Question 1

Where people think that no one is watching, they will often shirk their responsibilities. This is known as

Accepted Answer

A)   moral hazard.
B)   conservative accounting.
C)   adverse selection.
D)   an inefficient marketplace.E) A) and C)
F) C) and D)

Question 2

Management's primary responsibility with respect to financial statements is to

Accepted Answer

A)   prepare them, as they have the best insight and know what should be included.
B)   audit them, as they are distant enough from daily operations.
C)   rely on them to make decisions.
D)   None of the above are true.E) B) and C)
F) A) and C)

Question 3

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

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 4

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

An example where disclosure may hurt the...

Question 5

The auditor's primary responsibility is to

Accepted Answer

A)   review financial statements and discuss them with management.
B)   prepare financial statements.
C)   report to Canada Revenue Agency.
D)   report to standard setters.E) A) and D)
F) A) and C)

Question 6

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 stakeholder ecosystem does not alway...

Question 7

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

Accepted Answer

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 consultationE) B) and C)
F) A) and C)

Question 8

Which of the following does NOT describe a cause of management bias?

Accepted Answer

A)   the need to comply with contracts, such as debt covenants
B)   the desire to meet financial analysts' expectations
C)   the tendency to downplay negative events
D)   the desire for all stakeholders to have access to all informationE) None of the above
F) All of the above

Question 9

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

Accepted Answer

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.E) All of the above
F) A) and B)

Question 10

The widely publicized subprime lending crisis was NOT caused by

Accepted Answer

A)   capital market participants who acted in their own self-interest.
B)   a lack of transparency.
C)   the practice of securitizing assets.
D)   a lack of investor understanding of the investment's true risk.E) A) and B)
F) A) and C)

Question 11

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

Accepted Answer

The entity perspective views companies a...

Question 12

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

Accepted Answer

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.E) A) and B)
F) B) and D)

Question 13

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

Accepted Answer

A)   the impact of technology on user's needs.
B)   the impact of globalization on capital markets.
C)   ethical behaviour.
D)   the desire of most private companies to expand internationally.E) C) and D)
F) None of the above

Question 14

Under ASPE, the primary sources of GAAP include

Accepted Answer

A)   accounting textbooks and journals.
B)   International Financial Reporting Standards.
C)   the CICA Handbook and appendices.
D)   research studies.E) All of the above
F) B) and C)

Question 15

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

Accepted Answer

Since the decision to adopt IFRS was mad...

Question 16

Explain why U.S. GAAP has and will continue to have a significant impact on GAAP in Canada.

Accepted Answer

U.S. GAAP has and will continue to have ...

Question 17

Professional judgement
Explain the principle of professional judgement. When or why might it be necessary to employ professional judgement, even in a rules-based system?

Accepted Answer

Professional judgement is the process by...

Question 18

Extensible business reporting
What is extensible business reporting language and how is it used?

Accepted Answer

Extensible business reporting language (...

Question 19

Where information asymmetry exists, the capital market may attract the wrong kind of company. This is known as

Accepted Answer

A)   moral hazard.
B)   conservative accounting.
C)   adverse selection.
D)   an inefficient marketplace.E) All of the above
F) None of the above

Question 20

Explain the advantages of an effective capital allocation process.

Accepted Answer

An effective capital allocatio...

Exam 1: The Canadian Financial Reporting Environment

Under ASPE, the primary sources of GAAP include

Correct Answer
verified

Explain why U.S. GAAP has and will continue to have a significant impact on GAAP in Canada.

Correct Answer
verified
U.S. GAAP has and will continue to have ...
View Answer

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

Correct Answer
verified
Since the decision to adopt IFRS was mad...
View Answer

The widely publicized subprime lending crisis was NOT caused by

Correct Answer
verified

Where people think that no one is watching, they will often shirk their responsibilities. This is known as

Correct Answer
verified

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

Correct Answer
verified

Which of the following does NOT describe a cause of management bias?

Correct Answer
verified

Professional judgement Explain the principle of professional judgement. When or why might it be necessary to employ professional judgement, even in a rules-based system?

Correct Answer
verified
Professional judgement is the process by...
View Answer

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

Correct Answer
verified

Extensible business reporting What is extensible business reporting language and how is it used?

Correct Answer
verified
Extensible business reporting language (...
View Answer

Correct Answer
verified
An example where disclosure may hurt the...
View Answer

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

Correct Answer
verified

Management's primary responsibility with respect to financial statements is to

Correct Answer
verified

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

Correct Answer
verified

Explain the advantages of an effective capital allocation process.

Correct Answer
verified
An effective capital allocatio...
View Answer

Correct Answer
verified
The stakeholder ecosystem does not alway...
View Answer

Where information asymmetry exists, the capital market may attract the wrong kind of company. This is known as

Correct Answer
verified

The auditor's primary responsibility is to

Correct Answer
verified

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

Correct Answer
verified
The entity perspective views companies a...
View Answer

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

Correct Answer
verified

Exam 1: The Canadian Financial Reporting Environment

Under ASPE, the primary sources of GAAP include

Correct AnswerverifiedShow Answer

Explain why U.S. GAAP has and will continue to have a significant impact on GAAP in Canada.

Correct AnswerverifiedU.S. GAAP has and will continue to have ...View AnswerShow Answer

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

Correct AnswerverifiedSince the decision to adopt IFRS was mad...View AnswerShow Answer

The widely publicized subprime lending crisis was NOT caused by

Correct AnswerverifiedShow Answer

Where people think that no one is watching, they will often shirk their responsibilities. This is known as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following does NOT describe a cause of management bias?

Correct AnswerverifiedShow Answer

Professional judgement Explain the principle of professional judgement. When or why might it be necessary to employ professional judgement, even in a rules-based system?

Correct AnswerverifiedProfessional judgement is the process by...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Extensible business reporting What is extensible business reporting language and how is it used?

Correct AnswerverifiedExtensible business reporting language (...View AnswerShow Answer

Correct AnswerverifiedAn example where disclosure may hurt the...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Management's primary responsibility with respect to financial statements is to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain the advantages of an effective capital allocation process.

Correct AnswerverifiedAn effective capital allocatio...View AnswerShow Answer

Correct AnswerverifiedThe stakeholder ecosystem does not alway...View AnswerShow Answer

Where information asymmetry exists, the capital market may attract the wrong kind of company. This is known as

Correct AnswerverifiedShow Answer

The auditor's primary responsibility is to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe entity perspective views companies a...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
U.S. GAAP has and will continue to have ...
View Answer

Correct Answer
verified
Since the decision to adopt IFRS was mad...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Professional judgement is the process by...
View Answer

Correct Answer
verified

Correct Answer
verified
Extensible business reporting language (...
View Answer

Correct Answer
verified
An example where disclosure may hurt the...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An effective capital allocatio...
View Answer

Correct Answer
verified
The stakeholder ecosystem does not alway...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The entity perspective views companies a...
View Answer

Correct Answer
verified