Honours Accounting Theory
Final Test Solutions
Course Introduction
Honours Accounting Theory is an advanced course designed to deepen students' understanding of the conceptual frameworks, philosophical bases, and critical issues underpinning contemporary accounting practice and research. The course explores the evolution of accounting theories, the development and application of accounting standards, and the ethical and regulatory influences that shape the accounting profession. Through critical examination of major accounting theories such as positive accounting theory, normative accounting theory, and systems-oriented approaches, students will analyze how theoretical perspectives guide financial reporting and decision-making. The course also engages with current debates and research trends, preparing students for postgraduate study or professional roles requiring robust analytical and interpretive skills in accounting.
Recommended Textbook
Financial Accounting Theory 4th Edition by Craig Deegan
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12 Chapters
359 Verified Questions
359 Flashcards
Source URL: https://quizplus.com/study-set/2769
2
Chapter 1: Introduction to Financial Accounting Theory
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/55205
Sample Questions
Q1) Which of the following hypotheses is testable,and therefore possible to falsify?
A) Assets are designed to best fulfil the function for which they are intended
B) Current replacement cost accounting is more useful than historical cost accounting
C) Research and development expenditure is an expense.
D) The net profit of a company is affected by the economic downturn
Answer: D
Q2) Theories and models in the social sciences differ from theories in the pure sciences because:
A) Theories about human behaviour cannot be expected to apply all the time, like some natural science theories.
B) A number of theories may be available to describe, or provide a different perspective on, a particular phenomenon.
C) Not all theories in social science have predictions that can be tested.
D) All of the given options are correct.
Answer: D
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3
Chapter 2: The Financial Reporting Environment
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Financial accounting leads to the generation of:
A) Reports to meet the specific information needs of users
B) Monthly financial reports for management
C) Special purpose financial reports
D) General purpose financial reports
Answer: D
Q2) What is the role of the accounting profession in the US with regard to stipulating accounting standards?
A) It has the authority to develop and issue accounting standards.
B) It has been delegated responsibility from the Securities and Exchange Commission, providing it performs such duties diligently.
C) Indirect authority. Standards are issued by the Accounting Principles Board, a committee of the accounting professional bodies.
D) No authority. Standards are issued by the Federal Accounting Standards Board, which is independent of the accounting profession.
Answer: D
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Chapter 3: The Regulation of Financial Accounting
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Which of the following best describes the process of setting accounting standards?
A) A technical process where accounting experts determine the most technically correct and logical standards to issue
B) A political process where the constituency affected either socially or economically by a proposed AASB standard has influence on the final outcome
C) An exclusive process where the AASB sets the agenda and determines which standards to issue and what requirements they will contain
D) An inclusive process where standards are proposed from various interested parties for approval by the AASB
Answer: B
Q2) 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
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5
Chapter 4: International Accounting
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33 Flashcards
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Sample Questions
Q1) Which of the following is not a characteristic of the Anglo-American model of financial accounting and its regulation?
A) It has been strongly influenced by professional accounting bodies rather than government
B) It emphasises the importance of capital markets as the main source of equity and debt
C) Regulation tends to be totally rule-based rather than requiring professional judgement
D) It emphasises consideration of substance over legal form
Q2) According to Gray (1988),the higher a country ranks in terms of individualism and the lower it ranks in terms of uncertainty avoidance and power distance,the more likely it is to rank highly in terms of:
A) Optimism
B) Professionalism
C) Uniformity
D) Transparency
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Chapter 5: Measurement Issues: Accounting for the Effects
of Changing Prices and Market Conditions
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Which of the following statements about holding gain (cost savings)in the CCA model is false?
A) Unrealised savings include gains (cost saving) from holding inventory that has increased in price, which have yet to be realised.
B) Realised savings relate to cost savings in inventory actually incurred, and gains (cost savings) relate to depreciation actually incurred.
C) Unrealised savings include gains (cost savings) from holding depreciable assets (with higher replacement costs) not yet realised through the process of depreciation.
D) All of the given options are correct.
Q2) Assume that for Company X,the opening residual equity was $30 000 000 and the price index increased from 150 to 175.The capital maintenance adjustment would be calculated and classified as:
A) Calculation: $30 000 000 × 25/150 = $5 000 000 and classified as an income
B) Calculation: $30 000 000 × 25/175 = $4 285 714 and classified as an income
C) Calculation: $30 000 000 × 25/150 = $5 000 000 and classified as an expense
D) Calculation: $30 000 000 × 25/175 = $4 285 714 and classified as an expense
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Page 7
Chapter 6: Normative Theories of Accounting: The Case of Conceptual Framework Projects
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32 Flashcards
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Sample Questions
Q1) What is the purpose of developing a conceptual framework?
