International Accounting 3rd Ed By Doupnik - Test Bank

Chapter 03 International Convergence of Financial Reporting Multiple Choice Questions 1. According to Sir Bryan Carsberg, former IASC Secretary-General, what is the most significant cost of accounting diversity? A) The time expended by accountants to create multiple sets of financial statements conforming to different national standards B) The cost of the IASB to regulate compliance with many national accounting standards C) The reduction in effectiveness of the international markets for capital D) The resources used by countries in legislating different sets of accounting standards Answer: C Level: Medium LO: 1 2. From a practical standpoint, what is the goal of accounting standards harmonization? A) Creating one set of standards used throughout the world B) Reducing the conflict among national accounting standards C) Producing accounting standards that are unique for each country D) Forcing compliance with IASB regulations Answer: B Level: Medium LO: 1 3. De jure harmonization refers to: A) the process of making accounting practice consistent across countries. B) the process of making accounting regulations consistent internationally. C) forcing accounting differences to be resolved through jury trials. D) eliminating the need to have different accounting methods. Answer: B Level: Medium LO: 1 4. De facto harmonization refers to: A) the process of making accounting practice consistent across countries. B) the process of making accounting regulations consistent internationally. C) forcing accounting differences to be resolved through litigation. D) creating one set of accounting standards. Answer: A Level: Medium LO: 1   5. Which of the following statements is true about accounting convergence? A) Convergence is a synonym for harmonization. B) Convergence is the opposite of standardization. C) Convergence, unlike harmonization, takes place over a period of time. D) Convergence means developing high-quality standards in partnership with national standard-setters. Answer: D Level: Medium LO: 1 6. Which of the following statements is believed to be true about accounting convergence by proponents of convergence? A) Convergence would decrease feelings of nationalism. B) Convergence is desirable because there is little difference among capital markets in different countries. C) Convergence would help to raise the quality of accounting practice internationally. D) None of the above statements is true. Answer: C Level: Medium LO: 2 7. Which of the following items is considered to be the most significant impediment to accounting convergence? A) Nationalism B) Lack of accounting knowledge C) Language differences D) High cost of convergence Answer: A Level: Medium LO: 2 8. In addition to the International Accounting Standards Board (IASB), which of the following organizations was considered to be one of the two most important forces in efforts to harmonize accounting standards? A) U.S. Financial Accounting Standards Board (FASB) B) United Nations (UN) C) North Atlantic Treaty Organization (NATO) D) European Union (EU) Answer: D Level: Medium LO: 3   9. It has been said that the addition of 10 new members to the European Union in 2004 is likely to significantly change the dynamics within the EU. What was the explanation given for this statement? A) The EU is getting too large to manage effectively. B) The members added in 2004 have very different economic traditions than the 15 members that joined before 2004. C) The members added in 2004 have more economic power than the members that joined the EU between 1957 and 1995. D) The purchasing power of the EU was weakened by the addition of additional members. Answer: B Level: Medium LO: 3 10. Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia joined the European Union in 2004. Besides membership in the EU, what do these countries have in common? A) They share a common language. B) They were previously under the political and economic influence of the Soviet Union. C) All were under the political control of Germany until the early 1960's. D) They were former British colonies until after World War II. Answer: B Level: Medium LO: 3 11. The “Fourth Directive” issued by the European Commission, which administers the European Union (EU), deals with which of the following? A) Adoption of the Euro as the currency used throughout the EU B) Consolidated financial statements C) Rules for valuation, financial statement disclosures, and format D) Authority of the European Commission to pass laws Answer: C Level: Hard LO: 3 12. The “Seventh Directive” issued by the European Commission is a statement to the European Union (EU) members concerning: A) adoption of the Euro as the currency used throughout the EU. B) consolidated financial statements. C) rules for valuation, financial statement disclosures, and financial statement format. D) authority of the European Commission to pass laws. Answer: B Level: Hard LO: 3   13. In preparation for admission to the European Union, Hungary, Poland, and the Czech Republic passed new accounting laws based on EU Directives. How were these new laws different from their previous accounting laws? A) The new laws are