Question 1

Stevens's general description of scales is nominal,interval or ratio.

Accepted Answer

A) True 
 B)False  False

Question 2

Briefly outline the nominal,ordinal and ratio scales of measurement and explain why the ratio scale is the one most commonly used by accountants.Include in your discussion an example for each of the three scales.

Accepted Answer

The nominal scale of measurement is the simplest and involves categorizing data into distinct categories with no specific order or ranking. An example of the nominal scale is classifying people by their eye color, such as blue, brown, or green.

The ordinal scale involves categorizing data into distinct categories with a specific order or ranking. An example of the ordinal scale is ranking students based on their performance in a competition, such as first place, second place, and so on.

The ratio scale is the most comprehensive and involves categorizing data into distinct categories with a specific order or ranking, as well as having a true zero point. This means that ratios and proportions can be calculated. An example of the ratio scale is measuring the weight of objects, where zero weight means the absence of weight and ratios can be calculated.

Accountants commonly use the ratio scale of measurement because it allows for more meaningful and comprehensive analysis of financial data. For example, when analyzing financial statements, accountants use ratios such as the debt-to-equity ratio, return on investment, and profit margin, which require the use of a ratio scale to accurately interpret and compare financial data. Additionally, the ratio scale allows for more precise calculations and comparisons, making it the most suitable for accounting purposes.

Question 3

A measurement may be reliable without being accurate.

Accepted Answer

A) True 
 B)False  True

Question 4

Higher than average income
Which of these measurement scales would her data be measured on?

Accepted Answer

A) Nominal 
B) Ordinal 
C) Interval 
D) Ratio 
A) Nominal 
B) Ordinal 
C) Interval 
D) Ratio

Question 5

'…when profit is derived from changes in fair values more difficult questions arise for the auditor …' J.Godfrey,et el,'Accounting Theory',7th Ed.p.150.
Discuss the implications for auditors of the shift in the focus of profit measurement from matching revenues and expenses to assessing changes in the fair value of the net assets.

Accepted Answer

The shift in focus of profit measurement

Question 6

The weakness of the interval scale is that the zero point is arbitrarily established.

Accepted Answer

A) True 
 B)False

Question 7

Since all measurements involve errors,no statement that includes a measurement can be regarded as truthful.

Accepted Answer

A) True 
 B)False

Question 8

There could be many different asset values that are acceptable to an auditor.

Accepted Answer

A) True 
 B)False

Question 9

The incorrect statement in relation to measurement issues for auditors is:

Accepted Answer

A) It is easier for the auditor to gather evidence if profit is measured by changes in fair value than when it is determined by matching revenue and expense transactions. 
B) ISA 540 is the international auditing standard that provides guidance for auditing impairment losses. 
C) Under the international auditing standard on impairment losses auditors are required to judge if the amount recognised as an impairment loss is reasonable 
D) Auditors must assess whether the asset or liability values are properly determined from management's significant assumptions. 
A) It is easier for the auditor to gather evidence if profit is measured by changes in fair value than when it is determined by matching revenue and expense transactions. 
B) ISA 540 is the international auditing standard that provides guidance for auditing impairment losses. 
C) Under the international auditing standard on impairment losses auditors are required to judge if the amount recognised as an impairment loss is reasonable 
D) Auditors must assess whether the asset or liability values are properly determined from management's significant assumptions.

Question 10

The statement that is false with regard to the ratio scale is:

Accepted Answer

A) The intervals between the objects are equal and are known 
B) A natural zero point exists where the distance from it for at least one object is known 
C) The intervals between the numbers do not tell anything about the differences in the quantity of the property they represent 
D) The rank order of the objects or events with respect to a given property is known 
A) The intervals between the objects are equal and are known 
B) A natural zero point exists where the distance from it for at least one object is known 
C) The intervals between the numbers do not tell anything about the differences in the quantity of the property they represent 
D) The rank order of the objects or events with respect to a given property is known

Question 11

An example of attribute unclear error is:

Accepted Answer

A) An accountant measures the value of a manufacturing plant 
B) A tax officer uses an outdated list of tax rates when calculating tax returns 
C) A manager misreads a question while completing a survey 
D) An accountant applies the reducing-balance depreciation method instead of the straight-line method due to pressures from his manager 
A) An accountant measures the value of a manufacturing plant 
B) A tax officer uses an outdated list of tax rates when calculating tax returns 
C) A manager misreads a question while completing a survey 
D) An accountant applies the reducing-balance depreciation method instead of the straight-line method due to pressures from his manager

Question 12

The ratio scale does not allow for all the fundamental arithmetic operations to be performed on the data.

Accepted Answer

A) True 
 B)False

Question 13

It has been argued by some firms that IASB fair value accounting fundamentally changes the focus of risk management.Which of these is a way in which the focus may change?

