Question 1

The Corporations Act requires which of the following to be included in a Directors' Declaration?
I. State whether in their opinion the financial statements comply with accounting standards and the Corporations Act.
II. State whether in their opinion the financial statements give a true and fair view of the financial position and financial performance of the entity.
III. State whether or not in their opinion, when the declaration was made, there were reasonable grounds to believe that the company would be able to pay its debts as they become due.
IV. State details of directors' emoluments.
V. State principal activities of the entity.
A) All of the given answers.
B) I, II and III only.
C) I, II, III and IV only.
D) IV and V only.
E) II, III and IV only.

Accepted Answer

The Directors' Declaration must include statements regarding the compliance of financial statements (I) and whether they give a true and fair view (II), as well as whether the company can pay its debts (III). Details of directors' emoluments (IV) and principal activities of the entity (V), although important, are not required to be included in the Directors' Declaration under the Corporations Act.

Question 2

The role of the Financial Reporting Council is to provide broad oversight of the process for setting standards in Australia, including the authority to direct the AASB to develop, amend or revoke a particular standard:

Accepted Answer

False

Question 3

A criticism of the way the membership of the Financial Reporting Council has been structured is that:
A) Groups that are primarily interested in the financial performance of entities are represented while lobby groups with other interests are not.
B) It has increased the breadth of representation too widely.
C) The Treasurer does not have sufficient input into the selection process.
D) It is dominated by professional accountants.
E) None of the given answers.

Accepted Answer

A

Question 4

The AASB has responsibility for developing a conceptual framework, among other things. AASB are initials that stand for:
A) Australian Accounting Standards Board.
B) Accounting & Auditing Standards Bureau.
C) Australian Accounting Standards Bureau.
D) Accounting & Auditing Supervision Board.
E) None of the given answers.

Accepted Answer

The correct initials for the organization responsible for developing a conceptual framework is the Australian Accounting Standards Board (AASB), which is responsible for developing and issuing accounting standards in Australia.

Question 5

The Corporations Act is very specific about what must, and must not, be included in the Directors' Report attached to a company's financial statements:

Accepted Answer

The answer of The Corporations Act is very specific about...

Question 6

Directors could elect not to comply with an accounting standard on the grounds that applying the particular accounting standard would cause the accounts not to present a true and view.

Accepted Answer

The answer of Directors could elect not to comply with...

Question 7

The Australian Accounting Standards Board reports to which body?
A) The Urgent Issues Group.
B) The Financial Accounting Standards Board.
C) The Financial Reporting Council.
D) The Australian Accounting Standards Review Board.
E) The Australian Accounting Research Foundation.

Accepted Answer

The Australian Accounting Standards Board (AASB) reports to the Financial Reporting Council (FRC), which is an independent body responsible for overseeing the effectiveness of the financial reporting framework in Australia. The AASB is responsible for developing and maintaining financial reporting standards in Australia. The Urgent Issues Group and the Australian Accounting Standards Review Board have been replaced by the AASB. The Australian Accounting Research Foundation no longer exists. The Financial Accounting Standards Board is a similar body in the United States.

Question 8

The AASB's responsibilities include:
A) developing accounting standards that have the force of law under The Corporations Act.
B) Setting ethical guidelines for the accounting profession.
C) Formulating standards to be used by the entities in the public sector.
D) developing accounting standards that have the force of law under The Corporations Act and formulating standards to be used by the entities in the public sector.
E) All of the given answers.

Accepted Answer

The AASB's responsibilities include developing accounting standards that have the force of law under The Corporations Act and formulating standards to be used by the entities in the public sector. They do not set ethical guidelines for the accounting profession. Therefore, options A, B, and C are incorrect. The correct answer is D.

Question 9

Pursuant to Corporate Law Economic Reform Program (CLERP) issued in October 2003, which of the following is/are required to provide a written declaration to the board of directors that the annual financial statements are in accordance with the Corporations Act and Australian Accounting Standards and that the financial statements present a true and fair view of the entity's financial position and performance?
A) any independent director.
B) chief executive officer.
C) chief financial officer.
D) any independent director and chief financial officer.
E) chief executive officer and chief financial officer.

Accepted Answer

According to CLERP, the chief executive officer and the chief financial officer are required to provide a written declaration to the board of directors about the annual financial statements being in accordance with the Corporations Act and Australian Accounting Standards and presenting a true and fair view of the entity's financial position and performance. Independent directors are not required to provide such a declaration.

Question 10

The only body with the power to veto a standard recommended by the AASB is:
A) The Financial Reporting Council.
B) The Commonwealth Parliament.
C) The Australian Accounting Standards Review Board.
D) The Urgent Issues Group.
E) None of the given answers.

Accepted Answer

The answer of The only body with the power to...