easier to enforce than the previous laws. B) The new accounting regulations are written in English, whereas the earlier accounting standards were written in Russian. C) The new laws are less flexible than their earlier accounting laws. D) The new laws are market-oriented and their earlier accounting laws were Soviet-style. Answer: D Level: Medium LO: 3 14. In 1990, the European Commission stopped issuing directives related to accounting. Why? A) The EU was leaving the formulation of accounting standards up to the IASC. B) The European Commission had finished the task of formulating accounting standards for the European Union. C) Accounting harmonization had been completed. D) The Commission found that its directives were unenforceable. Answer: A Level: Medium LO: 3 15. The early () harmonization efforts of the International Accounting Standards Committee (IASC) created standards that have been described as a “lowest common denominator” approach. What was the effect of these first international accounting standards? A) The IASC standards accommodated existing accounting practice in various countries. B) Comparability of financial statements across countries was achieved. C) It resulted in few companies being in compliance with IASC standards. D) All of the above Answer: A Level: Medium LO: 3 16. The second phase () of the IASC's efforts to harmonize accounting standards was aimed at what goal? A) Making international accounting standards more flexible B) Creating greater financial statement comparability across countries C) Adding new alternatives for accounting practice desired by the international community D) Strengthening the enforcement power of the IASC Answer: B Level: Medium LO: 3   17. Which of the following is NOT an objective of the International Accounting Standards Board? A) To establish worldwide uniformity of accounting practice B) To develop a single set of enforceable global accounting standards C) To promote the use and application of global accounting standards D) To encourage convergence of national accounting standards and international accounting standards Answer: A Level: Medium LO: 3 18. Of the 16 members of the International Accounting Standards Board (IASB), how many must have experience as auditors? A) 0 B) 3 C) 5 D) 12 Answer: A Level: Medium LO: 3 19. Of the 16 members of the International Accounting Standards Board (IASB), how many work for the board on a full-time basis? A) 8 B) 13 C) 10 D) 0 Answer: B Level: Medium LO: 3 20. To create an appropriate mix of members of the IASB, by 2012 there will be: A) 8 auditors. B) 8 academic representatives. C) 4 members of the FASB. D) a diverse geographical balance of members. Answer: D Level: Hard LO: 3   21. Who was the first chairman of the International Accounting Standards Board? A) Sir Walter Raleigh B) Sir David Tweedie C) Sir Paul McCartney D) Sir Bryan Carsberg Answer: B Level: Medium LO: 3 22. The International Accounting Standards Board was preceded by: A) the IOSCO. B) the ASEAN. C) the IASC. D) the NRC . Answer: C Level: Medium LO: 3 23. The IFRS Foundation will normally have as its trustees how many senior partners of international accounting firms? A) 0 B) 2 C) 5 D) 10 Answer: B Level: Medium LO: 3 24. The IASB is organized under an independent entity called: A) the SEC. B) the AFL. C) the IFRSF. D) INTERPOL. Answer: C Level: Medium LO: 3 25. Which of the following is NOT part of the due process followed by the IASB in formulating International Financial Reporting Standards? A) A period of public comment is provided after discussion papers are prepared. B) Standards are approved by a unanimous vote of the 16-member board. C) Exposure drafts are published prior to taking a vote of the board. D) National accounting standards and practices are studied before preparing exposure drafts. Answer: B Level: Medium LO: 3   26. What basis does the International Accounting Standards Board use in formulating its IFRS? A) Detailed rules to govern accounting practice B) A framework of accounting principles C) Typical tax laws of western nations D) Exceptions or unusual circumstances that require special attention Answer: B Level: Medium LO: 3 27. Why does the IASB believe that a principles-based approach to standard setting is superior to a rules-based perspective? A) Detailed prescriptions or rules encourage accountants to look for ways to circumvent the rules rather than trying to provide useful information. B) Principles-based standard setting is less costly to undertake than rules-based standard formulation. C) It is desirable to have all corporations in all countries using the same accounting practice. D) A conceptual framework for standard setting has been demonstrated to encourage the greatest economic development. Answer: A Level: Medium LO: 4 28. According to the IASB, what is needed for international accounting standards to work effectively? A) Commitment from auditors to resist client pressures B) Professional judgment in the public interest on the part of management C) Financial statement preparers must produce reports that faithfully represent all transactions D) All of the above are conditions for effective standards. Answer: D Level: Medium LO: 4 