Accepted Answer

A) Firms may increase their hedging activities because they are worried about the impact on accounting profits 
B) Firms may decrease their hedging activities because they are worried about the impact on accounting profits 
C) Firms may increase their hedging for pension liabilities as these now must show up as a liability on the balance sheet 
D) B and C 
A) Firms may increase their hedging activities because they are worried about the impact on accounting profits 
B) Firms may decrease their hedging activities because they are worried about the impact on accounting profits 
C) Firms may increase their hedging for pension liabilities as these now must show up as a liability on the balance sheet 
D) B and C

Question 14

The event that was not a contributory factor towards the evolution of capital valuation is:

Accepted Answer

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 
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

Question 15

Changing from the nominal dollar scale to the purchasing power of the dollar scale for historical cost accounting is an example of invariant transformation.

Accepted Answer

A) True 
 B)False

Question 16

A nominal scale ranks the objects in question with respect to a given property.

Accepted Answer

A) True 
 B)False

Question 17

An ordinal scale would be used where the data set consists of the net present value of different projects measured in dollars.

Accepted Answer

A) True 
 B)False

Question 18

The operations that can be performed with reference to particular numbers on the interval scale is/are:

Accepted Answer

A) Multiplication and division 
B) Subtraction 
C) Addition 
D) B and C only 
A) Multiplication and division 
B) Subtraction 
C) Addition 
D) B and C only

Question 19

Discuss how the move away from historical cost towards fair value accounting may affect the reliability and relevance of financial reports.

Accepted Answer

The move away from historical cost towar

Question 20

Which of these is not the condition of invariance?

Accepted Answer

A) The rank order of the points is unchanged 
B) The numbers in the scale are unchanged 
C) The ratios of the points are unchanged 
D) The zero point is unchanged 
A) The rank order of the points is unchanged 
B) The numbers in the scale are unchanged 
C) The ratios of the points are unchanged 
D) The zero point is unchanged

Stevens's general description of scales is nominal,interval or ratio.

Briefly outline the nominal,ordinal and ratio scales of measurement and explain why the ratio scale is the one most commonly used by accountants.Include in your discussion an example for each of the three scales.

A measurement may be reliable without being accurate.

Higher than average income Which of these measurement scales would her data be measured on?

The weakness of the interval scale is that the zero point is arbitrarily established.

Since all measurements involve errors,no statement that includes a measurement can be regarded as truthful.

There could be many different asset values that are acceptable to an auditor.

The incorrect statement in relation to measurement issues for auditors is:

The statement that is false with regard to the ratio scale is:

An example of attribute unclear error is:

The ratio scale does not allow for all the fundamental arithmetic operations to be performed on the data.

It has been argued by some firms that IASB fair value accounting fundamentally changes the focus of risk management.Which of these is a way in which the focus may change?

The event that was not a contributory factor towards the evolution of capital valuation is:

Changing from the nominal dollar scale to the purchasing power of the dollar scale for historical cost accounting is an example of invariant transformation.

A nominal scale ranks the objects in question with respect to a given property.

An ordinal scale would be used where the data set consists of the net present value of different projects measured in dollars.

The operations that can be performed with reference to particular numbers on the interval scale is/are:

Discuss how the move away from historical cost towards fair value accounting may affect the reliability and relevance of financial reports.

Which of these is not the condition of invariance?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Accounting Measurement Systems

Assets

Liabilities and Owners Equity

Revenue

Expenses

Positive Theory of Accounting Policy and Disclosure

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters

Exam 5: Measurement

Stevens's general description of scales is nominal,interval or ratio.

Briefly outline the nominal,ordinal and ratio scales of measurement and explain why the ratio scale is the one most commonly used by accountants.Include in your discussion an example for each of the three scales.

A measurement may be reliable without being accurate.

Higher than average income Which of these measurement scales would her data be measured on?

The weakness of the interval scale is that the zero point is arbitrarily established.

Since all measurements involve errors,no statement that includes a measurement can be regarded as truthful.

There could be many different asset values that are acceptable to an auditor.

The incorrect statement in relation to measurement issues for auditors is:

The statement that is false with regard to the ratio scale is:

An example of attribute unclear error is:

The ratio scale does not allow for all the fundamental arithmetic operations to be performed on the data.

It has been argued by some firms that IASB fair value accounting fundamentally changes the focus of risk management.Which of these is a way in which the focus may change?

The event that was not a contributory factor towards the evolution of capital valuation is:

Changing from the nominal dollar scale to the purchasing power of the dollar scale for historical cost accounting is an example of invariant transformation.

A nominal scale ranks the objects in question with respect to a given property.

An ordinal scale would be used where the data set consists of the net present value of different projects measured in dollars.

The operations that can be performed with reference to particular numbers on the interval scale is/are:

Discuss how the move away from historical cost towards fair value accounting may affect the reliability and relevance of financial reports.

Which of these is not the condition of invariance?

Introduction

Accounting Theory Construction

Role of Theory in Accounting Regulation

Theory Underpinning Accounting Standards

Accounting Measurement Systems

Assets

Liabilities and Owners Equity

Revenue

Expenses

Positive Theory of Accounting Policy and Disclosure

Capital Market Research

Behavioural Research

Emerging Issues in Accounting and Auditing

Filters