Exam 11: Positive Theory of Accounting Policy and Disclosure

'Politically sensitive firms are likely to understate profits' ' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.384.Explain why this may be so and which firms are likely to be 'politically sensitive'.

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Question 1

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Politically sensitive firms are likely to understate profits because they may be trying to appease government regulators, tax authorities, or other stakeholders. These firms may be operating in industries that are heavily regulated or have a significant impact on public policy, such as healthcare, energy, or finance. By understating profits, these firms may be able to avoid scrutiny or criticism from these stakeholders, or even gain favor with them by appearing to be more compliant or socially responsible.

Additionally, politically sensitive firms may also be trying to manage public perception and avoid negative attention. By understating profits, they may be able to downplay their financial success and appear more modest or in line with public expectations. This can be particularly important for firms that rely on public support or goodwill, such as non-profit organizations or companies with a strong public image.

Overall, politically sensitive firms are likely to be those that operate in industries with high regulatory or public policy scrutiny, or those that rely on public support or perception. These firms may have a strong incentive to understate profits in order to manage their relationships with government regulators, tax authorities, and the public.

Which of these is not an assumption of the efficient markets hypothesis (EMH)?

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Question 2

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The demand for auditing can be explained by agency theory as part of monitoring and bonding activities and costs.

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Question 3

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Outline how the demand for auditing can be explained by agency theory as part of monitoring and bonding activities and costs.

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Question 4

Explain and discuss why the firm can be described as a 'nexus of contracts.

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Question 5

Which of these is not the reason why there is generally less demand and incentive for the production of information in political markets than in capital markets?

(Multiple Choice)

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Question 6

Traditional conservatism in accounting means:

(Multiple Choice)

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Question 7

The change that will increase reported profit (assuming inflation)is:

(Multiple Choice)

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Question 8

Explain and discuss why,under signalling theory,it is predicted that firms will disclose more information than is demanded.

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Question 9

The statement in relation to issues for auditors in relation to agency theory that is not true is:

(Multiple Choice)

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Question 10

The statement that is true is:

(Multiple Choice)

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Question 11

Under signalling theory it is predicted that firms will disclose less information than is demanded.

(True/False)

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Question 12

An example of a bonding cost is:

(Multiple Choice)

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Question 13

Covenants that restrict production-investment opportunities aim to reduce claim dilution problem.

(True/False)

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Question 14

Ball and Foster were among the researchers who supported the use of firm size as a measure of political costs.

(True/False)

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Question 15

The statement that is correct concerning Australia is:

(Multiple Choice)

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Question 16

A price-protected owner will remunerate their manager according to the owner's expectations of how much the manager's behaviour is likely to be contrary to the owner's interests.

(True/False)

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Question 17

Initially monitoring costs are incurred by the principal,however,ultimately agents will bear the monitoring costs.

(True/False)

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Question 18

Which of these research findings is not true?

(Multiple Choice)

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Question 19

Who were generally regarded as the pioneers in developing the agency theory?

(Multiple Choice)

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Question 20

Showing 1 - 20 of 34

'Politically sensitive firms are likely to understate profits' ' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.384.Explain why this may be so and which firms are likely to be 'politically sensitive'.

Which of these is not an assumption of the efficient markets hypothesis (EMH)?

The demand for auditing can be explained by agency theory as part of monitoring and bonding activities and costs.

Outline how the demand for auditing can be explained by agency theory as part of monitoring and bonding activities and costs.

Explain and discuss why the firm can be described as a 'nexus of contracts.

Which of these is not the reason why there is generally less demand and incentive for the production of information in political markets than in capital markets?

Traditional conservatism in accounting means:

The change that will increase reported profit (assuming inflation)is:

Explain and discuss why,under signalling theory,it is predicted that firms will disclose more information than is demanded.

The statement in relation to issues for auditors in relation to agency theory that is not true is:

The statement that is true is:

Under signalling theory it is predicted that firms will disclose less information than is demanded.

An example of a bonding cost is:

Covenants that restrict production-investment opportunities aim to reduce claim dilution problem.

Ball and Foster were among the researchers who supported the use of firm size as a measure of political costs.

The statement that is correct concerning Australia is:

A price-protected owner will remunerate their manager according to the owner's expectations of how much the manager's behaviour is likely to be contrary to the owner's interests.

Initially monitoring costs are incurred by the principal,however,ultimately agents will bear the monitoring costs.

Which of these research findings is not true?

Who were generally regarded as the pioneers in developing the agency theory?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Measurement

Accounting Measurement Systems

Assets

Liabilities and Owners Equity

Revenue

Expenses

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters

Exam 11: Positive Theory of Accounting Policy and Disclosure

'Politically sensitive firms are likely to understate profits' ' J.Godfrey,et el,'Accounting Theory',7th Ed.p.384.Explain why this may be so and which firms are likely to be 'politically sensitive'.

Which of these is not an assumption of the efficient markets hypothesis (EMH)?

The demand for auditing can be explained by agency theory as part of monitoring and bonding activities and costs.

Outline how the demand for auditing can be explained by agency theory as part of monitoring and bonding activities and costs.

Explain and discuss why the firm can be described as a 'nexus of contracts.

Which of these is not the reason why there is generally less demand and incentive for the production of information in political markets than in capital markets?

Traditional conservatism in accounting means:

The change that will increase reported profit (assuming inflation)is:

Explain and discuss why,under signalling theory,it is predicted that firms will disclose more information than is demanded.

The statement in relation to issues for auditors in relation to agency theory that is not true is:

The statement that is true is:

Under signalling theory it is predicted that firms will disclose less information than is demanded.

An example of a bonding cost is:

Covenants that restrict production-investment opportunities aim to reduce claim dilution problem.

Ball and Foster were among the researchers who supported the use of firm size as a measure of political costs.

The statement that is correct concerning Australia is:

A price-protected owner will remunerate their manager according to the owner's expectations of how much the manager's behaviour is likely to be contrary to the owner's interests.

Initially monitoring costs are incurred by the principal,however,ultimately agents will bear the monitoring costs.

Which of these research findings is not true?

Who were generally regarded as the pioneers in developing the agency theory?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Measurement

Accounting Measurement Systems

Assets

Liabilities and Owners Equity

Revenue

Expenses

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters

'Politically sensitive firms are likely to understate profits' ' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.384.Explain why this may be so and which firms are likely to be 'politically sensitive'.