Question 1

Identify which qualitative characteristic of financial reports is best described in each item below:
The financial reports of Curl Curl Ltd are audited by a chartered accountant.
Curl Curl Ltd and Bondi Ltd both use fair value accounting to recognise financial instruments.
Curl Curl Ltd authorises issue of its financial reports prior to the shareholders' meeting.

Accepted Answer

A)   relevance, comparability, timeliness.
B)  reliability, consistency, understandability.
C)  reliability, comparability, timeliness.
D)   relevance, understandability, comparability.
E)  None of the given answers.

Question 2

Which of the following actions are consistent with the notion of "prudence"?

Accepted Answer

A)  deliberate overstatement of expenses to reduce profits.
B)   excessive provisions for warranty expenses.
C)   careful assessment of doubtful debts.
D)   adoption of accelerated depreciation method to reduce profits.
E)   moving forward unrealised sales to increase profits.

Question 3

In adopting the standards of IASB, Australian entities are required to comply with:

Accepted Answer

A)  the Australian Conceptual Framework and Statement of Accounting Concepts 1 to 4;
B)   the Australian Conceptual Framework and Statement of Accounting Concepts 3 and 4;
C)  the IASB Framework and the Statement of Accounting Concepts 3 and 4;
D)  the IASB Framework and the Statement of Accounting Concepts 1 and 2;
E)   None of the given answers

Question 4

Mr and Mrs K Urban are partners in Urban Ltd a music shop with sales revenue of $5,000,000 per annum, total assets of $10,000,000 and employees totalling 15. Blank Ltd is:
1. a reporting entity because there are at least two users of a financial report.
2. not likely to be a reporting entity because it is unlikely to have users dependent on its financial reports.
3. likely to be a reporting entity because there are two shareholders and it is an exempt proprietary entity.
4. not a reporting entity because small proprietary companies are frequently not considered reporting entities.
5. is a reporting entity because total assets of the entity is greater than $5,000,000.

Accepted Answer

The determination of whether a company i...

Question 5

Which of the following items is not considered an asset?

Accepted Answer

A)  Patents.
B)   Research expenses of an R&D project.
C)  Equipment under lease where the risks and rewards flows into the entity.
D)   All of the given answers.
E)  Research expenses of an R&D project and equipment under lease where the risks and rewards flows into the entity.

Question 6

The Framework outlines two underlying assumptions of financial statements. These arE.

Accepted Answer

A)  fair value basis and insolvency assumption.
B)   accrual basis of accounting and going concern assumption.
C)   cash basis of accounting and insolvency assumption.
D)   historical cost accounting and limited life concept.
E)   fair value basis of measurement and perpetual life concept.

Question 7

The IASB and US FASB are jointly developing a common conceptual framework to guide both standard setters in developing separate standards for their constituents.

Accepted Answer

A) True 
 B)False

Question 8

In accordance with AASB framework which of the following is consistent with the definition of expenses?

Accepted Answer

A)   Expenses are decreases in economic benefits during the accounting period in the form of outflows other than those relating to distributions to equity participants.
B)   Expenses are increases in economic benefits during the accounting period in the form of inflows or enhancement of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
C)  Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
D)   All of the given answers.
E)   None of the given answers.

Question 9

The Australian Accounting Standards Board (AASB) retained the use of its own conceptual framework even after harmonisation:

Accepted Answer

A) True 
 B)False

Question 10

The audit of Liverpool Ltd had been completed and the audit senior for the engagement prepared items for discussion. He argues that the following list of accounting changes violate the consistency qualitative characteristic of accounting information. As audit manager, which of the following items do you think are worthy of discussion with the audit partner?
1. After five years of using straight-line depreciation for reporting purposes and accelerated depreciation for tax purposes, the entity decided to adopt accelerated depreciation for reporting purposes.
2. The company uses an inventory valuation method that is different from the method used by other companies in the industry.
3. The estimated remaining useful life of an asset was reduced due to the increase in volume of use of the asset.
4. The company disposed of a subsidiary that had been included in the financial reports in prior years.
5. The company wrote off equipment due to obsolescence.

Accepted Answer

As the audit manager, I believe that ite...

Question 11

Ms Marple is an accounting cadet for one of the big accounting firms. She is a bit confused as to which of the following Anss should be applied first in dealing with an accounting issue.
I. Industry Practice
II. Accounting Standards
III. Conceptual Framework
IV. International Financial Reporting Interpretations Committee (IFRIC) 
Which ordering would you recommend?

Accepted Answer

A)   I, II, III, IV.
B)   II, IV, III, I.
C)  II, I, IV, III.
D)   III, II, I, IV.
E)   IV, III, II, I.

Question 12

When preparing financial reports "users are assumed to have a reasonable knowledge of the business and economic activities and accounting and a willingness to study the information with reasonable diligence". This statement is consistent with the qualitative characteristic of:

Accepted Answer

A)  materiality.
B)   reliability.
C)   understandability.
D)  comparability.
E)  relevance.

Question 13

Which of the following factors should be considered in order to determine whether an entity is a reporting entity when it is not obvious that users exist who would be dependent on the financial reports of the entity.

Accepted Answer

A)  Separation of management from those with economic interest in the entity.
B)   Economic or political importance/influence.
C)   Financial characteristics.
D)  All of the given answers.
E)  Separation of management from those with economic interest in the entity and economic or political importance/influence.

Question 14

Which of the following Statement of Accounting Concepts are still operational in Australia?

