Deck 2: Companies and Corporate Regulation

Question 1

The first system of easily registerable companies with limited liability share units tradable on a public stock exchange developed:

A)in ancient Assyria around 400 BC
B)in the Italian city states at the end of the fifteenth century
C)in Great Britain in the 1840s and 1850s
D)in the United States of America in the 1890s.

Answer 1

C

Question 2

Which of the following is NOT a characteristic of the proprietary company?

A)There need only be one director
B)There is no obligation to hold an annual general meeting
C)There must be no more than 50 non-employee shareholders
D)Unlike small proprietary companies the proprietary company can advertise in newspapers to obtain loans

Answer 2

D

Question 3

$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Gross operating } \\\text { revenue } \\\text { \$ millions }\end{array} & \begin{array} { l } \text { Gross assets } \\\text { \$ millions }\end{array} & \begin{array} { l } \text { Total employees } \\\text { (full time) }\end{array} & \text { Company type } \\\hline \text { Company I } & 2 & 16 & 150 & \text { Proprietary } \\\hline \text { Company II } & 5 & 14 & 4 & \text { Proprietary } \\\hline \text { Company III } & 126 & 1900 & 580 & \text { Public } \\\hline\end{array}$

-What type of entity is company II?
Small proprietary $\quad$$\quad$ Large proprietary $\quad$$\quad$$\quad$ Disclosing entity

A)Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes
B)Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Maybe
C)No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ No
D)No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Maybe

Answer 3

Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Maybe

Question 4

Under the Scheme based on the Uniform Companies Acts 1961-2 the court system in New South Wales would have had jurisdiction over a company registered in which of the following locations?

A)New Zealand, Great Britain or Tasmania
B)Khazakstan, Sierra Leone or Queensland
C)South Australia
D)None of the above

Question 5

Under the current structure for accounting standard setting in Australia, accounting standards for public sector entities are made by the:

A)FRC
B)PSASB
C)AARF and the PSASB with guidance from the AASB
D)AASB

Question 6

ICompanies with enhanced disclosure securities on offer
IIPublic companies
IIIWholly Australian-owned large proprietary companies
IVWholly Australian-owned small proprietary companies
As a general rule, under the Corporations Act, which of the following types of companies must have their financial report audited for a financial year?

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

Question 7

With which of the following sources of authority must Snout Ltd always comply?
ASX Listing Rules | Corporations Act | AASB standards

A)No | Yes | Yes
B)No | No | Yes
C)Yes | Yes | No
D)Yes | No | No

Question 8

The directors of Corp Ltd agree that to apply all the AASB standards would not provide a true and fair view of Corp Ltd's financial position.They advise their auditors that the financial report will not comply with all AASB standards.Which is correct?

A)The auditors must state in the audit report that the financial report does not comply with those AASB standards
B)The directors are in accordance with the Corporations Act provided that they provide their reason(s) in the financial report
C)The directors are in accordance with the Corporations Act provided that they list the standards that have not been complied with
D)The auditors should audit the financial statements as they have been prepared and need disclose no information about the non-application of the AASB standards

Question 9

Which of the following statements is untrue?

A)AAS standards no longer cover all accounting topics
B)AAS standards may contain requirements not found in IFRS
C)AAS standards may apply to superannuation schemes
D)None of the above

Question 10

Complete the following sentence:
The ______________ is responsible for prosecuting companies for breaches of AASB standards.

A)ASIC
B)AARF
C)AASB
D)ASX

Question 11

Meteor Pty Ltd owns 100% of the share capital of Satellite Pty Ltd and Meteor Pty Ltd controls Satellite Pty Ltd.The following information is available:
$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Meteor Pty } \\\text { Ltd }\end{array} & \begin{array} { l } \text { Meteor Pty } \\\text { Ltd }\end{array} & \begin{array} { l } \text { Satellite Pty } \\\text { Ltd }\end{array} & \begin{array} { l } \text { Satellite Pty } \\\text { Ltd }\end{array} \\\hline & 20 \mathrm { X } 7 & 20 \mathrm { X } 8 & 20 \mathrm { X } 7 & 20 \mathrm { X } 8 \\\hline \text { Gross operating revenue } & \$ 26 \mathrm {~m} & \$ 20 \mathrm {~m} & \$ 1 \mathrm {~m} & \$ 6 \mathrm {~m} \\\hline \text { Full-time employees at year end } & 32 & 10 & 15 & 32 \\\hline \text { Gross assets at year end } & \$ 8 \mathrm {~m} & \$ 6 \mathrm {~m} & \$ 6 \mathrm {~m} & \$ 3 \mathrm {~m} \\\hline\end{array}$

-For the 20X8 year would Satellite Pty Ltd have to:
Prepare a financial report?
Lodge the financial report with ASIC?
Distribute the financial report to members?