29. Which of the following statements is true about the IASB's approach to accounting standard setting? A) The IASB approach is very similar to the rules-oriented basis favored by the FASB in the United States. B) The IASB uses a principles-based approach to standards formulation. C) The IASB pronouncements have been called a “cookbook” of accounting standards. D) The Sarbanes-Oxley Act requires the FASB to move toward the approach for standard setting used by the IASB. Answer: B Level: Medium LO: 4   30. The IASB's Framework for Preparation and Presentation of Financial Statements (1989) establishes: A) the required practices that should be followed by accountants in preparing financial statements. B) the structure, content, and format of financial statements. C) sanctions for failure to comply with the IASB standards. D) the concepts to be used in formulating international accounting standards. Answer: D Level: Hard LO: 5 31. The IASB's Framework for Preparation and Presentation of Financial Statements (1989) implies that the most important group of users is: A) government. B) general public. C) creditors. D) investors. Answer: D Level: Hard LO: 5 32. According to the Framework for Preparation and Presentation of Financial Statements of the IASB, which of the following is NOT required for asset recognition? A) Control of the resource B) Ownership of the resource C) Future economic benefits D) Reliable measurement of the cost or value of the resource Answer: B Level: Medium LO: 5 33. According to the Framework for Preparation and Presentation of Financial Statements of the IASB, what is the definition of income? A) Assets minus liabilities B) Revenue minus expenses C) Increase in equity (other than from contributions by owners) D) Inflow of resources with future economic benefit Answer: C Level: Medium LO: 5   34. In November 2007 which organization removed the requirement that foreign private issuers reconcile their financial statements to U.S. GAAP? A) IASB B) EU C) SEC D) FASB Answer: C Level: Medium LO: 9 35. Which of the following is NOT a way in which a country might adopt IFRS? A) All companies in that country adopt IFRS. B) Foreign companies listed on domestic exchanges adopt IFRS. C) IASB forces them to adopt IFRS. D) Domestic companies that list on foreign exchanges adopt IFRS. Answer: C Level: Hard LO: 8 36. What was the 2002 finding by the six largest public accounting firms regarding International Financial Reporting Standards? A) Of the countries surveyed, almost all planned to make their GAAP converge with IFRS. B) Very few of the countries studied planned to move their national accounting standards toward convergence with IFRS. C) There were almost as many convergence strategies as there were countries in the study. D) The countries that planned to make their GAAP converge with IFRS were predominantly western European nations. Answer: A Level: Hard LO: 7 37. In the 2002 study by the world's six largest public accounting firms concerning convergence with IFRS, what was the most frequently cited concern about convergence? A) Language translation difficulties B) Lack of perceived benefit of using IFRS C) Complexity of specific IFRS D) Preference for national standards Answer: C Level: Hard LO: 8   38. What is the official language of the IASB? A) English B) French C) Spanish D) German Answer: A Level: Easy LO: 7 39. What language is used to develop the International Financial Reporting Standards (IFRS)? A) French B) German C) English D) Spanish Answer: C Level: Easy LO: 7 40. What group is responsible for translating International Financial Reporting Standards into languages other than the official language of the IASB? A) The International Accounting Standards Board B) The International Accounting Standards Committee Foundation C) The United Nations D) The national accountancy bodies of individual countries Answer: D Level: Medium LO: 7 41. The International Financial Reporting Standards (IFRS) have been translated into how many languages? A) None. They are only written in the official language of the IASB. B) More than 30 C) More than 100 D) Six (6): Chinese, English, German, Japanese, Russian, and Spanish Answer: B Level: Hard LO: 7   42. What was the “Norwalk Agreement?” A) A pledge between the Financial Accounting Standards Board in the U.S. and the IASB to make their reporting standards compatible B) A concession by the Financial Accounting Standards Board in the U.S. to adopt IFRS as soon as possible C) It is a treaty between the United States and the European Union to make their accounting standards converge. D) It was an agreement signed in Norwalk, Connecticut in 2002 to make English the official language of the IASB. Answer: A Level: Medium LO: 9 43. According to the Norwalk Agreement, the FASB will monitor: A) all IASB projects. B) only those projects where they have a level of interest in the topic. C) no IASB projects, since the IASB is capable of self-monitoring. D) only those projects dealing with internationally complex issues. Answer: B Level: Medium LO: 9 44. What is the role of the liaison members of the International Accounting Standards Board? A) To facilitate information exchange and cooperation