Topic 1 MCQ question regulatory frame work ch-1 PDF

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Topic 1 Chapter 1 question bank

Which of the following statements relating to APRA is incorrect? APRA is responsible for the reporting of monthly banking statistics. APRA identifies the key risks taken by an entity and ensures those risks are adequately measured, managed and monitored. APRA’s aim is to promote financial stability among the financial services industry to minimise losses by the industry’s policy holders and members. APRA helps to educate retail investors. Which of the following entities is a large proprietary company? A company that earns $15 million of annual revenue, controls $15 million of assets, and has 30 employees. A company that earns $30 million of annual revenue, controls $10 million of assets, and has 25 employees. A company that earns $20 million of annual revenue, controls $8 million of assets, and has 40 employees. A company that earns $22 million of annual revenue, controls $14 million of assets, and has 55 employees. Which of the following statements is NOT correct in relation to the Financial Reporting Council (FRC)? Membership of the FRC is determined by the Federal Treasurer. The main role of the FRC is to act as an overseer and advisory body to ASIC. The FRC does not have the power to veto accounting standards. The FRC was established in 2000, as a result of the CLERP Act 1999. APRA is responsible for the reporting of monthly banking statistics. The role of the Australian Securities and Investments Commission is to (select all that apply): enforce compliance with accounting standards. protect markets and consumers from manipulation and unfair practices. act as a corporate watchdog. regulate advertising, selling and disclosure of financial services to consumers. isue accounting standards. (All yellow correct) Which of the following statements is NOT true in relation to public companies?

A public company can have only one member A public company is required to have issued share capital A public company must appoint a secretary. A public company is any company that is not a proprietary company. Accounting standard setting: is described as a political process in Australia because the members of the AASB are appointed by the FRC which, in turn, is appointed by the federal Treasurer is based entirely on research and empirical findings. is described as a political process because interested parties attempt to influence and persuade those who formulate the standards by lobbying. is described as a political process because it involves voting. If a company is a small proprietary company it must comply with accounting standards if directed to prepare an annual financial report by at least: 1% of its shareholders. 3% of its shareholders 5% of its shareholders. 2% of its shareholders.

Australia’s adoption of International Financial Reporting Standards: Awas verbatim but partial because it only applies to a reduced set selected by the AASB. involved modification to some of the wording and applied to a reduced set of standards selected by the AASB. involved verbatim adoption of all standards. involved modification to some of the wording but included all IASB standards.

The Australian Prudential Regulation Authority (APRA) oversees the regulation of the following financial services entities except for: building societies. taxation. superannuation. insurances. A company comes into existence when it is registered with the: Australian Securities and Investments Commission. Australian Accounting Standards Board.

Financial Reporting Council. Attorney-General’s Department. In Australia the law governing corporations is administered by the: Australian Accounting Research Foundation. Corporate Law Economic Reform Program. International Accounting Standards Board. Australian Securities and Investments Commission. Which regulatory body has the responsibility for overseeing the standard-setting process in Australia? ASIC FRC AASB APRA The body responsible for overseeing compliance with securities legislation in Australia is the: ASIC. SEC. IOSCO. AASB. International Financial Reporting Standards are issued by: the Australian Accounting Standards Board the International Accounting Standards Committee Foundation. the Financial Accounting Standards Board. the International Accounting Standards Board.

ASX stands for: Australian Securities Exchange. 

Australian Special Exchange.

Australian Stock Exchange. Australian Societies Exchange. A disclosing entity is: an entity which has no obligation to present half-yearly financial statements. an entity which has no obligation to present financial statements that comply with accounting standards. an entity which has shares or other securities listed on the ASX. a company that is not a reporting entity.

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In Australia interpretations of IFRS are considered by: the AASB, with assistance from panels providing expert advice.

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panels of experts.

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the Urgent Issues Group. the Emerging Issues Task Force. Which of the following entities is a large proprietary company? A company that earns $30 million of annual revenue, controls $10 million of assets, and has 25 employees. A company that earns $22 million of annual revenue, controls $14 million of assets, and has 55 employees. A company that earns $15 million of annual revenue, controls $15 million of assets, and has 30 employees. A company that earns $20 million of annual revenue, controls $8 million of assets, and has 40 employees.

In Australia the law governing corporations is administered by the Australian Securities and Investments Commission. Corporate Law Economic Reform Program. International Accounting Standards Board. Australian Accounting Research Foundation. Q 1.89: Members of the IASB are appointed by: the IFRS Foundation Trustees. the IFRS Advisory Council. the IFRS Interpretations Committee. the Monitoring Board. Q 1.90: YinYang Ltd is a company listed on the ASX, with a total number of 250 nonemployee shareholders owning the company’s shares and 60 employees working at the company. Which of the following statements about YinYang Ltd is incorrect YinYang Ltd is required to prepare a financial report.

