Contemporary Issues in Accounting Solved
Exam Questions
Course Introduction
This course explores current topics and emerging trends in accounting, emphasizing how global, technological, ethical, and regulatory developments shape the profession. Students will analyze contemporary debates such as sustainability reporting, the impact of artificial intelligence on accounting processes, evolving international accounting standards, and issues of transparency and corporate governance. Through case studies, recent research, and practical examples, the course prepares students to critically evaluate and respond to the dynamic challenges facing accountants today.
Recommended Textbook
Financial Accounting Theory 4th Edition by Craig Deegan
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12 Chapters
359 Verified Questions
359 Flashcards
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2
Chapter 1: Introduction to Financial Accounting Theory
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Sample Questions
Q1) Which of the following statements best explains the role of logic in a theoretical argument?
A) As long as the premises of an argument follow logically from one to the other, the conclusion will be correct.
B) A conclusion can only be true to the extent that we accept that the premises on which it is based are true.
C) Arguments cannot be rejected on the basis of observation; only on whether they are logical or not.
D) All theories and their arguments must correspond with actual observation of current practices, or real-world phenomena, to be logical.
Answer: B
Q2) Which of the following is an example of a dominant paradigm in accounting prior to 1960?
A) Current cost accounting
B) Conceptual framework of accounting
C) Historical cost accounting
D) Continuously contemporary accounting
Answer: C
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Chapter 2: The Financial Reporting Environment
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Sample Questions
Q1) Which of the following is not an argument for regulation?
A) Markets for information are not efficient, and therefore produce a sub-optimum amount of information given the problem of 'free riders'.
B) The capital market is efficient, but only 'on average'.
C) Capital markets require information, and therefore firms that do not supply it will be punished.
D) Information asymmetry exists, because not everyone has the same power over resources to obtain the information they need.
Answer: C
Q2) Which theoretical perspective suggests that where firms are able to choose accounting methods,they will choose those that provide the result desired by the preparers?
A) Efficiency perspective
B) Objectivity perspective
C) Stakeholder perspective
D) Opportunistic perspective
Answer: D
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Chapter 3: The Regulation of Financial Accounting
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Sample Questions
Q1) In the absence of regulation,the 'market for lemons perspective' (Arkerlof,1970)assumes that:
A) There is no incentive for firms to disclose bad news.
B) Firms have incentives to disclose both good and bad news.
C) No news is good news.
D) All of the given options are correct.
Answer: B
Q2) Which of the following arguments is used in support of reducing accounting regulation?
A) Accounting information is like any other good, and the forces of supply and demand should be allowed to operate so that the optimal amount of accounting information is produced.
B) The capital market operates quite efficiently, and will impose penalties on managers who elect to provide biased information about an organisation's financial performance and position.
C) Individuals act in their own self-interest and will use the given regulation to maximise their own wealth.
D) All of the given options are correct.
Answer: D
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Page 5
Chapter 4: International Accounting
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Sample Questions
Q1) Which of the following is not true for the International Accounting Standards and the International Financial Reporting Standards?
A) They are based on the legalistic approach.
B) They provide choices in the recognition and measurement of various accounting transactions.
C) They incorporate 'uncertainty expressions', such as 'probable', 'significant influence', 'control' and 'substantial'.
D) They are based on the concept of presenting a 'true and fair view' of a company's financial reports, where professional accountants are given the right to use their judgment to accomplish this goal.
Q2) Which of the following is an influence on the nature of accounting practice in different countries?
A) Accidents in history, such as stock-market crashes
B) The strength of the accounting profession
C) Religion
D) All of the given options are correct.
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6
Chapter 5: Measurement Issues: Accounting for the Effects of Changing
Prices and Market Conditions
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Sample Questions
Q1) Which of the following is a unique characteristic of the CoCoA model in comparison with other alternative accounting models?
A) It attempts to recognise the changes in value of specific assets on the Balance Sheet.
B) All gains (realised or unrealised) are treated as part of the profits.
C) It includes an adjustment to take into account changes in purchasing power which it calls a 'capital maintenance adjustment'.
D) All of the given options are correct.
Q2) Assume that an entity acquired 150 items of inventory at a cost of $90 each,and sold 100 of the items for $160 each when the replacement cost to the entity was $120 each.Also assume that the replacement cost of the 50 remaining items of inventory at year end was $130.What would be the realised holding gain on the inventory that was sold?
A) $7 000 [100 x ($160 - $90)]
B) $4 000 [100 x ($130 - $90)]
C) $3 000 [100 x ($120 - $90)]
D) $500 [50 x ($130 - $120)]
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Chapter 6: Normative Theories of Accounting: The Case of Conceptual Framework Projects
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Sample Questions
Q1) Which of the following is true in relation to expenses,according to the IASB Conceptual Framework?