between the FASB and the IASB B) To eliminate the political influences on the IASB and national accounting bodies C) To enforce adherence to the fundamental principles of the IASB D) All of the above Answer: A Level: Medium LO: 9 45. Which of the following is not a major concern related to convergence of international accounting standards? A) The complicated nature of particular standards B) The tax-driven nature of the national accounting regime C) An overload of guidance on the first-time application of IFRS D) IFRS language translation difficulties Answer: C Level: Medium LO: 8   46. What is the intent of IFRS 1? A) To establish the guidelines for financial statement presentation B) Provide the working definitions of accounting elements C) It gives guidance to first-time adopters of IFRS issued by the IASB. D) To provide the framework for setting international accounting standards Answer: C Level: Hard LO: 6 47. What is the primary focus of IAS 1? A) To establish the guidelines for financial statement presentation B) Provide guidance to first-time adopters of IFRS issued by the IASB C) Establish the framework that is to guide the IASB in setting accounting standards D) None of the above. Answer: A Level: Hard LO: 6 48. What is Anglo-American Accounting? A) It is an association of British and American accounting regulatory agencies. B) The accounting systems used in the U.S., U.K., and other English-speaking countries C) This refers to the basis used by the IASB to judge the appropriateness of international accounting standards. D) All of the above are true. Answer: B Level: Medium LO: 10 49. Which of the following statements is NOT true about Anglo-American Accounting? A) There is a strong reliance on professional judgment. B) Financial reporting focuses on the firm with an investor orientation. C) There is a strong emphasis on measurement of taxable income. D) Audits report on the adherence to the principle of fair presentation. Answer: C Level: Hard LO: 10   50. Which of the following statements is NOT true about Anglo-American Accounting? A) There is a strong reliance on professional judgment. B) There is agreement on the interpretation of the principle of fair presentation. C) There is a stronger emphasis on substance of reports rather than the form of reports D) Audits report on the adherence to the principle of fair presentation. Answer: B Level: Hard LO: 10 51. Which of the following is a difference among the U.S. and other Anglo-American countries in terms of accounting standards? A) The U.S. does not adhere to the “true and fair view” approach. B) The U.S. is more private-sector oriented. C) The U.S. always follows a conceptual framework when developing accounting standards. D) U.S. standards are becoming more rigid than U.K. standards. Answer: D Level: Medium LO: 10 52. Which of the following terms describe the qualitative characteristic of information usefulness? A) Relevance B) Understandability C) Representational faithfulness D) All of the above are characteristics of information usefulness. Answer: D Level: Easy LO: 5 53. In which of the following countries is the use of IFRS not allowed for domestic companies listed on its stock exchanges? A) United Kingdom B) Yugoslavia C) Australia D) United States Answer: D Level: Medium LO: 6 Chapter 06 Comparative Accounting Multiple Choice Questions 1. What term should be used to describe the current economic system in the People's Republic of China? A) Communist B) Socialist market C) Totalitarian D) Free enterprise Answer: B Level: Easy LO: 1 2. What is the basis for the People's Republic of China's current economic system? A) Government ownership of all businesses and economic resources B) Private ownership of all business enterprises C) Competition between state-owned enterprises and private business D) Congressional planning of industrial output and consumption Answer: C Level: Medium LO: 1 3. Among the world's nations, where does the People's Republic of China rank in terms of receiving foreign direct investment? A) First B) Fourth C) Tenth D) Fifth Answer: A Level: Easy LO: 1 4. What is China’s policy regarding revaluation of intangible assets? A) It is encouraged. B) It is prohibited. C) It is permitted only if the asset trades in an active market. D) It has offered no guidance on the issue. Answer: B Level: Medium LO: 4   5. Which term refers to an affiliate relationship between an accounting/auditing firm and its sponsoring organization? A) parent/subsidiary B) hooked up C) guanxi D) brother/sister Answer: B Level: Medium LO: 2 6. What body regulates trading of corporate securities in the People's Republic of China? A) National People's Congress B) State Council C) Securities and Exchange Commission D) Chinese Security Regulatory Commission Answer: D Level: Easy LO: 3 7. Why is the validity and reliability of financial disclosures of limited importance in the People's Republic of China (PRC)? A) China has no corporations with publicly traded stock. B) The government owns all of the corporate stock traded in the PRC. C) Most of the stock purchased in the PRC is held for only a short period of time. D) Most of the stock is rated by the government of the PRC in terms of