Deck 14: Disclosure: Legal Requirements and Accounting Polices

Question 1

If an accounting policy change is voluntary,which of the following disclosures is required by AASB 108?

A)The nature of the change.
B)The reasons that applying the new accounting policy provides reliable and more relevant information.
C)The amount of the adjustment relating to periods prior to those presented to the extent practicable.
D)All of the above.

Answer 1

D

Question 2

Which of the following does not involve the use of estimates by an entity in preparing its financial statements?

A)Doubtful debts expense
B)Depreciation expense
C)The original purchase price of an asset
D)Employee benefit liabilities such as long-service leave

Answer 2

C

Question 3

The Corporations Act allows a company the right to prepare and send a concise report to members which consists of which of the following?
I)A concise financial report drawn up in accordance with accounting standards.
II)A directors' report for the year.
III)An auditor's statement.
IV)A statement that the report is a concise report and that the full financial report and auditor's report is available if requested.

A)I,II and III only
B)II,III and IV only
C)III and IV only
D)I,II,III and IV

Answer 3

D

Question 4

If in the directors' opinion compliance with accounting standards will not provide a true and fair view,then a reporting entity must also provide:

A)additional information in the notes.
B)a concise financial report.
C)a letter of explanation from the auditors.
D)a letter of explanation from the most senior financial officer in the company.

Question 5

The statement of profit or loss and other comprehensive income provides information relating to:

A)financial position and the capacity of an organisation to adapt.
B)financial performance.
C)cash flows and the liquidity and solvency of an entity.
D)the debt and equity structure of an entity.

Question 6

The general information component of a Directors' Report must contain which of the following information?
I)A review of operations and the results of operations.
II)The entity's principal activities.
III)Likely future developments in the entity's operations.
IV)Whether the financial report is in accordance with the Corporations Act.

A)I,II and III only
B)I,II and IV only
C)II,III and IV only
D)I,II,III and IV

Question 7

In the preparation of financial statements,it is necessary to present comparative information for:

A)statement of profit or loss and other comprehensive income items only.
B)statement of financial position items only.
C)statement of cash flow items only.
D)all amounts reported in the financial statements.

Question 8

Which of the following is not a type of specific information required to be included in a directors' report?

A)The name of each director and the period for which they were a director.
B)Dividends paid to shareholders during the year.
C)Details of options granted to any of the directors.
D)The name of the company's auditor.

Question 9

A statement of financial position provides information about which of the following?

A)Solvency
B)Capacity to adapt
C)Resources controlled
D)All of the above

Question 10

Which of the following statements is incorrect?

A)Financial records must be retained for 7 years.
B)Financial records may be kept in any language.
C)A company can decide where to keep its financial records.
D)Financial records must be retained for 10 years.

Question 11

Information about the financial position of an entity is largely contained in the:

A)statement of financial position.
B)statement of comprehensive income.
C)statement of cash flows.
D)directors' report.

Question 12

Which type of financial statements is prepared for users who depend on them for information to enable them to make decisions about the allocation of scarce resources?

A)Management financial statements
B)Short-term financial statements
C)Specific purpose financial statements
D)General purpose financial statements

Question 13

Canetoads Ltd has discovered that the estimated useful life made on a material depreciable asset was incorrect due to a change in the way the asset was being used.The correct accounting treatment of this event is to:

A)disclose the change in the notes to the financial statements.
B)treat it as an error and adjust retrospectively.
C)treat it as a change in an accounting estimate and adjust prospectively.
D)treat it as a change in an accounting estimate and adjust retrospectively.

Question 14

According to the Corporations Act,a company is required to include which of the following financial statements in its annual financial report?
I Statement of profit or loss and other comprehensive income
II Statement of financial income
III Statement of financial position
IV Statement of changes in equity
V Statement of cash flows

A)I,II,III and IV only
B)II,III,IV and V only
C)I,II,III and V only
D)I,III,IV and V only

Question 15

If a company is a small proprietary company,it must comply with accounting standards if directed to prepare an annual financial report by shareholders with at least:

A)1% of the company's votes.
B)2% of the company's votes.
C)3% of the company's votes.
D)5% of the company's votes.

Question 16

Instead of sending each shareholder a full set of financial statements including notes and the directors' and auditor's reports to members,a company has a right to instead send:

A)a notice that the report has been lodged with ASIC.
B)a statement of financial position only.
C)a concise report.
D)an income statement and statement of financial position only.

Question 17

Which of the following matters does an auditor of the financial report not have to form an opinion about?

A)Whether the financial report gives a true and fair view.
B)Whether any financial statement fraud has occurred.
C)Whether the auditor has been given all information,explanation and assistance necessary for the conduct of the audit.
D)Whether the company has kept financial records sufficient to enable the financial report to be prepared and audited.

Question 18

Which of the following is not required to be disclosed in an entity's accounting policy note?

A)That the financial statements are general purpose financial statements.
B)The measurement bases used in the preparation of the financial statements.
C)That the financial statements have been prepared on the going concern basis.
D)A description of the entity's key accounting policies.

Question 19

Information about how a company has financed its operations and invested surplus cash is found in the:

A)directors' report.
B)statement of profit or loss and other comprehensive income.c.statement of cash flows.
D)statement of financial position.

