Advanced Financial Accounting Exam Preparation Guide
Course Introduction
Advanced Financial Accounting explores complex topics in the preparation and analysis of financial statements, building on foundational accounting principles. This course delves into accounting for business combinations, consolidations, foreign currency transactions, partnership accounting, segment reporting, and intercompany transactions. Emphasis is placed on the application of current accounting standards, interpretation of detailed financial disclosures, and resolution of challenging reporting issues faced by multinational corporations. Through case studies and real-world examples, students develop critical analytical skills and an in-depth understanding of advanced concepts essential for professional accountancy and financial analysis roles.
Recommended Textbook Financial Accounting Theory 3rd Edition by Craig Deegan
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12 Chapters
300 Verified Questions
300 Flashcards
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Page 2
Chapter 1: Introduction to Financial Accounting Theory
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24 Flashcards
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Sample Questions
Q1) Which of the following statements aligns with the view of Falsificationists,such as Popper and others?
A) Hypotheses are proposed by guessing, without guidance from existing theories
B) It is possible to state that a theory is true
C) Hypotheses must be stated in a form that assumes they are true, until evidence that is not supportive rejects them
D) All theories are false until they are proved to be true
Answer: C
Q2) The failure of a particular study to support a theory:
A) Provides the basis for rejecting the theory as useless or insignificant
B) Means that the particular study must have flaws in its design or execution in specifying and collecting the data
C) Threatens the theory, if repeated or more refined studies fail to support it with empirical evidence
D) Means that the hypothesis was too broad, and did not specify the particular circumstances and conditions in enough detail
Answer: C
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3
Chapter 2: The Financial Reporting Environment
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Sample Questions
Q1) Which of the following statements is true about accounting measurements such as profits and assets?
A) They are subject to professional judgment
B) They would not vary if prepared by different accountants, providing they were based on the same set of accounting standards
C) They are based on hard, objective, evidence
D) All of the given options are correct
Answer: A
Q2) Which of the following expectations is not in line with statements by standards-setters that they consider the economic and social consequences of standards on affected parties when setting accounting standards?
A) Accounting standards should be neutral and free from bias
B) Accounting standards should represent faithfully the underlying transactions
C) Accounting standards should consider the potential impact on others
D) None of the given options is correct
Answer: A
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Chapter 3: The Regulation of Financial Accounting
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Sample Questions
Q1) Which of the following is not a cause or result of 'information overload' or standards overload?
A) Increased compliance costs
B) Attempts to create a level playing field by requiring disclosures that provide equal access to information to everyone
C) Concerted lobbying by different interest groups that are economically or socially affected
D) Increased understanding of accounting information because of the increased quantity of standards and disclosures provided
Answer: D
Q2) Which of the following is a valid criticism of the economics-based rationality argument that asserts that credible information will be supplied in the absence of regulation,by aligning management's self-interest with that of the owners and lenders,thereby reducing the cost of capital?
A) The arguments do not follow logically
B) The arguments do not have historical support
C) The assumptions of management self-interest is too pessimistic
D) The argument has no empirical support
Answer: C
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5
Chapter 4: International Accounting
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28 Flashcards
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Sample Questions
Q1) Which of the following does not constitute one of Grey's accounting values in the accounting sub-culture,which he identified after closely considering Hofstede's societal values?
A) Secrecy versus transparency
B) Uniformity versus flexibility
C) Conservatism versus optimism
D) Individualism versus collectivism
Q2) Which of the following does not equate with Gray's hypothesised linkages between accounting values and accounting practice?
A) The higher the degree of optimism, as opposed to conservatism, the stronger the ties with traditional measurement practice
B) The higher the degree of uniformity, the lower the extent of professional judgment and the stronger the level of enforcement in applying rules and procedures
C) The higher the degree of secrecy preferred, the lower the amount of disclosure
D) The higher the degree of professionalism, the greater the degree of self-regulation and lower need for government intervention
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Chapter 5: Normative Theories of Accountingthe Case of
Accounting for Changing Prices
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Sample Questions
Q1) Continuously Contemporary Accounting (CoCoA),as proposed by Chambers,includes the following characteristics except:
A) Provides information about an entity's capacity to adapt to changing circumstances using its cash and cash equivalents
B) All assets are valued in the Balance Sheet based on their exit (net selling) prices
C) Profit is defined as the amount that can be distributed while maintaining operating capacity intact
D) Unlike CCA, CoCoA does not make a distinction between realised and unrealised gains (cost savings)
Q2) If historical cost profits are all distributed in dividends during times of rising inventory prices,this will lead to (assuming other things being equal):
A) A reduction in financial capital
B) An erosion of operating capacity
C) No effect on capital
D) None of the given options is correct
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Chapter 6: Normative Theories of Accountingthe Case of Conceptual Framework Projects
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Q1) According to the IASB definition of 'income',which of the following is not included?
A) Non-reciprocal transfers such as grants, bequests or liabilities forgiven
B) Gains and losses from the sale of assets
C) Enhancement of assets
D) Dividends received
Q2) What is the definition of the 'conceptual framework'?
