Advanced Accounting Review
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Course Introduction
Advanced Accounting delves into the complexities of accounting for business combinations, consolidated financial statements, foreign currency transactions, partnerships, and nonprofit organizations. The course emphasizes both the theoretical foundations and practical applications of advanced financial reporting issues, including mergers, acquisitions, intercompany transactions, and the translation of foreign financial statements. Students will develop a comprehensive understanding of the standards and methods used to prepare and analyze financial information for a wide variety of organizational structures, equipping them with the skills necessary for addressing challenging real-world accounting scenarios.
Recommended Textbook Accounting Theory 7th Edition by Jayne Godfrey
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Page 2
Chapter 1: Introduction
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Sample Questions
Q1) Which of these is one of the two main factors that prompted the demise of the normative period of accounting research?
A)The availability of financial economic principles and testing methods
B)Severe criticisms from positive accounting theorists
C)The resurgence of behavioural research
D)The increased popularity of a conceptual framework
Answer: A
Q2) Which of these is an era of accounting theory development during which the emphasis was on providing an overall framework to explain and develop accounting practice by using the empirical analysis method?
A)The general scientific period
B)The pre-scientific period
C)The practical approach period
D)The normative period
Answer: A
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3
Chapter 2: Accounting Theory Construction
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Sample Questions
Q1) The following research methods are used by naturalistic researchers,except:
A)Case studies
B)Experience of events
C)Syntactic model formulation
D)Exploration by flexibility
Answer: C
Q2) Under the Morgan and Smircich classification,Category 1 assumes that the world is unstable and that individuals do not share a common understanding of how the world works.
A)True
B)False
Answer: False
Q3) The concept of realism under the decision-usefulness approach asserts that for an accounting theory to be valid it must hold as a description of the reality that underlies the accounting phenomena.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Role of Theory in Accounting Regulation
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Sample Questions
Q1) Which theory of regulation assumes that politicians are not neutral arbiters?
A)Private-interest theory
B)Public-interest theory
C)Regulatory capture theory
D)All assume that politicians are not neutral arbiters.
Answer: A
Q2) International standards on Auditing (ISA)are developed by:
A)Public Company Accounting and Oversight Board (PCAOB)
B)International Auditing and Assurance Standards Board (IAASB).
C)International Accounting Standards Board (IASB)
D)The International Organisation of Securities Commissions (IOSCO)
Answer: B
Q3) The Norwalk Agreement is the name of the IASB and the FASB convergence program.
A)True
B)False
Answer: True
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5
Chapter 4: Theory Underpinning Accounting Standards
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Sample Questions
Q1) In June 2009,in relation to the IASB/FASB joint conceptual framework project,one exposure draft relating to the objectives and qualitative characteristics has been issued.Which of these is not a key issue raised by the exposure draft?
A)The entity vs proprietorship perspective
B)Measurement of assets
C)The primary user group of general-purpose financial reports
D)The objective of financial reporting,particularly the place of stewardship.
Q2) A disadvantage of a conceptual framework is:
A)It will be easier to avoid reporting requirements
B)It will be more expensive to prepare individual accounting standards
C)It will increase political interference in the standard setting process
D)None of the above are disadvantages
Q3) Is a conceptual framework necessary? Discuss the arguments for and against having a conceptual framework for accounting.
Q4) Discuss the effects on accounting reporting of the movement in the early 1960's from a stewardship objective to a decision-usefulness objective.
Q5) Discuss the strengths and weaknesses of principles-based accounting standards compared to rule-based standards.
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Page 6
Chapter 5: Measurement
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Sample Questions
Q1) The set of data that would be measured on a nominal scale is:
A)The height of a group of school children
B)Assets classified into current/non-current and tangible/intangible
C)Investment opportunities classified into 'poor','average' or 'good' with respect to anticipated returns.
D)The share prices of a group of companies
Q2) The weakness of the interval scale is that the zero point is arbitrarily established.
A)True
B)False
Q3) The event that was not a contributory factor towards the evolution of capital valuation is:
A)The development of joint stock companies with limited liability in England
B)The World War II
C)The railway expansion in the United States
D)Publication of the first definitive statement on the concepts of capital and profit by Paton and Littleton
Q4) Stevens's general description of scales is nominal,interval or ratio.
A)True B)False
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Chapter 6: Accounting Measurement Systems
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Sample Questions
Q1) The difference between the physical capital concept and the financial capital concept is that holding gains are included in profit under the physical capital concept.
A)True
B)False
Q2) Under international accounting standards,the definition of fair value can vary substantially.
A)True
B)False
Q3) Each accounting measurement model creates the same type of misstatement risk for an auditor.
A)True
B)False
Q4) Exit price accounting considers value in use as one of its key factors.
A)True
B)False
Q5) Exit price accounting has been criticised for it does not recognise the possibility of selling assets as one package.
A)True
B)False
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Chapter 7: Assets
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Questions
Q1) Arguments in favour of including 'exchangeability' as an essential criterion for the identification of an asset under the IASB (AASB)Framework include which of the following?
A)That assets should be separable from the entity and have a separate disposal value
B)That exchange is only one way to obtain the benefit of an asset
C)That economic value depends upon scarcity and utility,but not on exchangeability
D)None of the above are arguments in favour of including exchangeability as an essential characteristic of an asset.