its quality. Answer: C Level: Medium LO: 2 8. Which of the following statements is true about accounting in China? A) Accounting has a long history, dating back thousands of years. B) The first professional accounting body in the People's Republic of China was established in 1988. C) The philosopher Confucius taught about accounting. D) All of the statements above are true. Answer: D Level: Medium LO: 2   9. What was the difference between the CICPA and CACPA in the People's Republic of China (PRC)? A) These are two translations of a single Chinese professional association from Mandarin to English. B) The CICPA was the professional association for accountants and the CACPA is the professional association for auditors. C) The CICPA was the professional association for CPAs in private practice and the CACPA is the professional association for accountants in public practice in the PRC. D) None of the statements above is true. Answer: B Level: Medium LO: 2 10. What reason is given for the stagnation of accounting development during the “Cultural Revolution” in China ()? A) Over-simplification of accounting was pursued to make it accessible to a broad populace. B) There was very little business being transacted in China during the Cultural Revolution. C) Businesses in China were converting to international accounting standards during this period of time so they stopped developing new standards. D) Auditors took over the development of accounting practice. Answer: A Level: Medium LO: 2 11. The People's Republic of China made economic reforms in the 1980s to encourage international trade. What impact have these reforms made on accounting? A) Increased the demand for accounting information from investors. B) Increased the supply of publicly available accounting information from Chinese companies. C) Changed the nature of auditing in the PRC. D) All of the above are true. Answer: D Level: Medium LO: 1, 2 12. Which of the following statements is true about joint ventures between Chinese companies and international companies? A) Tax returns of joint ventures must be audited by Chinese CPAs. B) Annual financial reports of joint ventures must be audited by Chinese CPAs. C) Capital contributions by investors must be verified by Chinese CPAs. D) All of the above statements are true about Chinese joint ventures. Answer: D Level: Medium LO: 1   13. What agency is responsible for setting accounting standards and regulations in the People's Republic of China? A) Chinese Institute of CPAs B) Ministry of Finance C) Chinese Security Regulatory Commission D) State Council Answer: B Level: Medium LO: 3 14. In addition to the 16 Chinese Accounting Standards, what else forms the structure of financial reporting in modern China? A) IFRS B) U.S. GAAP C) ASBE D) CICPA Answer: C Level: Medium LO: 4 15. Who is the main user of accounting information in China? A) listed companies B) banks C) investors D) the government Answer: D Level: Medium LO: 4 16. What recent event has given the People's Republic of China an incentive to harmonize its accounting standards? A) Collapse of Arthur Andersen B) Membership in the NATO C) Admission to the WTO D) Establishment of the CSRC Answer: C Level: Medium LO: 1   17. Why is accounting conservatism NOT a basic principle underlying accounting standards in the People's Republic of China? A) It is perceived to manipulate accounting numbers for the benefit of owners by exploiting workers. B) It too closely reflects the views of the masses, which are not considered in establishing accounting standards. C) Conservatism has been shown to cause economic hardship for companies operating in China. D) Conservatism overstates assets, which is perceived to distort financial results. Answer: A Level: Hard LO: 5 18. Which of the following is the purpose of China's “Accounting System for Business Enterprises” issued in 2001 to supersede its “Basic Standard of Accounting for Business Enterprises?” A) Increase harmonization of accounting standards. B) Improve comparability of accounting statements. C) Make financial reporting distinct from taxation. D) All of the above Answer: D Level: Medium LO: 5 19. What is the primary source of capital in Germany? A) Issuance of stock B) Corporate bonds C) Bank loans D) Government grants Answer: C Level: Easy LO: 1 20. Which of the following countries has NOT had its accounting systems significantly influenced by Germany? A) Switzerland B) Denmark C) Japan D) France Answer: D Level: Medium LO: 1   21. What functional area dominates the accounting profession in Germany? A) Taxation B) Auditing C) Financial reporting D) Managerial Accounting Answer: B Level: Medium LO: 2 22. In Germany, prudence is an accounting principle established in commercial law. What does “prudence” mean in an accounting context? A) Reliability B) Comparability C) Conservatism D) Relevance Answer: C Level: Easy LO: 4 23. What was the primary influence on Germany's accounting regulations from the mid-1980's until very recently? A) The Stock Corporation Law B) The directives of the European Union C) The Companies Act D) The U.S. Financial Accounting Standards Board Answer: B Level: Medium LO: 1 24. What body currently develops accounting