YinYang Ltd is proprietary company. YinYang Ltd is a public company. YinYang Ltd is a disclosing entity. Q 1.91: A basic premise of the IASB’s in establishing standards is that

it should operate in full view of the public. it should operate in full view of the IASC Foundation. privacy and confidentiality must be maintained for all discussions of accounting issues. a combination of all options depending on the sensitivity of the issue as determined by the IASC. Which of the following statements is false?  Members of the IFRS Interpretations Committee are appointed by the IASB. IFRS Foundation Trustees appoint members of both IASB and IFRS Advisory Council. The IFRS Advisory Council provides strategic advice to the IASB. Compliance with IASB standards includes compliance with interpretations issued by IFRS Interpretations Committee. Q 1.93: Currently the Australian conceptual framework comprises the Framework for the Preparation and Presentation of Financial Statements and SAC 1. the Conceptual Framework for Financial Reporting. the Conceptual Framework for Financial Reporting, SAC 1, and SAC 2. the Framework for the Preparation and Presentation of Financial Statements. Which of the following statements relating to the ASX is correct? The ASX relies on a range of subsidiary brands to monitor and enforce compliance with its operating rules. The ASX promotes standards of corporate governance among. The ASX operates the largest securities market in Australia. All of the options listed. 1.95: A conceptual framework consists of a set of principles with the purpose to assist users in the interpretation of information in financial statements. assist preparers of financial statements in the application of accounting standards and in dealing with topics that are not the subject of existing accounting standards assist standard setters to develop accounting standard all of the options listed. Members of the International Accounting Standards Board are appointed by and answerable to: its founders which are a group of professional accounting bodies.

the International Accounting Standards Committee Foundation. representative body of national standard setters. IOSCO. Professional accounting bodies play an important role in the accounting regulation process. Their involvement includes responding to exposure drafts and providing comments on accounting standards under development. providing professional development resources to their members on accounting standards and other accounting regulation regulating accountants through professional codes of conduct. all of these options. Q 1.126: The qualitative characteristics that make information in financial statements useful to investors identified within the Framework are relevance and faithful representation. relevance, faithful representation, comparability, verifiability, timeliness and understandability. comparability, verifiability, timeliness and understandability relevance, faithful representation, timeliness and comparability. Information that is able to confirm or correct past evaluations that have been made by users of financial information is an example of information that satisfies which of the following characteristics of financial information identified in the Framework Relevance Comparability Verifiability Understandability Q 1.128: A quality of information demonstrated when different independent observers could reach the same general conclusions that the information represents what it purports to represent is understandability. verifiability. neutrality. comparability. Q 1.132: Section 297 of the Corporations Act states that financial statements must provide a true and fair view of an entity’s financial position and performance. However, when compliance with the accounting standards results in financial statements which would not produce a true and fair view, the Corporations Act requires the entity to

request an exemption from the AASB. still comply with the accounting standards and provide additional information in the notes to the financial statements to give a true and fair view. not comply with the accounting standards. not comply with the accounting standards and write a letter to the shareholders explaining the non-compliance. Q 1.133: Some of the implications of adopting the going concern assumption are shown in the following accounting practices, except: justification of using historical cost to measure value of assets. depreciation of non-current assets. liquidation of an entity’s operations. inclusion of goodwill in the statement of financial position. Q 1.134: The IASB conceptual framework for financial reporting describes the basic concepts that underlie financial statements and define disclosure principles the elements of financial statements. accounting recognition criteria. the principles for measurement. Q 1.135: The going concern assumption underlying the preparation of financial statements is also known as: the continuity assumption. the matching principle. the historical cost measurement basis. the prudence principle. Q 1.136: Which of the following are the three essential criteria in the definition of an asset? (Select all that apply. Control Past event Future economic benefits Present obligation Ownership Future sacrifices of economic benefits Q 1.137: Which of the following income and expense items is NOT recorded initially directly in equity

The impairment of goodwill in accordance with IAS 36 Impairment of Assets, where the entity is confident that the factors giving rise to the impairment will reverse in a future period. An increase in the fair values of land & buildings, where the revaluation method is used to account for land & buildings in accordance with IAS 16 Property, Plant and Equipment Foreign currency translation adjustments arising on the translation of a foreign operations financial statements from their functional currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. None of the options listed. Q 1.146: The definition of equity as given in the conceptual framework shows that Equity = Assets – Liabilities. Equity = Assets – Liabilities – Expenses. Equity = Assets – Expense Equity = Income – Expenses. Q 1.147: A liability is defined in conceptual framework as: a present obligation of the entity arising from past events, the settlement of which is expected to result in an inflow to the entity of resources embodying economic benefits. possible obligation of the entity, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. a possible obligation of the entity expected to arise from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Q 1.151: The definition of income encompasses the following criteria, except control of increases in economic benefits by the entity. including capital contributions from owners. increases in economic benefits. results in increases in equity. Q 1.152: Which of the following satisfies the definition of expenses Payment of dividends to shareholders Purchase of equipment Payment of salaries to employees Cash withdrawal by owner