Question 11

What are two key ways management accounting is different from financial accounting?
A) Management accounting provides special-purpose information to people external to the firm and it is highly regulated.
B) Management accounting provides information for the day-to-day running of an organisation and it is governed by the requirements of ASIC.
C) Management accounting is focused on providing formation to shareholders who wish to have input into the management of the organisation and it is regulated by generally accepted accounting principles.
D) Management accounting focuses on providing information for internal users and it is largely unregulated.
E) None of the given answers.

Accepted Answer

Management accounting differs from financial accounting in that it is focused on providing information for internal users, such as managers, rather than external users like shareholders or regulators. It is also largely unregulated and not subject to the same generally accepted accounting principles as financial accounting.

Question 12

Financial accounting can be considered a process involving the collection and processing of financial information to assist the decision-making needs of parties internal to an organisation:

Accepted Answer

Financial accounting primarily focuses on the collection and processing of financial information to meet the needs of external parties, such as investors, creditors, and regulators, rather than internal decision-making needs, which are addressed by managerial accounting.

Question 13

The Australian Accounting Standards Board (AASB) issues only one set of accounting standards which have general applicability to the private, public and not-for-profit sectors:

Accepted Answer

The AASB issues one set of accounting standards known as Australian Accounting Standards (AAS), which have general applicability to all entities in Australia, including private, public and not-for-profit sectors.

Question 14

What option(s) does a company have when directors are of the view that compliance with accounting standards does not generate a true and fair view financial statements?
A) Directors may elect not to comply with the standard.
B) Directors may exercise the "true and fair view override".
C) Directors may provide additional information to this effect in the notes to the accounts.
D) All of the given answers.
E) Directors may elect not to comply with the standard and Directors may provide additional information to this effect in the notes to the accounts.

Accepted Answer

The best option in this scenario is for the directors to provide additional information in the notes to the accounts that explains why they believe compliance with accounting standards does not generate a true and fair view. This provides transparency and allows stakeholders to make informed decisions. Choosing option A or B would be non-compliant and risky, while option E is unnecessary as providing additional information in the notes already covers the issue.

Question 15

The financial statements and supporting notes included in an annual report presented to shareholders at a company's annual general meeting is an example of a general-purpose report:

Accepted Answer

The financial statements and supporting notes included in an annual report are intended for a general audience and are designed to provide information about the overall financial performance and health of the company. This makes them a good example of a general-purpose report.

Question 16

ASIC (The Australian Securities and Investment Commission) has the responsibility, among other things, to monitor and regulate various investment products and superannuation:

Accepted Answer

ASIC is responsible for monitoring and regulating investment products and superannuation in Australia.

Question 17

Accounting cannot be considered to be "culture free". Arguably, value systems of accountants are expected to be related to the values of the society within which they operate. Ans to such values will have an impact on accounting systems:

Accepted Answer

Accounting practices are not culture free and are influenced by the values and norms of the society in which they operate. The values held by accountants can affect the way financial information is prepared, presented, and interpreted. For example, in some cultures, there may be a greater emphasis on group harmony and social relationships, which could impact the way business transactions are recorded and reported. Therefore, it is important to understand the cultural context in which accounting operates.

Question 18

Standards with the prefix IFRS/IAS:
A) Will require material to be added by the AASB to that which describes the scope and applicability of the standards in the Australian context.
B) Will be adopted in Australia without modification.
C) Are being implemented in Australia to simplify reporting for all entities and to reduce reporting costs.
D) Will not require Australian businesses to make any major alterations to their current accounting practices.
E) Will be adopted without change by the US to ensure accounting reports are globally comparable.

Accepted Answer

Standards with the prefix IFRS/IAS are developed by the International Accounting Standards Board (IASB) and are not specific to any one country. Therefore, they will require material to be added by the AASB to describe the scope and applicability of the standards in the Australian context.

Question 19

The regulation of accounting can be argued to be necessary to protect the information rights of parties not involved in the day-to-day operations of the organisation:

Accepted Answer

Accounting regulations ensure that accurate and reliable financial information is reported to stakeholders such as investors, creditors, and the government. This protects their information rights and helps them make informed decisions about the organization.

Question 20

There has been a trend by governments and government departments towards adopting specialised public sector accounting techniques:

Accepted Answer

The answer of There has been a trend by governments...

Quiz 1: An Overview of the Australian External Reporting Environment

The role of the Financial Reporting Council is to provide broad oversight of the process for setting standards in Australia, including the authority to direct the AASB to develop, amend or revoke a particular standard:

A criticism of the way the membership of the Financial Reporting Council has been structured is that:

The AASB has responsibility for developing a conceptual framework, among other things. AASB are initials that stand for:

The Corporations Act is very specific about what must, and must not, be included in the Directors' Report attached to a company's financial statements:

Directors could elect not to comply with an accounting standard on the grounds that applying the particular accounting standard would cause the accounts not to present a true and view.

The Australian Accounting Standards Board reports to which body?

The AASB's responsibilities include:

The only body with the power to veto a standard recommended by the AASB is:

What are two key ways management accounting is different from financial accounting?