Accepted Answer

A)  Statement of Accounting Concepts 1 to 4
B)  Statement of Accounting Concepts 1 to 3
C)   Statement of Accounting Concepts 1 and 2
D)   Statement of Accounting Concepts 3 and 4
E)   Statement of Accounting Concepts 2 and 3F)  None of above

Question 15

Which of the following is/are characteristics of "comparability"?

Accepted Answer

A)  Users must be able to compare the financial reports of an entity with the financial reports of a shareholder.
B)  Users must be able to compare the current financial reports with prior period financial reports of an entity.
C)  Users must be able to compare the financial reports of an entity with the financial reports of another entity
D)   All of the given answers.
E)   Users must be able to compare the current financial reports with prior period financial reports of an entity and users must be able to compare the financial reports of an entity with the financial reports of another entity.

Question 16

Which of the following are considered in the AASB Framework as primary qualitative characteristics?

Accepted Answer

A)   relevance, reliability, materiality and comparability.
B)  relevance, reliability, timeliness and understandability.
C)  relevance, reliability, understandability and comparability.
D)   materiality, reliability, understandability and comparability.
E)   materiality, timeliness, understandability and comparability.

Question 17

One of the uses of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues:

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statement(s)  is/are true of the qualitative characteristic "reliability"?

Accepted Answer

A)   Information that is free from material bias and error.
B)  Information that faithfully represents what it purports to represent.
C)   Information that should affect the decisions of financial statement users.
D)   All of the given answers.
E)   Information that is free from material bias and error, and that faithfully represents what it purports to represent.

Question 19

The accountant of Broken Bay Ltd decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets. This action is consistent ____________.

Accepted Answer

A)  substance over form.
B)  balancing of relevance and reliability.
C)   accrual accounting.
D)   cash accounting.
E)  true and fair view.

Question 20

Prudence is exercised in the preparation and presentation of financial statements when asset values are never shown in excess of their realisable values but could be understated, and liabilities are never to be understated.

Accepted Answer

A) True 
 B)False

Exam 2: The Conceptual Framework of Accounting and Its Relevance to Financ

Which of the following Statement of Accounting Concepts are still operational in Australia?

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Prudence is exercised in the preparation and presentation of financial statements when asset values are never shown in excess of their realisable values but could be understated, and liabilities are never to be understated.

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Which of the following is/are characteristics of "comparability"?

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Which of the following items is not considered an asset?

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Which of the following statement(s) is/are true of the qualitative characteristic "reliability"?

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Which of the following factors should be considered in order to determine whether an entity is a reporting entity when it is not obvious that users exist who would be dependent on the financial reports of the entity.

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The determination of whether a company i...
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In adopting the standards of IASB, Australian entities are required to comply with:

Correct Answer
Answered by ExamLex AI

One of the uses of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues:

Correct Answer
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When preparing financial reports "users are assumed to have a reasonable knowledge of the business and economic activities and accounting and a willingness to study the information with reasonable diligence". This statement is consistent with the qualitative characteristic of:

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Answered by ExamLex AI

The accountant of Broken Bay Ltd decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets. This action is consistent ____________.

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Answered by ExamLex AI

Which of the following actions are consistent with the notion of "prudence"?

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The Australian Accounting Standards Board (AASB) retained the use of its own conceptual framework even after harmonisation:

Correct Answer
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Which of the following are considered in the AASB Framework as primary qualitative characteristics?

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In accordance with AASB framework which of the following is consistent with the definition of expenses?

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The Framework outlines two underlying assumptions of financial statements. These arE.

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Answered by ExamLex AI

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Answered by ExamLex AI

Correct Answer
Answered by ExamLex AI

The IASB and US FASB are jointly developing a common conceptual framework to guide both standard setters in developing separate standards for their constituents.

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
As the audit manager, I believe that ite...
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Exam 2: The Conceptual Framework of Accounting and Its Relevance to Financ

Which of the following Statement of Accounting Concepts are still operational in Australia?

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Prudence is exercised in the preparation and presentation of financial statements when asset values are never shown in excess of their realisable values but could be understated, and liabilities are never to be understated.

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Which of the following is/are characteristics of "comparability"?

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Which of the following items is not considered an asset?

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Which of the following statement(s) is/are true of the qualitative characteristic "reliability"?

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Which of the following factors should be considered in order to determine whether an entity is a reporting entity when it is not obvious that users exist who would be dependent on the financial reports of the entity.

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Correct AnswerAnswered by ExamLex AIThe determination of whether a company i...View AnswerShow Answer

In adopting the standards of IASB, Australian entities are required to comply with:

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One of the uses of the Conceptual Framework is that it provides parameters for the exercise of judgement in resolving accounting issues:

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When preparing financial reports "users are assumed to have a reasonable knowledge of the business and economic activities and accounting and a willingness to study the information with reasonable diligence". This statement is consistent with the qualitative characteristic of:

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The accountant of Broken Bay Ltd decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets. This action is consistent ____________.

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Which of the following actions are consistent with the notion of "prudence"?

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The Australian Accounting Standards Board (AASB) retained the use of its own conceptual framework even after harmonisation:

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Which of the following are considered in the AASB Framework as primary qualitative characteristics?

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In accordance with AASB framework which of the following is consistent with the definition of expenses?

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The Framework outlines two underlying assumptions of financial statements. These arE.

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Correct AnswerAnswered by ExamLex AIShow Answer

Correct AnswerAnswered by ExamLex AIShow Answer

The IASB and US FASB are jointly developing a common conceptual framework to guide both standard setters in developing separate standards for their constituents.

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Correct AnswerAnswered by ExamLex AIAs the audit manager, I believe that ite...View AnswerShow Answer

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As the audit manager, I believe that ite...
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