Deck 1: The Canadian Financial Reporting Environment

Question 1

Whether a business is successful and thrives is determined by

A)free enterprise.
B)competition.
C)markets.
D)all of these.

Answer 1

D

Question 2

The preparation by some companies of biased information is sometimes referred to as

A)conservative financial reporting.
B)aggressive financial reporting.
C)full disclosure of all material facts.
D)management stewardship.

Answer 2

B

Question 3

Which of the following is not a stakeholder in the Canadian Financial Reporting Environment?

A)Investors
B)Creditors
C)Auditors
D)All of these are stakeholders

Answer 3

D

Question 4

Generally accepted accounting principles include

A)specific rules, practices and procedures.
B)broad principles and conventions of general applications including underlying concepts.
C)pronouncements by the Emerging Issues Committee.
D)all of these.

Question 5

Which of the following statements is not an objective of financial reporting?

A)Provide information that is useful to users in making resource allocation decisions.
B)Provide information about an entity's economic resources, obligations, and equity/net assets.
C)Provide information on the liquidation value of an enterprise.
D)Provide information about changes in an entity's economic resources, obligations, and equity/net assets.

Question 6

Which of the following aspects is often described as one of the main issues of measuring performance in the "knowledge-based" economy?

A)"Knowledge-based" assets are mostly linked to physical assets.
B)The success of "knowledge-based" companies includes non-financial components.
C)"Knowledge-based" companies are dominating the market.
D)All of these.

Question 7

Which of the following statements does not describe the activities and authority of the Ontario Securities Commission (OSC)?

A)The OSC reviews and monitors the financial statements of companies whose shares are listed on the Toronto Stock Exchange
B)The OSC issues its own disclosure requirements for listed companies.
C)The OSC has the ability to fine or delist companies.
D)The OSC issues financial accounting standards for Canadian companies.

Question 8

The essential characteristic(s) of accounting is (are)

A)communication of financial information to interested persons.
B)communication of financial information about economic entities.
C)identification, measurement, and communication of financial information.
D)all of these.

Question 9

The body that has the responsibility to set generally accepted accounting principles in Canada is the

A)FASB.
B)IASB.
C)AcSB.
D)OSC.

Question 10

The widely publicized subprime lending crisis was not caused by

A)Capital market participants who acted in their own self-interest.
B)A lack of transparency.
C)A lack of investor understanding of the investment's true risk.
D)The practice of securitizing assets.

Question 11

In assessing management stewardship, users traditionally refer to

A)non-financial measurements.
B)forward-looking data.
C)historical data .
D)none of these.

Question 12

In establishing financial accounting standards, "due process" refers to

A)the process of giving interested parties ample opportunity to express their views.
B)the practice of researching, creating a task force, issuing an exposure draft and establishing the new GAAP.
C)the researching of the legal implications of proposed new accounting standards.
D)the requirement that all accountants must receive a copy of financial standards.

Question 13

Which of the following parties is not instrumental in the development of financial reporting standards in Canada?

A)the Financial Accounting Standards Board (FASB)
B)the Provincial Securities Commissions
C)the International Accounting Standards Board (IASB)
D)the American Institute of Certified Public Accountants

Question 14

The role of the Accounting Standards Board (AcSB) in the formulation of accounting principles in Canada can be best described as

A)primary.
B)secondary.
C)sometimes primary and sometimes secondary.
D)non-existent.

Question 15

The information provided by financial reporting pertains to

A)individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.
B)business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.
C)individual business enterprises, industries, and an economy as a whole, rather than to
D)an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

Question 16

Financial accounting can be broadly defined as the area of accounting that prepares financial statements to be used

A)by parties internal to the business enterprise only.
B)by investors only.
C)by parties both internal and external to the business enterprise.
D)primarily by management.

Question 17

Which of the following describes one of the causes of management bias?

A)The need to comply with contracts, such as debt covenants.
B)The desire to meet financial analyst's expectations.
C)The tendency to emphasize positive events only.
D)All of these

Question 18

An effective capital allocation process

A)encourages innovation.
B)promotes productivity.
C)provides an efficient and liquid market for buying and selling securities.
D)all of these.

Question 19

Financial accounting is concerned with the process that culminates in

A)the preparation of financial reports.
B)specialized reports for inventory management and control.
C)specialized reports for income tax calculation and recognition.
D)reports on changes in stock prices and future estimates of market position.

Question 20

The adoption of International Financial Reporting Standards is an example of

A)The impact of technology on user's needs.
B)The impact of globalization on capital markets
C)Ethical behaviour.
D)None of the above

Question 21

The exercise of professional judgement does not involve which of the following:

A)the use of knowledge gained through education.
B)the application of knowledge gained through experience.
C)the use of ethical decision making.
D)none of these.

Question 22

Financial statements are prepared for the user.Which of the following best describes the responsibility for the preparation of financial statements?

A)They are the responsibility of management.
B)They are the responsibility of external auditors.
C)They are the responsibility of shareholders.
D)They are the responsibility of standard setters.

Question 23

The business strategy model called the "Balanced Scorecard"

A)ensures that all of the financial statements are accurate and balanced.
B)views the company from the financial, customer, internal processes perspectives, and learning and growth perspectives.
C)begins each reporting period with zero balances in all areas of measurement.
D)views the financial statements as the major component of useful information for decision making within the company.

Question 24

Which of the following is NOT likely a drawback of the dramatic advancement of technology on financial reporting?

A)Users of financial information have access to more information.
B)Quality and reliability may be compromised
C)Equal and fair access may be at issue.
D)None of these are drawbacks

Question 25

Which of the following are major factors in the rapidly changing financial reporting environment in Canada?

A)Increased demand for accountants and the impact of technology
B)Globalization and the unethical actions of accountants
C)The growing number of institutional investors and the knowledge based economy
D)All of these

Question 26

Canada Customs and Revenue Agency does not require a corporation to use the same reporting principles for tax as for accounting.Which of the following accounting principles is most likely to be the same for accounting and tax purposes?

A)Amortization expense
B)Development costs
C)Long-term leases
D)Revenue Recognition

Question 27

Which of the following does not describe a step in the AcSB's standard setting process?

A)Issue an emerging Issues Abstract
B)Develop an Exposure Draft
C)Write a project proposal
D)Develop a Re-exposure Draft.

Question 28

Which of the following supports the use of "simplified GAAP" for private companies?

A)Private companies usually have less complex business models.
B)The financial statement users of private companies tend to have first-hand information.
C)Private companies tend to have fewer users.
D)All of these

Question 29

The Sarbanes-Oxley Act (SOX) was not enacted to

A)Help prevent fraud and poor financial reporting practices.
B)Ensure the act was applied internationally.
C)Enable the SEC to increase its policing efforts.
D)Introduce new independence rules for auditors