Question 1

Verifiability is one of the fundamental characteristics that make accounting information relevant.

Accepted Answer

Verifiability is a fundamental characteristic that enhances the reliability of accounting information, not its relevance. Relevance is primarily determined by the information's ability to influence decision-making.

Question 2

Which of the following is not a qualitative characteristic of accounting information?

Accepted Answer

Liquidity is not a qualitative characteristic of accounting information. The qualitative characteristics of accounting information are relevance, reliability, comparability, and understandability. Liquidity is a measure of the ability of a company to convert its assets into cash to meet its short-term obligations. It is not a characteristic used to evaluate the quality of accounting information.

Question 3

Under IFRS, which of the following characteristics is included in "faithful representation"?

Accepted Answer

Faithful representation, as defined under IFRS, includes completeness, neutrality, and free from error as its characteristics. Neutrality is the characteristic that ensures financial information is not biased towards achieving a predetermined result or influencing users' decisions in a particular direction. This is essential for the information to faithfully represent the financial position and performance of an entity.

Question 4

The shareholders are an example of an internal user of annual report information.

Accepted Answer

Shareholders are considered external users of annual report information because they are not part of the company's day-to-day operations but have a financial interest in the company's performance.

Question 5

Which of the following statements best describes accounting?

Accepted Answer

Accounting is an information system that records, summarizes, and reports the underlying economic conditions of organizations. It involves identifying, measuring, and communicating financial information to users such as investors, creditors, and regulatory agencies. The purpose of accounting is to provide useful information for decision-making, planning, and control within an organization.

Question 6

What is the initial investment by the shareholders in a company called?

Accepted Answer

The answer of What is the initial investment by the...

Question 7

Information contained in the financial statements of a company is of use to both internal and external users.

Accepted Answer

Financial statements provide important information about a company's financial performance and position, which is useful not only for internal decision-making but also for external users such as investors, creditors, analysts, and regulatory bodies.

Question 8

Assets and liabilities are listed in the order of their liquidity on both classified and unclassified balance sheets.

Accepted Answer

This is correct. Both classified and unclassified balance sheets list assets and liabilities in the order of their liquidity, from most liquid to least liquid.

Question 9

The shareholders typically elect which of the following to represent their interests:

Accepted Answer

Shareholders typically elect the members of the Board of Directors to represent their interests. The Board of Directors is responsible for overseeing the management of the company and making important business decisions on behalf of the shareholders. While senior management and the Chief Operating Officer are important individuals within the company, they are typically chosen and appointed by the Board of Directors rather than the shareholders. Independent Auditors are a separate entity responsible for ensuring the company's financial statements are accurate and reliable, but they are not elected by the shareholders.

Question 10

The constraints on the qualities of accounting information are:

Accepted Answer

The constraints on the qualities of accounting information are cost/benefit and materiality. While the other qualities (comparability, consistency, understandability, neutrality, verifiability, and timeliness) are important, they are either qualitative characteristics (comparability, consistency, understandability, neutrality) or enhancing qualitative characteristics (verifiability, timeliness). Cost/benefit and materiality are constraints that help ensure that the other qualities are achieved in a manner that is reasonable and practical based on the resources available.

Question 11

A firm's activities can be divided into borrowing, investing, and operating.

Accepted Answer

The answer of A firm's activities can be divided into...

Question 12

Which of the following is an internal user of annual report information?

Accepted Answer

Internal users are those who are inside the company and use the annual report for decision-making purposes. Board of directors are the internal users of annual report information as they have the responsibility to oversee the company's management and make strategic decisions. Creditors and regulators are external users, while shareholders can be both internal and external depending on their involvement in the company.

Question 13

The financial statements of a company are prepared by the auditors.

Accepted Answer

The financial statements of a company are prepared by the company's management or accounting department, not by the auditors. The auditors review and provide an opinion on the accuracy of the financial statements.

Question 14

Which of the following is a not characteristic of reliability?

Accepted Answer

The answer of Which of the following is a not...

Question 15

Which of the following is a characteristic of relevance?

Accepted Answer

Timeliness is a characteristic of relevance as information that is available in a timely manner is more likely to be useful in decision-making compared to outdated information. Verifiability refers to the ability to confirm the accuracy of information, consistency refers to the absence of any significant variations or discrepancies in information, and neutrality refers to unbiased and impartial information. While these are all important characteristics of information, they do not specifically relate to relevance.

Question 16

Relevant information may have the following kinds of value:

Accepted Answer

Relevant information in financial reporting is characterized by its predictive value and confirmatory value, which help users make decisions about the future and assess past predictions.

Question 17

Accountants are concerned that the information they provide is both relevant and reliable.

Accepted Answer

This statement is true. Accountants must ensure that the information they provide is both relevant and reliable in order to be useful for decision-making purposes. Relevant information is information that is important and useful for decision-making, while reliable information is information that is accurate and can be trusted.

Question 18

What does the CICA use to deductively justify new accounting standards?

Accepted Answer

The CICA (Canadian Institute of Chartered Accountants) uses the conceptual framework to deductively justify new accounting standards. The conceptual framework provides a foundation for the development of accounting standards and helps ensure that they are logically and consistently presented. The CICA Handbook is a collection of accounting standards and guidance, but it does not provide deductive justification for new standards. The notes to the financial statements and the audit report provide additional context and information about the financial statements, but they do not serve as the primary justification for new accounting standards.

Question 19

A corporation whose shares are held by a small number of individuals is referred to as a:

Accepted Answer

A privately held corporation is a corporation whose shares are held by a small number of individuals. Unlike publicly traded corporations, the shares of privately held corporations are not offered for sale to the general public on stock exchanges.

Question 20

Which of the following users is least focused on the corporations debt levels?

Accepted Answer

Corporate regulators are more focused on ensuring compliance with laws and regulations rather than the specific debt levels of a corporation.

Quiz 1: Overview of Corporate Financial Reporting