Q 1.153: In relation to the concept of recognition of an item in the financial statements: items of equity must satisfy both the probability and measurement criteria before they can be recognised. assets can only be recognised where there is a high probability of future economic benefits flowing to the entity expenses are recognised when a decrease in a future economic benefit related to an increase in an asset or a decrease in a liability has arisen that can be measured reliably. for items to qualify for recognition in the financial statements as liabilities or income they must first satisfy the definition of an element, and then meet both the probability and measurement requirements in relation to recognition. Q 1.154: MJ Salon rents a small shop located in Melbourne CBD to operate its hairdressing business. In accordance with the Conceptual Framework, MJ Salon should recognise monthly payment for the shop rental as: an increase in income and a decrease in liabilities. a decrease in assets and an increase in equity. a decrease in assets and a decrease in income. a decrease in assets and an increase in expense. Q 1.155: In accordance with the conceptual framework, income is recognised in the statement of profit or loss and other comprehensive income when an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably an decrease in future economic benefits relating to an decrease in an asset or an increase in a liability can be measured reliably. an increase in future economic benefits relating to an decrease in an asset or an increase in a liability can be measured reliably. an increase in future economic benefits relating to an increase in an asset can be measured reliably. Q 1.156: Which of the following statements is INCORRECT in relation to the recognition criteria for elements of the financial statements? Liabilities are recognised when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which settlement will take place can be measured reliably. Income is recognised when an increase in future economic benefits related to a decrease in an asset or an increase in a liability that has arisen can be measured reliably. Assets are recognised when it is probable that future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.

Because equity is the arithmetic difference between assets and liabilities, a separate recognition criteria for equity is not needed in the Framework. Q 1.157: Which of the following statements in relation to income is true? Gains and revenue are different in nature and therefore are recognised as separate elements of the financial statements per the Framework. Gains are normally reported separately from revenue in the statement of profit or loss and other comprehensive income due to the different probabilities attached to that type of income. The Framework defines income as an increase in economic benefits which results in an increase in equity. The Framework requires that all items of income are reported on a net basis. Q 1.158: Australian law requires compliance with Australian Equivalents of International Financial Reporting Standards b public companies and other listed entities only. public companies and large private companies only. public companies and government sector entities only. public companies, large private companies and government sector entities. Q 1.159:Which of the following statements about the Conceptual Framework’s definition of income is correct? Income results in decreases in equity. Income is always in the form of enhancements of assets. Income includes gains from non-ordinary business activities Income includes contributions from owners. \ Q 1.168: Which measurement base uses the discounted future net cash inflows or net cash savings that are expected to arise in the normal course of business in measuring the value of an asset Present value Current cost Realisable value Historical cost Q 1.169: Accounting interpretations are: developed by IFRIC and approved by a majority of the IASB. developed by the IASB and approved by a majority of the IFRIC. developed by IASB staff and approved by a majority of the IFRIC. developed by IASB staff and approved by a majority of the IASB.

Q 1.170: Which of the following are the recognition criteria of elements of financial statements? (Select all that apply. Existence of economic benefits Probable occurrence Reliable measurement Control by the entity Q 1.171: According to the Australian Accounting Standards, the following assets can be recorded initially at historical cost, except for: equipment. \ motor vehicle. inventories. land. Q 1.172: Expenses are recognised in the statement of profit or loss and other comprehensive income when: increase in future economic benefits related to an increase in an asset or an increase in a liability can be measured reliably. a decrease in future economic benefits related to a decrease in an asset or an increase in a liability can be measured reliably. a decrease in future economic benefits related to a decrease in an asset or a decrease in a liability can be measured reliably. none of the options listed. Q 1.174: Accounting interpretations are: developed by the IASB and approved by a majority of the IFRIC. developed by IASB staff and approved by a majority of the IFRIC. developed by IFRIC and approved by a majority of the IASB. developed by IASB staff and approved by a majority of the IASB Q 1.179: Ice-cream R Us Ltd just purchased a block of land, on which it will build a new factory for its operations. Ice-cream R Us paid $500 000 cash to the land owner. An independent evaluation reveals that the land is worth $550 000. Using historical cost as a measurement base, how should Ice-cream R Us recognise the land purchase in its financial statements? $500 000 recognised as an asset (land) and $50 000 as a liability. The land should not be recognised as an asset as it cannot be measured with reliability. $550 000 recognised as an asset (land). $500 000 recognised as an asset (land). Q 1.181:The two main concepts of capital are:

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financial and physical.

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historical and cost.

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current and non-current.

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general and specific. Q 1.182: The concept of physical capital refers to: the historical cost system the operating capability of the entity’s assets. the net assets of the entity....