AC102 Qualitative Questions
'When the shares of Lini plc are traded on the Stock Exchange and the current
market price is higher than the nominal value of the shares, the excess is added to
the share premium account in the statement of financial position of Lini plc.'
Critically discuss this statement. [5 marks] - correct answer-
Answer each of the following:
(i) Explain briefly the role of an external auditor.(ii) Explain the two types of reserves
in a statement of financial position. (iii) What is accounting conservatism
(prudence)?(iv)What is a secured loan?
[10 marks] - correct answer-
Briefly explain any two methods that a company can use to manage its reported
profits. [5 marks] - correct answer-
Briefly explain the role of an auditor. Who appoints the auditors and what information
is present in an auditor's report? [7 marks] - correct answer-The role of the auditor is
to assess whether financial statements follow accounting principles.
The auditor is appointed by the directors.
The information in an auditors report includes the basis of FS prep, audit
qualifications, comments on consistency of the director's report and the application of
'true and fair' criteria.
Chris does not maintain any books of account - these transactions were obtained
from bank statements and invoice files, and memory. Set out briefly the main
, problems inherent in operating a business in this rather haphazard manner. - correct
answer-
Discuss the benefits and problems of having uniform accounting standards across
the world. [10 marks] - correct answer-Some advantages include:
ensuring uniform high-quality financial reporting;
capital market benefits (e.g. decreased cost of capital; increased equity
valuations, etc.) as a result of increase in financial reporting quality;
increased comparability of financial statements across countries which is
beneficial for cross-listed companies and their investors.
Some disadvantages include:
Cross-country differences in accounting quality are likely to remain following
adoption of uniform standards because accounting quality is a function of the
company's overall institutional setting, including the legal and political system of the
country in which the company resides.
The uniform adoption of accounting standards eliminates the opportunity to compare
alternative practices and learn from them. It also disallows the tailoring of financial
reporting to local variations in economic, business, commercial, legal, auditing,
regulatory, and governance conditions across the globe.
Discuss the need for inflation accounting. Explain Current Cost Accounting (CCA)
and Current Purchasing Power (CPP) accounting.
[6 marks] - correct answer-
Discuss the trends in the company's financing cash flows over the three-year period.
` - correct answer-Financing cash flows are negative in all three years. This is more
'When the shares of Lini plc are traded on the Stock Exchange and the current
market price is higher than the nominal value of the shares, the excess is added to
the share premium account in the statement of financial position of Lini plc.'
Critically discuss this statement. [5 marks] - correct answer-
Answer each of the following:
(i) Explain briefly the role of an external auditor.(ii) Explain the two types of reserves
in a statement of financial position. (iii) What is accounting conservatism
(prudence)?(iv)What is a secured loan?
[10 marks] - correct answer-
Briefly explain any two methods that a company can use to manage its reported
profits. [5 marks] - correct answer-
Briefly explain the role of an auditor. Who appoints the auditors and what information
is present in an auditor's report? [7 marks] - correct answer-The role of the auditor is
to assess whether financial statements follow accounting principles.
The auditor is appointed by the directors.
The information in an auditors report includes the basis of FS prep, audit
qualifications, comments on consistency of the director's report and the application of
'true and fair' criteria.
Chris does not maintain any books of account - these transactions were obtained
from bank statements and invoice files, and memory. Set out briefly the main
, problems inherent in operating a business in this rather haphazard manner. - correct
answer-
Discuss the benefits and problems of having uniform accounting standards across
the world. [10 marks] - correct answer-Some advantages include:
ensuring uniform high-quality financial reporting;
capital market benefits (e.g. decreased cost of capital; increased equity
valuations, etc.) as a result of increase in financial reporting quality;
increased comparability of financial statements across countries which is
beneficial for cross-listed companies and their investors.
Some disadvantages include:
Cross-country differences in accounting quality are likely to remain following
adoption of uniform standards because accounting quality is a function of the
company's overall institutional setting, including the legal and political system of the
country in which the company resides.
The uniform adoption of accounting standards eliminates the opportunity to compare
alternative practices and learn from them. It also disallows the tailoring of financial
reporting to local variations in economic, business, commercial, legal, auditing,
regulatory, and governance conditions across the globe.
Discuss the need for inflation accounting. Explain Current Cost Accounting (CCA)
and Current Purchasing Power (CPP) accounting.
[6 marks] - correct answer-
Discuss the trends in the company's financing cash flows over the three-year period.
` - correct answer-Financing cash flows are negative in all three years. This is more
