Question 1

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

Accepted Answer

The Sarbanes-Oxley Act was not enacted to ensure the act was applied internationally. Its primary purpose was to enhance corporate accountability and transparency, and to help prevent fraud and poor financial reporting practices. It also introduced new independence rules for auditors and empowered the SEC to increase its policing efforts.

Question 2

Entity vs. proprietary perspective
Explain the difference between the entity perspective and the proprietary perspective.

Accepted Answer

The answer of Entity vs. proprietary perspective
Explain the difference between...

Question 3

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
Explain...

Question 4

User needs
Explain why providing information to users is a challenging task.

Accepted Answer

The answer of User needs
Explain why providing information to users...

Question 5

Imperfection of the stakeholder ecosystem
The stakeholder ecosystem (depicted in Illustration 1-3) provides checks and balances to ensure that the people with capital-investors and creditors-have good information to use when deciding where best to invest and allocate capital. However, the system does not always work. Explain why this is the case.

Accepted Answer

The answer of Imperfection of the stakeholder ecosystem
The stakeholder ecosystem...

Question 6

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

Accepted Answer

Advancement of technology can help in providing greater access to financial information to users. This can lead to more informed decision-making, increased transparency, and better accountability.

Question 7

Sources of capital and stages of company growth
Briefly describe how the sources of capital a company relies upon for funding might vary according to their stage of growth.

Accepted Answer

The answer of Sources of capital and stages of company...

Question 8

One political factor influencing the standard-setting process is how the standard-setting bodies are financed. Which of the following is NOT an IASB principle regarding the nature and amount of funding?

Accepted Answer

The IASB principles for funding emphasize broad-based support, compelling constituents to contribute, and sharing costs among major economies. They do not include making financial commitments contingent on specific outcomes, which would undermine the independence of the standard-setting process.

Question 9

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 describe...

Question 10

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 GAAP...

Question 11

Objectives of financial reporting
What are the objectives of financial reporting by business enterprises?

Accepted Answer

The answer of  Objectives of financial reporting
What are the...

Question 12

Explain the advantages of an effective capital allocation process.

Accepted Answer

The answer of Explain the advantages of an effective capital...

Question 13

The decision-usefulness approach to financial reporting
Explain what is meant by the "decision-usefulness" approach to financial reporting. Who will this information be useful to, and why?

Accepted Answer

The answer of The decision-usefulness approach to financial reporting
Explain what...

Question 14

Maintaining competitive advantage
In the most efficient and effective marketplace possible, all stakeholders would have equal access to all relevant information. However, a company may feel that complete disclosure may hurt their competitive advantage or position. Offer an example of a circumstance where this may be the case. What do you think the company should do?

Accepted Answer

The answer of  Maintaining competitive advantage
In the most efficient...

Question 15

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 16

Financial versus managerial accounting
Distinguish between financial and managerial accounting.

Accepted Answer

The answer of Financial versus managerial accounting
Distinguish between financial and...

Question 17

Management bias in financial statement presentation
There are many reasons why management may present biased information in the financial statements. Identify at least three (3) such motivations.

Accepted Answer

The answer of Management bias in financial statement presentation
There are...

Question 18

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

Accepted Answer

In a principles-based standard-setting system, accountants either apply specific standards based on the conceptual framework, or use professional judgement consistent with the framework. It is not a rule for every situation, and there may be situations when professional judgement must be applied. While the principles-based system may be less prescriptive than a rules-based approach, it encourages accountants to apply principles and use their judgement, which can lead to more accurate and relevant financial reporting.

Question 19

Which of the following is an argument in favour of a GAAP body of knowledge that is more prescriptive, or rules-based?

Accepted Answer

A more prescriptive, rules-based approach provides clear guidance on how particular items should be accounted for, making it easier for companies to defend their accounting practices in case of questions or disputes.

Question 20

Merits of accrual- vs. cash-basis accounting
Investors are interested in assessing a company's ability to generate net cash inflows, as well as its ability to protect and enhance capital investments. Briefly explain how each of the accrual- and cash-basis methods, respectively, might enhance these objectives.

Accepted Answer

The answer of  Merits of accrual- vs. cash-basis accounting
Investors...

Quiz 1: The Canadian Financial Reporting Environment

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

Entity vs. proprietary perspective Explain the difference between the entity perspective and the proprietary perspective.

Role of securities commissions and stock exchanges Explain the role of securities commissions and stock exchanges in financial reporting.

User needs Explain why providing information to users is a challenging task.

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

Sources of capital and stages of company growth Briefly describe how the sources of capital a company relies upon for funding might vary according to their stage of growth.

One political factor influencing the standard-setting process is how the standard-setting bodies are financed. Which of the following is NOT an IASB principle regarding the nature and amount of funding?

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.

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

Objectives of financial reporting What are the objectives of financial reporting by business enterprises?

Explain the advantages of an effective capital allocation process.

The decision-usefulness approach to financial reporting Explain what is meant by the "decision-usefulness" approach to financial reporting. Who will this information be useful to, and why?

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

Financial versus managerial accounting Distinguish between financial and managerial accounting.

Management bias in financial statement presentation There are many reasons why management may present biased information in the financial statements. Identify at least three (3) such motivations.

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

Which of the following is an argument in favour of a GAAP body of knowledge that is more prescriptive, or rules-based?