Question 20

Half yearly reports are required to be prepared by:

A)small proprietary companies.
B)disclosing entities.
C)reporting entities.
D)private companies.

Question 21

The financial statements of an entity are authorised for issue on:

A)the day the directors' declaration is signed.
B)30 June each year.
C)the last day of the financial year.
D)the day the auditor's report is signed.

Question 22

AASB 1048 Interpretation of Standards gives all IFRIC Interpretations the same status as AASB standards.

Question 23

Compliance with AASB accounting standards automatically results in meeting the Corporations Act requirements in relation to presenting a true and fair view in financial reports.

Question 24

A company's workforce went on strike for an indefinite period commencing on 5 August 2014.The strike was expected to cause severe financial conditions for the company.The financial statements for the year ended 30 June 2014 were expected to be finalised by 7 August 2014.In accordance with AASB 110 Events after the Reporting Period,the appropriate treatment regarding this event is:

A)disclosure as a note to the financial statements,as it is a non-adjusting event.
B)disclosure as a note to the financial statements,as it is an adjusting event.
C)to adjust the financial statements,as it is a non-adjusting event.
D)to adjust the financial statements,as it is an adjusting event.

Question 25

When conducting an audit of financial statements,an auditor must give an opinion on the existence of fraud in the company's financial statements.

Question 26

Prior to the finalisation of the financial statements for the year ended 30 June 2014,a company experienced a number of material events,including:
I on 10 July 2014 the directors decided to close a division of the company at an estimated cost of $1 000 000.
II on 10 August 2014 a court decision found the company liable to pay damages of $500 000 to a major customer who had commenced legal action in April 2012.
III an independent valuation of property conducted on 20 July 2014 revealed that the directors' valuation included in the 30 June 2014 financial statements was overstated by $700 000.
In respect of the events listed above,it will be necessary to adjust the financial statements,by way of general journal entries,for:

A)I,II and III.
B)II only,and make a note disclosure for I and III.
C)III only,and make a note disclosure for I and II.
D)II and III only,and make a note disclosure for I.

Question 27

The financial position of an entity as at reporting date is presented in a statement of comprehensive income.

Question 28

The correction of a material error that occurred in a previous period must be accounted for by:

A)disclosure in the notes to the financial statements.
B)an adjustment in future accounting periods.
C)a prospective adjustment to the financial statements.
D)a retrospective restatement in the first financial statements issued after the discovery of the error.

Question 29

Events occurring after the end of the reporting period which provide evidence of conditions that existed at the end of the reporting period are known as:

A)non-adjusting events.
B)reporting events.
C)adjusting events.
D)disclosing events.

Question 30

General purpose financial statements are prepared for users who depend on those reports for information to enable them to make decisions about the allocation of scarce resources.

Question 31

Errors can occur for which of the following reasons?

A)Mistakes in applying accounting policies
B)Misinterpretation of facts
C)Fraud
D)All of the above

Question 32

According to AASB 108,omissions or misstatements are material if they:

A)are greater than 50% of the relevant base amount.
B)are as a result of fraud.
C)could influence the economic decisions that users make on the basis of the financial statements.
D)are less than 10% of the relevant base amount.

Question 33

A complete set of financial statements will include a report on the entity's environmental activities.

Question 34

In determining whether an item is material,consideration must be given to:

A)its size only.
B)both its size and nature.
C)its nature only.
D)none of the above.

Question 35

Comparative information in respect of all previous periods for all amounts reported in the financial statements must be provided.

Question 36

Small proprietary companies are not required to prepare a directors' report to accompany their financial statements.

Question 37

Which of the following statement is correct?

A)Extensive guidance is given in accounting standards on the concept of materiality.
B)The disclosure provisions of accounting standards must always be applied even if the resulting information is immaterial.
C)Materiality only depends only ever depends on the size of an item.
D)The disclosure provisions of accounting standards do not need to be applied if the resulting information is immaterial.

Question 38

Under the Corporations Act,directors have a choice of providing either a directors' declaration or a directors' report to accompany a set of annual financial statements.

Question 39

Correcting the recognition,measurement and disclosure of amounts of financial statement elements as if a prior period error had never occurred is known as:

A)historical restatement.
B)retrospective restatement.
C)retrospective application.
D)prior period application.

Question 40

Attached to the financial statements must be a set of notes providing disclosures required by corporate regulations and accounting standards.

Question 41

Adjusting events are indicative of conditions that arose after the end of the reporting period.

Question 42

Companies must always disclose the fact that their financial statements are prepared using the going concern assumption.

Question 43

If a mistake in applying an accounting policy is discovered in a subsequent period,that mistake must be corrected retrospectively.

Question 44

The assessment of materiality is a matter of judgement in light of the reporting entity's particular circumstances.

Question 45

In addition to the annual financial statements,companies have the right to choose to prepare and distribute concise financial reports to members.

Question 46

Disclosing entities must prepare a half year financial report in accordance with AASB 134 Interim Financial Reporting.

Question 47

An entity is not permitted to change its accounting policies.

Question 48

If there are difficulties in distinguishing between a change in an accounting estimate and a change in an accounting policy,the change must be treated as a change in an accounting estimate.

Question 49

The date at which financial statements are authorised for issue is the date on which the shareholders approve the financial statements at an annual meeting.

Question 50

Material prior period errors must be corrected retrospectively,unless it is impracticable to do so.