A) To provide a coherent structure to accounting practice which had developed in an ad hoc way.
B) To guide standard-setters to develop standards based on the same concepts and principles, rather than in a piecemeal approach.
C) To guide users where there is no accounting standard covering an issue.
D) All of the given options are correct.
Q2) Which of the following is true about conceptual frameworks?
A) They lead to decreased international compatibility of accounting standards.
B) Communication between standard-setters and their constituents would be diminished.
C) Smaller organisations may feel overburdened by reporting requirements.
D) Standard-setters would be less accountable for their decisions.
Q3) Which of the following is a qualitative characteristic of financial information in general purpose financial reports,if they are to be useful?
A) Understandability
B) Comparability
C) Reliability
D) All of the given options are correct.
Page 8
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Chapter 7: Positive Accounting Theory
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30 Verified Questions
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Sample Questions
Q1) It is common practice for managers to be rewarded in a way that is tied to the profits of the firm,the sales of the firm,or the return on assets.That is,their remuneration is based on the output of the accounting system.Which of the following is a drawback for such bonus schemes?
A) Bonus schemes tied to the performance of the firm will be put in place to align the interests of the owners and the managers.
B) Rewarding managers on the basis of accounting profits may induce them to manipulate accounting numbers.
C) There would be limited incentives for the manager to adopt risky strategies that increase the value of the firm.
D) The manager may be reluctant to take on optimal levels of debt.
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
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9
Chapter 8: Unregulated Corporate Reporting Decisions:
Considerations of Systems-Oriented Theories
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Managerial Stakeholder Theory suggests that annual reports will be used to:
A) Gain the support of powerful stakeholders
B) Report on the activities of management with respect to each stakeholder
C) Explain why profits may have been sacrificed in order to respect the minimum rights of some stakeholders
D) All of the given options are correct.
Q2) An organisation disclosing social and environmental information because a competitor was gaining a competitive advantage by doing so,is an example of:
A) Mimetic isomorphism
B) Coercive isomorphism
C) Normative isomorphism
D) None of the given options are correct.
Q3) 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.
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Chapter 9: Extending Corporate Accountability: The
Incorporation of Social and Environmental Factors Within External Reporting
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) 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.
Q2) The 'triple bottom line' framework refers to three key areas,which are:
A) Economic/financial, cultural and ethical
B) Ethical, economic/financial and environmental
C) Economic/financial, leadership and social
D) Economic/financial, social and environmental
Q3) 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 are correct.
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Chapter 10: Reactions of Capital Markets to Financial Reporting
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Capital markets research assumes that markets are:
A) Semi-strong-form efficient
B) Strong-form efficient
C) Weak-form efficient
D) Inefficient
Q2) 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.
Q3) Semi-strong-form market efficiency means that the information reflected in security prices is:
A) All publicly available financial information
B) All public and private information
C) All publicly available information
D) All information about past prices and trading volumes
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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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29 Verified Questions
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Sample Questions
Q1) According to Wood and Ross (2006),which of the following environmental and social controls is the most influential factor in affecting managers' capital investment decisions with respect to investing in less polluting plant and equipment?
A) Mandatory disclosure required by law and accounting standards
B) Regulatory costs, such as direct payments on pollutant emissions and clean-up costs
C) Stakeholder opinion, that is, how the investment will be approved by various stakeholder groups
D) None of the given options are correct.
Q2) Which of the following are not among the limitations of behavioural research?
A) Many studies present conflicting results.
B) Small sample sizes limit the reliability of conclusions.
C) Studies are typically conducted in the 'real world', which makes findings difficult to generalise.
D) Theory development is incomplete.
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Chapter 12: Critical Perspectives of Accounting
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Sample Questions
Q1) Which of the following is not true about the role of the State in supporting existing social structures?
A) Increasing the flow of information, or availability of specific types of information, is seen as a means of maintaining particular organisations and social structures.
B) Government does not operate in the public interest but in the interests of 'well off' groups.
C) Government will take action to enhance the legitimacy of the (unjust) social system.
D) None of the above options are correct.
Q2) Marxists believe capitalism is inherently:
A) Unstable
B) Unjust
C) Contradictory
D) All of the given options are correct.
Q3) Critical researchers believe that accountants are:
A) Complicit in the exploitation of citizens
B) Resistant to the exploitation of citizens
C) Irrelevant to the exploitation of citizens
D) Exploited by citizens
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