A) Expenses are restricted to transactions and events relating to 'ongoing major or central operations'.
B) There is no reference to matching of revenue and expenses in the Conceptual Framework.
C) Expenses would not include losses that were not under the control of the entity, such as uninsured losses of assets from flood.
D) None of the given options are correct.
Q2) Which of the following was particularly concerned with addressing the rights of the community,in terms of access to financial information about entities?
A) Accounting Principles Board (APB) Statement No 4 (1970)
B) The Trueblood Report (1973)
C) The Corporate Report (UK) (1976)
D) The FASB Conceptual Framework Project
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8
Chapter 7: Positive Accounting Theory
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Sample Questions
Q1) The key theory that underpins Positive Accounting Theory is:
A) The Efficient Markets Hypothesis
B) Agency theory
C) Normative ethical theory
D) None of the given options are correct.
Q2) According to Positive Accounting Theory,the existence of debt covenants:
A) Can be explained from an efficiency perspective, and gives management an incentive to manipulate accounting information from an opportunistic perspective
B) Can be explained from an opportunistic perspective, and gives management an incentive to manipulate accounting information from an efficiency perspective
C) Can be explained from both efficiency and opportunistic perspectives
D) Cannot be explained
Q3) According to agency theory,contracts that align the interests of the principal and agent primarily benefit:
A) The agent
B) The principal
C) Both the principal and the agent
D) Neither the principal nor the agent
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9
Chapter 8: Unregulated Corporate Reporting Decisions:
Considerations of Systems-Oriented Theories
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Sample Questions
Q1) Institutional Theory suggests which of the following?
A) While organisational structures are initially varied, they are gradually homogenised by competition, the state and professions.
B) While organisational structures are initially homogenous, they are gradually varied by competition, the State and professions.
C) The organisational structure is determined by institutional factors such as management style and organisational culture.
D) The organisational structure is determined by the organisation's most powerful stakeholders.
Q2) The difference between the managerial and moral perspectives of Stakeholder Theory is that:
A) The moral perspective is empirically testable
B) The moral perspective is more 'organisation-centred'
C) The managerial perspective is empirically testable
D) The managerial perspective holds that all stakeholders have certain minimum rights that must not be violated
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10
Chapter 9: Extending Corporate Accountability: The
Incorporation of Social and Environmental Factors Within External Reporting
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Sample Questions
Q1) Which of the following is implied by the 'shareholder primacy' view of corporate reporting?
A) Regulators should mandate greater social and environmental reporting.
B) Reporting should primarily meet the needs of those with a financial stake in the organisation.
C) Organisations will voluntarily adopt greater social and environmental reporting.
D) All of the given options are correct.
Q2) A company reporting on its social and environmental performance could be explained by:
A) Legitimacy Theory, if management believed that the report would enhance the company's licence to operate
B) Managerial Stakeholder Theory, if management believed that reporting would influence the perceptions of powerful stakeholders
C) Institutional Theory, if management believed that by reporting they would gain approval from powerful stakeholders
D) All of the given options are correct.
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Chapter 10: Reactions of Capital Markets to Financial Reporting
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Sample Questions
Q1) Which of the following is not a reason so many studies have focused on market responses to earnings announcements?
A) Earnings data is unbiased.
B) Earnings data is readily available.
C) Earnings data is important to shareholders.
D) Earnings data is the primary purpose of financial reporting.
Q2) An example of an event study is:
A) The comparison of an earnings announcement with changes in share price levels
B) The comparison of a dividend announcement with changes in share trading volume
C) The comparison of an earnings announcement with changes in share price volatility
D) All of the given options are correct.
Q3) According to the findings of capital markets research,historic cost earnings information is:
A) Useful to investors
B) Useful to investors when it differs from expectations
C) Largely unknown by investors prior to announcement date
D) Manipulated by managers
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Page 12
Chapter 11: Reactions of Individuals to Financial Reporting:
An Examination of Behavioural Research in Accounting
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Sample Questions
Q1) Which of the following is not an example of secondary data?
A) Data collected through survey
B) Data collected through qualitative methodologies
C) Published printed sources
D) Organisational records
Q2) 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.
Q3) 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
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Page 13
Chapter 12: Critical Perspectives of Accounting
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Q1) Critical researchers believe increased corporate social and environmental disclosures may:
A) 'Capture' radical movements
B) Place unnecessary burdens on corporations
C) Improve corporate social and environmental performance
D) Address some of the inherent inequities of capitalist society
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
Q3) Which theoretical perspectives have been utilised by critical researchers?
A) Marxism
B) Deep ecology
C) Radical feminism
D) All of the given options are correct.
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Page 14