A)Yes
$\quad$ Yes
$\quad$ Yes
B) No
$\quad$ Yes
$\quad$ No
C) No
$\quad$ No
$\quad$ No
D)Yes
$\quad$ No
$\quad$ No

Question 12

Which of the following is NOT a characteristic of the public company?

A)Company can raise loans from general public
B)Company has no upper limit on the number of shareholders
C)Company must have financial reports audited
D)Company has a lower limit of five shareholders

Question 13

Meteor Pty Ltd owns 100% of the share capital of Satellite Pty Ltd and Meteor Pty Ltd controls Satellite Pty Ltd.The following information is available:
$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Meteor Pty } \\\text { Ltd }\end{array} & \begin{array} { l } \text { Meteor Pty } \\\text { Ltd }\end{array} & \begin{array} { l } \text { Satellite Pty } \\\text { Ltd }\end{array} & \begin{array} { l } \text { Satellite Pty } \\\text { Ltd }\end{array} \\\hline & 20 \mathrm { X } 7 & 20 \mathrm { X } 8 & 20 \mathrm { X } 7 & 20 \mathrm { X } 8 \\\hline \text { Gross operating revenue } & \$ 26 \mathrm {~m} & \$ 20 \mathrm {~m} & \$ 1 \mathrm {~m} & \$ 6 \mathrm {~m} \\\hline \text { Full-time employees at year end } & 32 & 10 & 15 & 32 \\\hline \text { Gross assets at year end } & \$ 8 \mathrm {~m} & \$ 6 \mathrm {~m} & \$ 6 \mathrm {~m} & \$ 3 \mathrm {~m} \\\hline\end{array}$

-For the 20X7 year, Meteor Pty Ltd would have to:
Have an audit
Lodge an audit report with the ASIC
Distribute the audit report to members

A) Yes
$\quad$ Yes
$\quad$ Yes
B) No
$\quad$ Yes
$\quad$ No
C) No
$\quad$ No
$\quad$ No
D) Yes
$\quad$ No
$\quad$ No

Question 14

Which of the following requirements is not found in the Corporations Act?

A)types of ledger accounts that must be used in particular circumstances
B)restrictions on the use of amounts in some ledger accounts
C)that accounting records must be kept for seven years
D)the headings that must be used in the balance sheet

Question 15

ICompanies with enhanced disclosure securities on offer
IIPublic companies
IIIWholly Australian-owned large proprietary companies
IVWholly Australian-owned small proprietary companies
As a general rule, under the Corporations Act, which of the following types of companies must prepare a financial report for a financial year?

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

Question 16

Which of the following statements is untrue?

A)A public company can be a guarantee company with limited liability
B)A small proprietary company can have share capital and no liability
C)A public company can have share capital and unlimited liability
D)A no liability company can not be a guarantee company.

Question 17

$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Gross operating } \\\text { revenue } \\\text { \$ millions }\end{array} & \begin{array} { l } \text { Gross assets } \\\text { \$ millions }\end{array} & \begin{array} { l } \text { Total employees } \\\text { (full time) }\end{array} & \text { Company type } \\\hline \text { Company I } & 2 & 16 & 150 & \text { Proprietary } \\\hline \text { Company II } & 5 & 14 & 4 & \text { Proprietary } \\\hline \text { Company III } & 126 & 1900 & 580 & \text { Public } \\\hline\end{array}$

-What type of entity is company III?
Disclosing entity $\quad$$\quad$$\quad$ Reporting entity

A)No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Likely
B)No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Unlikely
C)Maybe $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Likely
D)Maybe $\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$ Unlikely

Question 18

Which of the following statements is untrue?