standards in Germany? A) German Accounting Standards Committee B) German Ministry of Justice C) Bundestag D) Chamber of Auditors Answer: A Level: Medium LO: 3 25. What body currently enforces financial accounting requirements in Germany? A) German Accounting Standards Committee B) Bundestag C) Financial Reporting Enforcement Panel D) Financial Accounting Standards Board Answer: C Level: Medium LO: 3   26. What is Germany's position with respect to accounting standards harmonization? A) IFRS should be used as long as they conform to directives set by the European Union. B) German GAAP is not influenced by IFRS. C) Accounting standard harmonization is of little interest to German accounting regulators. D) Germany has no mechanism for ensuring that accounting standards are consistent with IFRS. Answer: A Level: Medium LO: 4 27. German accounting standards have a “reverse authoritative principle.” What does this mean? A) Reversing entries must be made before financial reports can be issued to the public. B) Only tax deductible expenses may be used for determining accounting income. C) Financial statements are the basis for taxation. D) None of the above. Answer: B Level: Medium LO: 4 28. What is meant by Germany's “authoritative principle?” A) The GASB is the final authority for accounting standards. B) The International Accounting Standards Board is the authority for making German GAAP. C) Financial accounting is the basis for determining tax. D) Accounting standards are derived from tax law. Answer: C Level: Medium LO: 4 29. Why is corporate income tax in Germany based on financial accounting income? A) Germany had rules for financial accounting before it had a corporate income tax. B) The German Accounting Standards Board has more authority than the Bundestag. C) German financial accounting standards reflect true economic income. D) Germany was following the practice set by the United Kingdom. Answer: A Level: Medium LO: 4   30. While German tax computations are based on financial accounting standards, this is not true in the United Kingdom. Why doesn't the U.K. base its tax code on financial accounting standards? A) The United Kingdom tries to avoid being like Germany whenever it can. B) The United Kingdom had a tax code long before it had financial accounting standards. C) Financial accounting standards in the United Kingdom are too conservative to be practical for tax purposes. D) Germany follows the directives of the European Union, whereas the United Kingdom has not adopted the directives of the EU. Answer: B Level: Medium LO: 4 31. Why do German companies willingly take a conservative position in calculating income? A) To minimize tax B) To keep employees from asking for higher wages. C) To stabilize income from year to year for dividend purposes. D) All of the above Answer: D Level: Medium LO: 1 32. Under what circumstance should a German company prepare its financial statements under German GAAP rather than international financial reporting standards? A) Reporting to banks B) Reporting consolidated financial statements C) Calculating tax D) German GAAP should always be used instead of IRFS. Answer: C Level: Medium LO: 5 33. Why does German accounting practice differ from IFRS? A) German accounting rules are much more specific in most areas than IFRS. B) German accounting law is less specific in some respects than IFRS. C) Germany has not adopted a policy on accounting standard harmonization. D) Germany is not interested in foreign direct investment. Answer: B Level: Medium LO: 5   34. The Japanese economy is dominated by “keiretsu.” What are these? A) warlords that control Japanese wealth B) local governmental entities C) corporate conglomerates D) joint ventures with foreign investors Answer: C Level: Easy LO: 1 35. What links the components of a Japanese keiretsu? A) a governmental agency B) a common industry affiliation C) a common market D) a bank Answer: D Level: Medium LO: 1 36. Keiretsu control about one-fourth (1/4) of the assets in Japan. What cultural value is reflected in this business structure? A) professionalism B) optimism C) collectivism D) conservatism Answer: C Level: Medium LO: 1 37. What is the reason given for a relatively low emphasis on public disclosure of financial information in Japan? A) Significant reliance on bank credit for financing B) Long-term cross-corporate ownership of stock C) Income is not viewed as a measure of corporate performance. D) All of the above Answer: D Level: Medium LO: 1 38. Why is public disclosure of financial information less important in Japan than in other industrialized countries? A) Very few corporations B) Undeveloped stock exchange C) Heavy reliance on bank financing. D) Strong government control of corporations Answer: C Level: Medium LO: 1   39. Which body has the primary responsibility for establishing accounting standards in Japan? A) Japanese Institute of Certified Public Accountants (JICPA) B) Japanese Accounting Association (JAA) C) Japan's Ministry of Finance (MoF) D) International Accounting Standards Board (IASB) Answer: C Level: Easy LO: 3 40. How does the cultural value of collectivism explain the status of auditors in Japanese society? A) Collectivism