cityboy

11. Financial reporting standards are most likely enforced by:
A. both standard-setting bodies and regulatory bodies.
B. regulatory authorities, such as the SEC and IOSC, only.
C. standard-setting bodies, such as the FASB and IASB, only.
               
Ans: B.
Generally, standard setting bodies make the rules and regulatory authorities enforce the rules.

cityboy

12. Which of the following is least likely to be a characteristic of an effective financial reporting framework?
A. Consistency.
B. Comparability.
C. Comprehensiveness.               

Ans: B.
The characteristics of a coherent financial reporting network are transparency, comprehensiveness and consistency. Comparability (along with understandability, relevance, and reliability) is a qualitative characteristic of financial statements.

cityboy

13. Accounting to the International Accounting Standards Board’s Conceptual Framework for Financial Reporting, the two fundamental qualitative characteristics that make financial information useful are best described as:
A. timeliness and accrual accounting
B. understandability and verifiability
C. relevance and faithful representation
               
Ans: C.
Relevance and faithful representation are the two fundamental qualitative characteristics that make financial information useful according to the IASB Conceptual Framework.

cityboy

14. Which of the following statements is most accurate respect to financial reporting requirements?
A. Regulatory authorities are typically private sector, self-regulated organizations.
B. Standard-setting bodies have authority because they are recognized by regulatory agencies.
C. The requirement to prepare financial reports in accordance with specified accounting standards is the responsibility of standard-setting bodies.               

Ans: B.
Without the recognition of the standards by the regulatory authorities, such as the U.S. Securities and Exchange Commission, the private sector standard-setting bodies, such as U.S.FASB, would have no authority.

A is incorrect. Regulatory authorities are government agencies that have the legal authority to enforce compliance with financial reporting standards.

C is incorrect. Standard-setting bodies are professional organizations of accountants and auditors that establish financial reporting standards.

cityboy

15. Under IFRS, the preparation of a complete set financial statement is best describe as a(n):
A. objective of financial reporting.
B. general requirement of financial statements.
C. qualitative characteristic of the IFRS Framework.
               
Ans: B.
The preparation of a complete set of financial statements is a general requirement of financial statements.

A is incorrect. According to the IASB Conceptual Framework for Financial Reporting 2010, the objective of financial reporting is to provide information about the firm to current and potential investors and creditors that is useful for making their decisions about investing in or lending to the firm.

C is incorrect. The Framework outlines four qualitative characteristics of financial information: Understandability, Relevance, Reliability and Comparability.

cityboy

16. Which of the following is least likely to be considered a barrier to developing one universally recognized set of reporting standards?
A. Differences of opinion among various regulatory bodies.
B. Reluctance of rims to adhere to a single set of reporting standards.
C. Political pressure from stakeholders affected by reporting standards.
               
Ans: B.
Firms usually support the idea of having a single set of reporting standards because having one set of standards would reduce the cost and the time spent on reporting. Disagreement among different standard-setting bodies and regulatory authorities does hamper agreement on a single set of standards, as does political pressure from business groups and other who would be affected by changes in reporting standards.

cityboy

17. Which of the following is least likely to be considered an objective of financial market regulation according the International Organization of Securities Commissions (IOSCO)?
A. Reduce systemic risk.
B. Ensure the fairness, efficiency and transparency of markets.
C. Develop individual financial regulatory standards for each country to reflect the unique needs of each market.
               
Ans: C.
The three objectives of financial market regulation according to IOSCO are to (1) protect investors; (2) ensure the fairness, efficiency and transparency of markets; (3) reduce systemic risk. Because of the increasing globalization of securities markets, IOSCO seeks to arraign uniform financial regulations across countries.

cityboy

18. The two primary assumptions in preparing financial statements under IFRS are:
A. accrual and going concern.
B. reasonable accuracy and accrual.
C. going concern and reasonable accuracy.
               
Ans: A.
In the IFRS framework, the two assumptions that underlie the preparation of financial statements are the accrual basis and the going concern assumption.