Q2) A valuation approach used by current IASB standards is:
i.Written down historical cost
ii.Fair values based on exit values
iii.Fair values based on value in use
A)i,ii
B)i,iii
C)ii,iii
D)i,ii,iii
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Chapter 8: Liabilities and Owners Equity
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Sample Questions
Q1) The version of the accounting equation that represents the entity theory of accounting is:
A)P = A - L
B)Assets = Equities
C)A = L + P
D)None of the above
Q2) An example of where fair value measurement is required subsequent to acquisition is post-employment obligations such as pensions (superannuation)under IAS 19/AASB 119.
A)True
B)False
Q3) Preference shares can have characteristics that are consistent with liabilities.These characteristics include:
A)Participation in dividends
B)Priority over ordinary shares in the return of capital
C)Voting rights
D)The claim associated with the preference share is variable
Q4) Retained profits and share dividends represent elements of earned capital. A)True B)False
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Chapter 9: Revenue
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Q1) The main consideration to determine whether a sale has occurred is:
A)The economic substance of the transaction
B)Whether title to the goods has passed
C)The provisions of the legal contract
D)Whether the sale is for goods or services
Q2) Explain why the point of sale ' is selected as being generally the most appropriate time to measure and record revenue ' J.Godfrey,et el,'Accounting Theory',7<sup>th</sup> Ed.p.306.
Q3) Revenue can never be recognised before the point of sale.
A)True
B)False
Q4) Where revenue is not recognised until cash is received it is possible that the revenue recognition criteria 'substantial completion' has not been met prior to this event. A)True
B)False
Q5) In determining whether a sale has taken place consideration should only be given to the legal form of the contract of sale.
A)True
B)False
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Chapter 10: Expenses
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Q1) For an outflow to be recognised as an expense it must be probable that the outflow of future economic benefits has occurred or the expense must be able to be measured with reliability.
A)True
B)False
Q2) The Framework links the definition of expenses to their relationship to revenue.
A)True
B)False
Q3) Under the Framework which of the following is not explicitly part of the definition of expenses?
A)Expenses are decreases in economic benefits
B)The decreases in economic benefits can be in the form of outflows or depletions of assets
C)The decreases in economic benefits can be in the form of incurrences of liabilities
D)The decrease in economic benefits must be from the occurrence of a past transaction
Q4) Explain the essence of each of the three basic methods of matching commonly relied on;associated cause and effect,systematic and rational allocation and immediate recognition.
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Chapter 11: Positive Theory of Accounting Policy and Disclosure
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Sample Questions
Q1) The following arguments are philosophical criticisms of positive accounting theory,except:
A)Cross-sectional models are poorly specified
B)Positive accounting theory is not an accounting theory,but only a sociology of accounting
C)Contrary to its claim,positive accounting theory is in fact value-laden
D)The methodology of positive accounting theory is inappropriate for the purpose it purports to serve
Q2) Under signalling theory it is predicted that firms will disclose less information than is demanded.
A)True
B)False
Q3) It may be appropriate to remunerate a manger using reported profits under which of these circumstances?
A)When the firm's market value is non-observable because of thin-trading
B)When the level of management being remunerated is lower than the CEO
C)A and B
D)None of the above
Q4) Explain and discuss why the firm can be described as a 'nexus of contracts.
Page 13
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Chapter 12: Capital Market Research
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Sample Questions
Q1) Explain what accounting researchers mean by the market 'being efficient'.
Q2) Jensen argues that positive accounting theory precedes normative accounting theory.
A)True
B)False
Q3) Outline the research that has been undertaken on post-announcement drift and the implications of this research.
Q4) Who first used the variance of abnormal return as an index of information content of profit announcements?
A)Ball
B)Brown
C)Beaver
D)Fama
Q5) 'There is increasing evidence that markets can be fooled by accounting numbers'.'
J.Godfrey,et el,'Accounting Theory',7<sup>th</sup> Ed.p.442.Discuss.
Q6) Outline the arguments that have been raised to explain why a firm's size is a factor in the responsiveness of share price and the volume of trade to profit announcements.
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Page 14
Chapter 13: Behavioural Research
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Sample Questions
Q1) One of the limitations of using CART models is that when there is lot of data available for analysis it becomes difficult to derive simple rules to train other analysts.
A)True
B)False
Q2) Which research question would not be answered using behavioural accounting research?
A)How does the stock market react to the disclosure of upward asset revaluations?
B)How does a bank loan officer decide whether to grant a loan to a client?
C)How does an auditor judge the riskiness of an audit client?
D)What are the most useful accounting disclosures for users of financial reports?
Q3) The Brunswik lens model always outperforms the process tracing model in any decision-making scenario.
A)True
B)False
Q4) Accounting is a function of human behaviour and activity.J.Godfrey,et el,'Accounting Theory',7<sup>th</sup> Ed.p.471.Discuss.
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Page 15
Chapter 14: Emerging Issues in Accounting and Auditing
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Q1) The water standards currently under development in Australia will essentially require qualitative rather than quantitative reports.
A)True
B)False
Q2) With respect to the concept of sustainability which of these statements is not true?
A)Sustainability is about eco-efficiency and eco-justice
B)A sustainable entity needs to consider objectives relating to economic,social and environmental performance
C)Recently the focus in the sustainability debate has been on eco-efficiency
D)None of the statements are untrue,i.e.all are true statements
Q3) SFAS 157 explicitly uses exit price as a definition of fair value but IFRS fair value is neither explicitly an exit nor an entry price.
A)True
B)False
Q4) What,in your opinion,was the role of fair value accounting in the Global Financial Crisis?
Q5) Discuss how social accounting differs from financial accounting.
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