places great importance on individual responsibility, giving auditors a high status in Japanese society. B) Since outsiders are not trusted in the Japanese culture, independent auditors in Japan do not enjoy the status of American auditors. C) Because individual achievement is a hallmark of collectivism, auditors are commonly found at the top of Japanese corporations. D) Collectivism values the ability of individuals to collect resources for themselves, so auditors who achieve distinction in their profession are highly regarded. Answer: B Level: Medium LO: 2 41. The population of Japan is about 1/3 the population of the United States. There are approximately 250,000 CPAs in the U.S. What is the approximate number of CPAs in Japan? A) 250,000 B) 100,000 C) 85,000 D) 15,000 Answer: D Level: Medium LO: 2 42. Accounting and financial reporting in Japan is regulated by its Commercial Code, which is patterned after the commercial code of what country? A) United States of America B) United Kingdom C) Germany D) France Answer: C Level: Medium LO: 3   43. What must large Japanese corporations report for years ending after 2004 due to recent amendments to the Japanese commercial code? A) Statement of Changes in Financial Position B) Consolidated Financial Statements C) Retained Earnings Statement D) Cash Flow Statement Answer: B Level: Medium LO: 4 44. The Securities and Exchange Law (SEL) is one of the regulators of accounting and financial reporting in Japan. The SEL is modeled on the regulations of what U.S. entity? A) Securities and Exchange Commission B) Financial Accounting Standards Board C) American Institute of Certified Public Accountants D) American Accounting Association Answer: A Level: Easy LO: 3 45. What was the “Big Bang” in Japan? A) The stock market crash of 1929. B) The unprecedented decline in exports and stock prices in the late 1980's. C) The changes in accounting regulation that occurred in the late 1990's D) The growth of the Japanese economy from the 1950's to the 1980's. Answer: C Level: Medium LO: 1 46. In Japan, what is the most commonly used ending date for accounting periods? A) December 31 B) March 31 C) June 30 D) September 30 Answer: B Level: Medium LO: 4 47. Unlike IFRS, under Japanese GAAP, inventories may be valued at: A) cost B) market C) lower of cost or net realizable value D) lower of cost or market Answer: A Level: Medium LO: 5   48. How does Japanese GAAP differ from IFRS with respect to costs of testing a fixed asset prior to use? A) Japanese GAAP requires expensing of pre-operating costs, whereas IFRS allows capitalization. B) Japanese GAAP requires expensing of pre-operating costs, where IFRS requires capitalization. C) Japanese GAAP requires capitalizing pre-operating costs, whereas IFRS requires expensing. D) Japanese GAAP allows capitalizing pre-operating costs, whereas IFRS requires expensing. Answer: D Level: Hard LO: 5 49. Privatization of Mexican businesses has been encouraged by: A) North American Free Trade Agreement (NAFTA). B) Governmental attempts to improve long-term economic growth. C) Loosening restrictions on foreign investment. D) All of the above. Answer: D Level: Medium LO: 1 50. What type of economic system presently exists in Mexico? A) socialist market B) Communist C) free market D) planned economy Answer: C Level: Medium LO: 1 51. Mexican corporations may issue three types of stock. Series A stock can only be owned by Mexican nationals. These shares must constitute at least what percentage of corporate voting rights? A) 51% B) 49% C) 25% D) 10% Answer: A Level: Medium LO: 1   52. Mexico has had a professional association of public accountants since what year? A) 1821 B) 1917 C) 1929 D) 1964 Answer: B Level: Medium LO: 2 53. By what title are professional accountants in Mexico known? A) Certified Public Accountant (CPA) B) Chartered Accountant (CA) C) Contador Publico Certificado (CPC) D) Mexican Certified Public Accountant (MCPA) Answer: C Level: Easy LO: 2 54. Companies listed on the stock exchange in Mexico City must provide annual audited financial statements to: A) The public through the national media. B) Shareholders only. C) Government only. D) Shareholders and the Government. Answer: A Level: Medium LO: 4 55. What is the most important federal agency regulating disclosure by publicly traded companies in Mexico? A) Mexican Institute of Public Accountants (MIPA) B) National Banking and Securities Commission (NBSC) C) Bolsa Mexicana de Valores (BMV) D) National Executive Committee (NEC) Answer: B Level: Medium LO: 3 56. What entity is primarily responsible for setting accounting and financial reporting standards in Mexico? A) Mexican Institute of Public Accountants (MIPA) B) National Banking and Securities Commission (NBSC) C) Bolsa Mexicana de Valores (BMV) D) International Accounting Standards Board Answer: A Level: Medium LO: 3   57. Which of the following is NOT considered GAAP in Mexico? A) MIPA Bulletins B) MIPA Interpretations C) International Financial Reporting Standards D) NBSC Statements on Accounting Practice Answer: D Level: Medium LO: 3 58. Which of the following statements is NOT required in Mexico? A) Statement of Financial Position B) Statement of Cash