A)A public company can be a guarantee company with unlimited liability
B)A small proprietary company can have share capital and unlimited liability
C)A public company can have share capital and unlimited liability
D)A no liability company can not be a guarantee company

Question 19

$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Gross operating } \\\text { revenue } \\\text { \$ millions }\end{array} & \begin{array} { l } \text { Gross assets } \\\text { \$ millions }\end{array} & \begin{array} { l } \text { Total employees } \\\text { (full time) }\end{array} & \text { Company type } \\\hline \text { Company I } & 2 & 16 & 150 & \text { Proprietary } \\\hline \text { Company II } & 5 & 14 & 4 & \text { Proprietary } \\\hline \text { Company III } & 126 & 1900 & 580 & \text { Public } \\\hline\end{array}$

-What type of entity is company I?
Small proprietary $\quad$$\quad$ Large proprietary $\quad$$\quad$$\quad$ Disclosing entity

A)Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes
B)Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Maybe
C)No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes
D)No $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Yes $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Maybe

Question 20

Winston owns shares in Beaver Mining NL and his friend Neville owns shares in Otter Pty Ltd.In the event of liquidation of both of these companies who would potentially have to pay the most per share?

A)Neville, because his liability is up to the amount unpaid on his shares and Winston has no such liability
B)Neville, because his shares are in an unlisted company and Winston's are in a listed company
C)Winston, because his shares are in a mining company that is listed
D)Not able to be answered decisively from the information

Question 21

CPA Australia was a founding member of the IASB's forerunner organisation, the IASC.

Question 22

Complete the following sentence:
The ______________ is responsible for appointing AASB board members.

A)ASIC
B)AARF
C)ASX
D)FRC

Question 23

In a limited liability share company, once the price of the share is fully paid the shareholder has no further liability.

Question 24

The adoption of IFRS in Australia was preceded by a lengthy public consultation process.

Question 25

Which answer best describes the following corporate governance system in Australia: 'legislation based in the states, with state-based legal jurisdiction, separate state-based regulators and a body of laws originally designed to be similar across the states, but in practical effect they were not always exactly the same.'

A)Scheme based on Uniform Companies Acts 1961-2
B)National Co-operative Scheme 1981-89
C)Scheme based on Corporations Act 1989
D)Scheme commonly known as the 'Corporations Law' that commenced in 1991

Question 26

Complete the following sentence:
The ______________ is primarily responsible for the broad direction of policy (for example, the adoption of IFRS) concerning Australian accounting standards.

A)ASIC
B)AARF
C)AASB
D)FRC

Question 27

Domestic companies in the USA are required to use IFRS.

Question 28

EU countries like France have had traditionally a greater emphasis on flexibility and presentation of financial statements at fair value than have Anglo countries like Great Britain and the USA.

Question 29

IFRS standards adopted for use in Australia cover all Australian accounting standard topics.

Question 30

The Urgent Issues Group was:

A)A sub committee of CPA Australia
B)A sub committee of the AASB
C)A joint committee of CPA Australia and the Institute of Chartered Accountants in Australia
D)A committee that reports directly to the Auditor-General of Australia

Question 31

No-liability companies are confined to the mining sector and must not have a share capital.

Question 32

AASB standards apply by force of law to managed investment schemes and to unit trusts regulated under the Corporations Act.

Question 33

Which statement is incorrect? AASB standards apply by force of law to:

A)all entities regulated by the Corporations Act
B)entities required to comply with AASB accounting standards by other legislation
C)entities required to comply with AASB accounting standards by ministerial directive
D)all of the above

Question 34

Which body has the power to make accounting standards under the Corporations Act?

A)ASIC
B)AASB
C)ICAA
D)AARF

Question 35

The International Accounting Standards Board (IASB) is:

A)a profit making body registered in Panama
B)a committee of the US Securities and Exchange Commission
C)an independent not for profit body headquartered in London
D)a body of the United Nations

Question 36

Which of the following is not one of the functions of the Financial Reporting Council (FRC)?

A)Appoint members of the AASB
B)Adjust errors in the drafting of accounting standards
C)Organise funding for the AASB
D)Make decisions about adoption of IFRS's by Australia

Question 37

Governments including the Australian government have direct control over the determination of IFRS content.

Question 38

Which statement is incorrect:

A)The EU has adopted IFRS for limited purposes from 1 January 2005
B)A nineteen person panel of trustees appoints the IASB members
C)IASB members are appointed jointly by the US and UK governments
D)The IASB's predecessor the IASC commenced operations in 1973

Question 39

The role of the Urgent Issues Group was:

A)to provide timely guidance on urgent financial reporting issues
B)to report breaches of the Corporations Act to the Auditor-General
C)to report breaches of the Corporations Act to ASIC
D)to investigate attempts at company take-over on the Australian Securities Exchange (ASX)

Question 40

Members of the Financial Reporting Council (FRC) are jointly appointed by the Business Council of Australia and the Australian Shareholders' Association.