology on user's needs.
B)the impact of globalization on capital markets.
C)ethical behaviour.
The Canadian Financial Reporting Environment 1 - 9
D)the desire of most private companies to expand internationally.

Accepted Answer

The adoption of International Financial Reporting Standards (IFRS) in Canada reflects the impact of globalization on capital markets, as it aligns Canadian financial reporting with international standards to facilitate cross-border investment and comparability.

Question 15

In a rules-based approach (such as U.S.GAAP), compared to a principles-based approach (such as Canadian GAAP),
A)the body of knowledge is smaller.
B)the importance of communicating the best information to users is emphasized.
C)since it is more prescriptive, it may be easier to defend how to account for a particular
Item.
D)companies frequently do not interpret the rules literally.

Accepted Answer

A rules-based approach provides detailed guidelines, making it easier to justify accounting decisions based on specific rules.

Question 16

Which of the following is likely to be an advantage of the advancement of technology on financial reporting?
A)Users of financial information will have access to more information.
B)The quality and reliability of the information may be compromised.
C)Equal and fair access may be at issue.
D)Internet reporting will increase costs.

Accepted Answer

Advancement in technology can lead to increased accessibility and availability of financial information to users. This can help in making informed decisions and improving transparency in financial reporting.

Question 17

SOX and standard setting After several highly-publicized accounting scandals in the U.S.such as Enron, Sunbeam and WorldCom, all of whom, coincidentally, were clients of the now basically defunct public accounting firm of Arthur Andersen, the U.S.regulators enacted the Sarbanes-Oxley Act (SOX). Pressure was put on Canada to follow a similar course.Explain what Canada has done to make public companies more accountable.

Accepted Answer

The answer of SOX and standard setting After several highly-publicized...

Question 18

The Sarbanes-Oxley Act (SOX)was NOT enacted to
A)help prevent fraud and poor financial reporting practices.
B)ensure the act was applied internationally.
C)enable the SEC to increase its policing efforts.
D)introduce new independence rules for auditors.

Accepted Answer

The Sarbanes-Oxley Act (SOX) was passed in the United States in 2002 as a response to accounting scandals such as Enron and WorldCom. It was mainly focused on helping prevent fraud and poor financial reporting practices in US companies, introducing new independence rules for auditors, and enabling the SEC to increase its policing efforts. However, the act was not meant to ensure its application internationally, so option B is the correct answer.

Question 19

Which of the following is NOT an objective of financial reporting?
A)To provide information about an entity's economic resources, obligations and equity/net
Assets
B)To provide information that is useful to investors and creditors and other users in making
Resource allocation decisions and/or assessing management stewardship
C)To provide information that is useful in assessing the economic performance of the entity
D)To provide the most useful information possible even if the costs exceed the benefits

Accepted Answer

Financial reporting aims to provide useful information, but it must balance the cost of providing that information with the benefits derived from it. Providing information where costs exceed benefits is not an objective.

Question 20

Sources of GAAP International Financial Reporting Standards (IFRS)are the primary source of GAAP for public enterprises in Canada.They are, however, insufficient to address all of the accounting issues facing accountants.Explain why this is so and outline some other sources of GAAP that accountants use.

Accepted Answer

The answer of Sources of GAAP International Financial Reporting Standards...

Quiz 1: Intermediate Accounting Volume 1

Under ASPE, the primary sources of GAAP include

Stakeholders in the financial reporting environment Briefly describe the much-publicized subprime lending crisis in the United States, and identify the stakeholders and how they were affected.

Which of the following statements does NOT describe the activities and authority of the Ontario Securities Commission (OSC) ?

Which of the following does NOT support the use of Accounting Standards for Private Enterprises (ASPE) ?

Which of the following is NOT part of the conceptual framework for financial reporting?

The exercise of professional judgement does NOT involve

Standard setting Explain the relationship between Canadian GAAP and International Financial Reporting Standards (IFRS).

Which of the following does NOT describe a step in the IASB's standard setting process?

User Needs The Canadian Financial Reporting Environment 1 - 13 Explain why providing information to users is a challenging task.

Role of Securities Commissions and Stock Exchanges Explain the role of securities commissions and stock exchanges in financial reporting.

Effective capital allocation Explain the advantages of an effective capital allocation process.

Information asymmetry In markets where information asymmetry exists, there can be adverse selection and moral hazard.Explain what these terms mean.

Which of the following is/are major factors in the rapidly changing financial reporting environment in Canada?

The adoption of International Financial Reporting Standards in Canada is an example of

In a rules-based approach (such as U.S.GAAP) , compared to a principles-based approach (such as Canadian GAAP) ,

Which of the following is likely to be an advantage of the advancement of technology on financial reporting?

The Sarbanes-Oxley Act (SOX) was NOT enacted to

Which of the following is NOT an objective of financial reporting?