Flows C) Statement of Changes in Financial Position D) Income Statement Answer: B Level: Medium LO: 5 59. What is the greatest difference between Mexican accounting practice and American accounting practice? A) The method of calculating earnings per share B) The lack of conservatism in Mexican accounting standards C) The treatment of inflation effects on financial statements D) The accounting for exchange rate gains and losses Answer: C Level: Medium LO: 4 60. What currency is used in Mexico? A) Peseta B) Peso C) Mexican dollar D) Bolivar Answer: B Level: Easy LO: 1   61. Why do Mexican accounting standards require all nonmonetary assets and liabilities to be restated in terms of purchasing power of the Mexican currency? A) So that exchange rate gains and losses are properly reflected in the financial statement B) In order to reflect the historical cost of the assets and financing associated with these assets C) To reflect the high rates of inflation that Mexico has experienced D) Because historical costs overstate the value of the assets and corresponding claims on resources. Answer: C Level: Medium LO: 4 62. What is the main source of corporate financing in the United Kingdom? A) banks B) capital markets C) government grants D) royal family Answer: B Level: Easy LO: 1 63. The first professional accounting association in the United Kingdom was established in 1853 in what city? A) London B) Belfast C) Edinburgh D) Canterbury Answer: C Level: Medium LO: 2 64. Of the following British professional accounting associations, whose members MAY NOT sign an audit report? A) ICAEW B) ACCA C) CIPFA D) ICAS Answer: C Level: Hard LO: 2   65. In what way does the public accounting profession in the United Kingdom differ from the profession in the United States? A) Public accountants in the U.K. may not sign audit reports. B) Auditors in the U.K. do not need to be independent from their audit clients. C) Public accountants in the U.K. are paid by the government for their audit services. D) Public accountants in the U.K. are not required to have a university education. Answer: D Level: Medium LO: 2 66. What reasons have been given by the Institute of Chartered Accountants in England and Wales (ICAEW) for following a principles-based approach to setting accounting standards? A) Lawmakers and standard-setters cannot anticipate every situation. B) Professions should be about exercising judgment and integrity. C) The profession needs to attract people of high intellect. D) All of the above. Answer: D Level: Medium LO: 2 67. Until recently, regulation of accounting practice in the United Kingdom had traditionally been left to: A) Parliament. B) the accounting profession. C) the securities exchange commission. D) None of the above. Answer: B Level: Medium LO: 3 68. Since the 1980s accounting regulation in the United Kingdom has been legislated more than it had been previously. What is the primary cause for this change from professional self-regulation to government regulation? A) High profile scandals in the British business community. B) Influence of the United States on the ICAEW C) Directives from the European Union D) All of the above. Answer: C Level: Medium LO: 3   69. What is the primary role of the Financial Reporting Council in the United Kingdom? A) Compliance oversight B) Setting standards for accounting practice C) Policy over the accounting standard setting process D) All of the above Answer: D Level: Hard LO: 3 70. What is the policy for accounting harmonization in the United Kingdom? A) Eventual adoption of standards promulgated by the IASB B) Alignment of U.K. GAAP with IFRS where practical C) Rejection of IASB pronouncements D) Alignment of U.K. GAAP with U.S. GAAP Answer: B Level: Medium LO: 5 71. Financial statements in the United Kingdom are supposed to provide a “true and fair view” of the firm's financial position and results of operations. How does U.K. GAAP define “true and fair view?” A) Objective, free from bias B) Statements must comply with accounting standards. C) Relevant D) U.K. GAAP does not define “true and fair view.” Answer: D Level: Medium LO: 4 72. What set of standards must companies listed on the stock exchange in the United Kingdom use for consolidated financial statements? A) U.K. GAAP B) U.K. GAAP or U.S. GAAP C) IFRS standards adopted by the European Union D) There is no specific requirement. Answer: C Level: Hard LO: 4 73. How is goodwill handled for U.K. GAAP purposes? A) Expensed right away B) Capitalized and never amortized C) Amortized at the firm’s choice D) There is no specific requirement. Answer: C Level: Medium LO: 4   74. IAS 38 requires the capitalization of development expenses. How does U.K. GAAP handle development expenses? A) Expensed right away B) Permits capitalization C) Amortized at the firm’s choice D) There is no specific requirement. Answer: B Level: Medium LO: 4, 5 75. What is a key component of the U.K.’s true and fair view? A) Professional judgment B) Prudence C) Historical cost D) Loss bias Answer: A Level: Medium LO: 4 76. Accounting in Mexico is oriented towards fairness, not: A) Professional judgment B) Legal compliance C) Correctness. D) Taxable income. Answer: B Level: Medium LO: 4