A) A set of prescriptions of what accounting should be
B) A structured positive theory of accounting
C) A coherent system of objectives and fundamentals that are expected to lead to consistent standards
D) A group of independent concepts on specific accounting issues, that are grouped together to provide a single reference
Q3) According to the IASB Exposure Draft,a Conceptual Framework:
A) Is a coherent system of concepts that flow from an objective
B) Provides guidance on identifying the boundaries of financial reporting in selecting the transactions, other events and circumstances to be represented
C) Outlines how transactions should be recognised and measured (or disclosed)
D) All of the given options are correct
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Chapter 7: Positive Accounting Theory
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Q1) The 'bonus plan hypothesis' of Positive Accounting Theory suggests managers of firms with bonus plans tied to reported income are more likely to use accounting methods that:
A) Increase prior period reported income
B) Increase current period reported income
C) Increase future period reported income
D) None of the given options is correct
Q2) Positive Accounting Theory suggests that bonus schemes benefit:
A) Only managers
B) Only owners
C) Both managers and owners
D) Neither managers nor owners
Q3) The "efficiency perspective" of Positive Accounting Theory suggests that firms will:
A) Adopt the accounting methods that require the least resources to implement
B) Adopt the accounting methods that result in the highest reported earnings
C) Adopt the accounting methods that result in the lowest reported earnings
D) Adopt the accounting methods that best reflect the underlying economic performance of the entity
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9
Chapter 8: Unregulated Corporate Reporting Decisions:
Considerations of Systems-Oriented Theories
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Q1) The difference between Positive Accounting Theory and Legitimacy Theory is that:
A) Legitimacy Theory does not rely on the assumption that all action is driven by individual self-interest
B) Legitimacy Theory makes no assumptions about the efficiency of markets
C) Legitimacy Theory suggests that organisations have a 'social contract' with society
D) All of the given options are correct
Q2) The idea of the 'social contract' is that corporations only exist because they benefit:
A) Shareholders
B) Governments
C) Managers
D) Society
Q3) The 'legitimacy gap' of a corporation will narrow when:
A) A corporation discloses good news about its behaviour, but its actual behaviour declines
B) A corporation discloses bad news about its behaviour, but its actual behaviour improves
C) Societal expectations of appropriate corporate behaviour increase
D) None of the given options is correct
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Chapter 9: Extended Systems of Accountingthe
Incorporation of Social and Environmental Factors Within External Reporting
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Q1) The Brundtland Report defined 'sustainable development' in terms of:
A) Intergenerational equity
B) Intragenerational equity
C) Both inter- and intra-generational equity
D) None of the given options is correct
Q2) The drivers towards greater corporate social responsibility identified by the Business Council of Australia did not include improved:
A) Employee recruitment and motivation
B) Competitiveness and market positioning
C) Social and environmental performance
D) Operational efficiency
Q3) 'Enlightened self-interest' means that businesses:
A) Will sacrifice financial returns in order to improve social and environmental performance
B) Will not sacrifice financial returns in order to improve social and environmental performance
C) Do not believe there is a conflict between financial returns and social and environmental performance
D) None of the given options is correct
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Chapter 10: Reactions of Capital Markets to Financial Reporting
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Q1) Semi-strong-form market efficiency suggests security prices will change when:
A) Unexpected earnings results are announced
B) Earnings results are announced
C) Cashflow results are announced
D) All of the given options are correct
Q2) Recent capital markets studies have:
A) Suggested capital markets are less efficient than previously believed
B) Confirmed previous beliefs about the efficiency of capital markets
C) Suggested capital markets are more efficient than previously believed
D) Not considered the efficiency of capital markets
Q3) The 'earnings/returns relation' refers to the relationship between returns and:
A) Changes in expected future earnings
B) Expected future earnings
C) Changes in current earnings
D) Current earnings
Q4) Earnings are relevant to investors because:
A) Investors want to maximise their profits
B) Past earnings predict future earnings
C) Past earnings predict future cashflows
D) Future cash flows are a function of future earnings
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Chapter 11: Reactions of Individuals to Financial Reporting:
An Examination of Behavioural Research
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Sample Questions
Q1) Behavioural research could be useful to accountants,because it could demonstrate the items which should be included in financial reports on the basis that they are:
A) Useful to stakeholders
B) Useful to decision-makers
C) Necessary to discharge management accountability
D) All of the given options are correct
Q2) Which of the following is an issue that has to be considered at the input level of the Lens Model?
A) Characteristics of the person making the judgment
B) Scaling characteristics of individual cues
C) Qualities of the judgment
D) Characteristics of the decision rule
Q3) Which of the following statements is true about the Lens model?
A) Cues may be either independent or interrelated
B) Cues may be inter-related but not independent
C) Cues may be independent but not inter-related
D) None of the given options is correct
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Page 13
Chapter 12: Critical Perspectives of Accounting
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Q1) Which of the following statements is true,when comparing the research undertaken by critical theorists with the work undertaken by other accounting researchers?
A) Most accounting researchers tend to accept current social systems as 'given', unlike critical theorists that question whether current systems of accounting systematically favour certain classes in society at the expense of others
B) Critical theorists do not tend to debate which methods of accounting should be employed, rather they reconsider the structures of society in terms of whether the structures are equitable
C) Critical theorists view accounting as a social practice within political struggles and not merely a market practice guided by equilibrium in an efficient market
D) All of the given options are correct
Q2) Critical accounting researchers have criticised other social and environmental accounting researchers for:
A) Lacking objectivity
B) Being too radical and unrealistic
C) Leaving existing social structures unchallenged
D) Ignoring the findings of empirical accounting research
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